New fossil fuel law aligned with Natural Gas National Policy

The Ministry of Energy has initiated the drafting of the new Fossil Fuel Resource Development Act, after the Cabinet of Ministers approved the proposal presented by Minister of Energy Udaya Gammanpila, The Sunday Morning learnt. 

“The new Act will replace the Petroleum Resources Act, No. 26 of 2003 and will address the shortcomings in the existing Act in terms of interpreting the definitions, regulation, progress, and maintaining a national monitoring agency. Furthermore, it will establish a new legal framework for local fossil fuel including the natural gas industry as proposed in the National Policy on Natural Gas (NPNG),” Gammanpila told The Sunday Morning

The Ministry of Energy published the NPNG in the Government Gazette in October 2020, with the assistance of the Petroleum Resources Development Secretariat (PRDS) followed by an extensive public consultation process. 

The policy focuses on five key principles – ensuring energy security; the minimisation of environmental, health, and safety risks; the optimal use of indigenous natural gas; enhanced private sector participation and adaptive development; and the optimisation of the market structure for inclusive benefits. 

As per the policy document, the Ministry of Energy would be the state entity in charge of policy direction, guidance, inter-agency co-ordination, as well as overall supervision of the policy implementation. 

It has also been proposed to set up a National Gas Company as the Single Credible Entity (SCE) for handling all government economic transactions pertaining to natural gas, including public-private partnership (PPP) ventures and technical and institutional assistance for policy implementation. 

Further, the PRDS proposed to regulate the upstream natural gas industry activities while the Public Utilities Commission of Sri Lanka (PUCSL) was proposed to become the mid and downstream gas market regulator. 

In addition, the Ceylon Petroleum Corporation (CPC) is expected to provide technical and institutional assistance for the implementation of the NPNG. 

The structural changes in the legal, institutional, and regulatory frameworks proposed in the NPNG are scheduled to be incorporated within an 18-month period.