- Chinese firm awarded FSRU contract
- Petronet MOU with India terminated
- ‘Take-or-pay’ contract concerns
- Calls for separate LNG import company
Despite finalising the contract to develop a Floating Storage Regasification Unit (FSRU) and Liquefied Natural Gas (LNG) pipeline offshore at Kerawalapitiya under a Build, Own, Operate, and Transfer (BOOT) model, the Government is yet to select an LNG supplier, The Sunday Morning reliably learns.
It is learnt that Sri Lanka has received interest from major LNG suppliers from leading countries such as India, the US, and China.
However, the Government has not shown firm interest in any of these offers, apart from the Energy Ministry’s acknowledgment that India could be a supplier, even as it rejected India’s Petronet deal for the FSRU and pipeline development.
When contacted, Energy Ministry Secretary Prof. Udayanga Hemapala said discussions were ongoing, with no final decision made on the LNG supplier yet.
The Ceylon Electricity Board (CEB) has finalised awarding a long-delayed contract to a Chinese company to develop an FSRU and LNG pipeline offshore at Kerawalapitiya under a BOOT model.
The tender, first issued in early 2021, was previously suspended pending a Government review.
Delays in LNG availability could cost Sri Lanka an estimated $ 304 million, highlighting the need for timely implementation.
Meanwhile, the Energy Ministry has sought Cabinet approval to cancel a Memorandum of Understanding (MOU) with India’s Petronet LNG Ltd., which was found unsuitable as a short-term solution due to scale and timing issues.
The Petronet proposal involved supplying LNG via ISO tank containers to fuel a power plant in Colombo.
Despite this, India remains a potential LNG supplier for Sri Lanka.
In 2021, US-based New Fortress Energy signed an agreement to invest in West Coast Power Ltd., gaining a 40% stake and committing to supply LNG to the Kerawalapitiya Power Complex, with plans for an offshore LNG terminal.
However, objections were raised over ‘take-or-pay’ contract clauses in both the New Fortress and Chinese deals, with the latter currently under evaluation by the Attorney General.
Meanwhile, a senior official from the CEB who wished to remain anonymous stated that ideally, there should be a separate company dedicated to importing LNG, similar to how coal is managed by Lanka Coal Company (LCC).
Depending on demand and requirements, Sri Lanka should be able to secure LNG supplies at competitive rates without fully handing over control to a foreign entity.
Sri Lanka is gradually transitioning its power generation sector towards LNG to reduce dependence on costly and polluting fuels like furnace oil and diesel.
A key facility in this shift is the Kerawalapitiya Power Complex, which currently operates with a capacity of around 310 MW and plans to expand by an additional 700 MW. LNG is expected to fuel the gas turbines at this complex, supporting cleaner and more efficient energy production.
Similarly, the Sobadhanavi Power Plant, which has a capacity of approximately 230 MW, is set to use LNG supplied through ISO tank containers to ensure reliable and continuous power generation.
Other plants, such as the Sapugaskanda Power Plant, have also been considered for LNG conversion or supplementation to further reduce emissions and improve fuel efficiency.