CPC seeks global expertise to complete policy paper on LNG

• Basic policy paper on LNG with local expertise completed
• Cabinet Subcommittee recommends LNG for power generation in future
• Govt. to set up FRSU to receive, regasify LNG before 2019 to support move to switch to LNG
• Sri Lanka currently negotiating with Japan and India for two LNG plants
• Dhammika Perera questions LNG affordability for SL when even the world’s biggest producers and exporters aren’t using same for their internal use due to high cost

By Charumini de Silva

Completing the initial compilation of a policy paper with local expertise for liquefied natural gas (LNG), the Ceylon Petroleum Corporation (CPC) is now seeking international expertise to carry out the necessary improvements, a top official said.

“We have now developed a basic policy paper on LNG with expertise from various local universities, our staff and Ceylon Petroleum Storage Terminals Ltd. (CPSTL) staff. We are now seeking international expertise to incorporate their viewpoint and necessary improvements,” CPC Chairman Dhammika Ranatunga told the Daily FT.

Facing a looming energy shortage in the country, the Government last year decided to adopt a policy to use LNG for electricity generation with plans to convert existing plants as well. 

With LNG being a new product to the market, he pointed out that it was critical to have a policy direction and feasibility study conducted in the sector going forward, as the Government has now shifted its focus to sustainable energy sources. 

The Cabinet Subcommittee appointed to make recommendations on the Government policy on the usage of LNG in electricity generation and the construction of required infrastructure advised the Government last year that while striving to meet the increasing demand in the country, LNG should be used for power generation in the future.

As per the given recommendations, the Government is to set up a Floating Regasification Storage Unit (FRSU) in order to receive and regasify LNG before 2019 to support the move to switch to LNG. The committee has recommended a floating unit due to the relatively low costs involved in setting it up, compared to building a land-based gas-receiving terminal and the time consumed.

“Although we wanted to shift to LNG, in the initial stage we did not have a policy paper or a feasibility study. Only then was it passed on to the joint working committee and now we have the policy paper ready. We are also in the process of conducting a feasibility study on LNG,” Ranatunga added.

The Government is currently negotiating with India and Japan on their proposals to build two LNG plants separately with a generation capacity of 500 MW each. 

The Daily FT learns that the Government will negotiate options and decide if the FRSU terminals are to be built by 2019 as a temporary solution until the terminals are built by India and Japan for the two LNG plants.

The Cabinet Subcommittee last year recommended technical conversions to be carried out at the Yugadanavi Power Plant in Kerawalapitiya, generating 300 MW and the two power plants situated in the Kelanitissa Complex, generating 163 MW each, to be operated by LNG. 

In addition, two more plants to be set up during the next year, which would add another 1,000 MW to the grid, are to be operated by LNG.

Business leader Dhammika Perera, who has investments in renewable energy, recently addressing a public forum insisted it was not economically viable for a country like Sri Lanka to shift towards LNG, noting that even the world’s most developed countries could not afford it.

“We talk about our environment and clean energy. Take clean energy. It should be affordable clean energy. For a country like ours, we should go for affordable clean energy. And the cleaner the energy the more expensive it gets. How much can a country like Sri Lanka afford? That’s why affordable clean energy is important,” he added.

Perera requested the audience to do a quick online search as to how electricity in Australia, Germany and the US were generated by source.

“You’ll find that Australia doesn’t have even 1% LNG. But Australia is the largest producer of LNG. That’s because even Australia cannot afford LNG. Then check Germany. Google ‘Germany – electricity generation by source’. They don’t have even 2%, even the USA. Their manufacturing plants have a base requirement, but don’t run at peak for 24 hours. Everyone talks about clean, clean, clean. The environment is the world’s environment, not just Sri Lanka’s environment. We must think of the whole world,” he stressed.

He said LNG was one of the cleanest forms of energy in the world. “What is LNG? It is natural gas purified. It stands for liquefied natural gas. Where is it cleaned? Take a country like Australia. They manufacture LNG. They clean the gas. They get rid of sulphur, carbon dioxide, etc. and it’s brought here as clean energy. This is a natural gas that’s purified. It’s the same whether it’s cleaned here or there. But we purchase cleaned gas at the price we can ill afford because it is cleaned in Australia.”