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No monopoly for New Fortress Energy: CEB

 

  • CEB assures new state entity would import, distribute LNG
  • Power Ministry says tender process adherence unnecessary

 

 BY Pamodi Waravita

The Ceylon Electricity Board (CEB) and the Ministry of Power yesterday (3) claimed that US-based energy company New Fortress Energy Inc. will not be able to monopolise the supply of liquefied natural gas (LNG) to Sri Lanka as a state corporation will be handling the importation and distribution of LNG, and that a tender process need not always be followed when finalising agreements like the one signed between New Fortress and the Government of Sri Lanka.

CEB Chairman M.C. Ferdinando noted: “On 5 July 2021, the Treasury Department and New Fortress Energy Inc. signed a framework agreement. Cabinet of Ministers’ approval was given for this. Based on that framework agreement, as an extension of it, a share sales and purchase agreement (SSPA) was signed about the sale of the 40% of the shares owned by the Government of Sri Lanka. This was a non-binding instrument, which also included a non-binding term sheet about the purchase and supply of LNG. This does not create a monopoly. That agreement says that the gas is purchased by a state corporation, which includes the Treasury Secretary, and the Power Ministry Secretary, amongst other individuals. This state corporation will import and distribute natural gas to Sri Lanka. New Fortress Energy Inc. will only sell gas based on the price agreed together with this state corporation. They will not be allowed to import or distribute gas. The import licence will be given to the state corporation.”

He added that the state corporation would work in a manner similar to Ceylon Petroleum Corporation (CPC).

However, in a press release issued in September 2021, New Fortress Energy Inc. said that it would acquire 40% of the shares at the 310 megawatts (MW) Yugadanavi Power Plant in Colombo and that as part of the agreement, it would also provide about 1.2 million gallons of LNG to the Government per day, through a LNG terminal which will be built off the shores of Colombo. “New Fortress Energy Inc. will acquire a 40% ownership stake and plan to build an offshore LNG receiving, storage, and regasification terminal located off the coast of Colombo. New Fortress Energy Inc. will initially provide the equivalent of an estimated 1.2 million gallons of LNG (35,000 metric million British thermal unit [MMBtu]) per day to the Government of Sri Lanka, with the expectation of significant growth as new power plants become operational,” said the statement.

Meanwhile, Power Ministry Additional Secretary Dr. Susantha Perera, responding to allegations that a transparent tender process was not followed to grant the aforementioned deal to New Fortress Energy Inc., said that a tender process is not required by the law. “The tender process currently occurs through guidelines which were approved in 2006 by the then Cabinet. However, that is not the law. Those are just guidelines. The President of the country can decide, depending on the situation such as the needs of the country or international agreements and understandings, that the tender process does not need to be adhered to,” said Dr. Perera. 

The Central Bank of Sri Lanka (CBSL) announced on 26 October that the Government is set to receive a $ 250 million inflow from the partial divestment of the Yugadanavi Power Plant to New Fortress Energy Inc. and that the first tranche of the same is expected in November and December 2021. However, allegations levelled against the deal claim that the long-term loss to Sri Lanka through the deal is around $ 6 billion and cite threats to the country’s energy security.

The Janatha Vimukthi Peramuna (JVP) has filed a writ application in the Court of Appeal against the agreement whilst the Samagi Jana Balawegeya (SJB), Archbishop of Colombo His Eminence Malcolm Cardinal Ranjith and Ven. Elle Gunawansa Thera, and the Federation of National Organisations filed fundamental rights (FR) petitions at the Supreme Court regarding the matter.

The People’s Alliance led by Industries Minister Wimal Weerawansa, Energy Minister Udaya Gammanpila, and Water Supply Minister Vasudeva Nanayakkara, held their press conference on 29 October, where they heavily criticised the agreement that the Government signed with New Fortress Energy Inc.

Elsewhere, the CEB Trade Union Alliance held an islandwide protest yesterday, demanding that the aforementioned agreement be revoked.