- CEB, CPC fail to agree on fuel procurement
Uncertainty looms in the country’s power sector with the Ceylon Electricity Board (CEB) and the Ceylon Petroleum Corporation (CPC) yet to reach an agreement on the procurement and transition to Liquefied Natural Gas (LNG) despite the urgent need for LNG-fired power plants, The Sunday Morning reliably learns.
The Long-Term Generation Expansion Plan (LTGEP) 2025–2044 identifies natural gas as vital for a cost-effective and environmentally sustainable power system.
In the Base Case scenario, LNG availability has been projected by mid-2027. Delays of three additional years could increase the present value of total costs by approximately $ 304 million, according to the LTGEP sensitivity analysis.
The CEB has planned the development of a 130 MW gas turbine plant at the Kelanitissa Power Station through international competitive bidding. The plant is expected to enhance operational flexibility, support grid stability, and aid restoration in case of islandwide power failures.
However, its implementation has been delayed and the plant is now expected to be operational by 2030.
CEB engineers argue that opening fuel procurement to international competitive bidding could deliver immediate financial savings and improve transparency.
Fuel accounts for approximately 85% of the CEB’s generation costs. In 2023, the board spent Rs. 109 billion on fuel oil; in 2024, this fell to Rs. 81 billion. Engineers estimate that a 10% saving through competitive procurement could save Rs. 8–10 billion annually, benefiting consumers and reducing financial pressure on the board.
The engineers claim that the CPC’s monopoly distorts pricing and erodes efficiency. Unlike petrol and diesel, naphtha and Heavy Fuel Oil (HFO) prices are not publicly published, and pipeline measurement protocols make the CEB liable for losses or leakages, transferring operational risks unfairly.
Engineers also cite instances where the CEB has been outbid in CPC tenders despite offering higher prices, pointing to opaque contract award practices.
The CPC, however, emphasises technical and logistical constraints. Existing pipelines do not support naphtha transport from the Colombo Port to the Kelanitissa Power Station. The crude oil pipeline from Colombo to Sapugaskanda is designed for heavy crude and cannot accommodate lighter fuels. Substantial investment in new pipelines, storage tanks, and handling infrastructure will be required to enable international imports.
CPC Managing Director Dr. Mayura Neththikumarage said: “There is no point in going for a separate supply mechanism. The CPC has the capacity to handle fuel requirements. There is no dedicated pipeline to carry naphtha from the Colombo Port to Kelanitissa. The existing pipeline network from Sapugaskanda to Kelanitissa is meant for other products. No country in the world uses crude pipelines to pump naphtha.”
The International Monetary Fund’s (IMF) Governance Diagnostic Report (September 2023) identified non-competitive procurement as a structural weakness in public enterprises and recommended adoption of a national procurement law.
Domestically, the Ministry of Energy Secretary instructed the CEB to initiate competitive bidding through letter PE/01/46 dated 7 October 2024, while Supreme Court rulings have confirmed that monopolistic procurement fosters corruption and violates constitutional principles.