Govt. accused of succumbing to Indian pressure to kick China out of LNG space

The Government is alleged to have succumbed to Indian pressure kicking China out of Sri Lanka’s Liquefied Natural Gas (LNG) space.

The alleged move concerning LNG infrastructure projects in Kerawalapitiya has sparked concerns among various stakeholders within the energy sector. Sources claimed that the move could possibly jeopardise the Kerawalapitiya LNG-led clean energy power complex which was in the power development master plan into disarray.

The concerned projects are “Development of FSRU at Offshore Kerawalapitiya on BOO Basis and Mooring on BOOT Basis” initiated by the Ceylon Electricity Board (CEB), and the “Construction of a Re-gasified Liquefied Natural Gas (R-LNG) pipeline system from Floating Storage Regasification Unit (FSRU) to existing Kelanitissa and Kerawalapitiya power plants on Build, Own, Operate and Transfer (BOOT) basis” initiated by CPC. They were published through an international bidding process in early 2021, (after four previously failed G2G/unsolicited attempts) which should have become the first project that introduced LNG to Sri Lanka. Sources said the projects have experienced a long and stringent evaluation of the technical and financial proposals, after which it was deemed that the Chinese company, China Harbour Engineering Company Ltd., (CHEC) was the only Technically Qualified bidder. 

“Such infrastructure ought to have been commenced if it were not for the economic issues faced last year, whereas both projects stagnated at the final stage of this procurement process for nearly one year,” sources said. 

Especially with the FSRU&M Project, its Concession Agreement has been ready since September 2022, only requiring Cabinet Approval, and had the Ministry drafted the cabinet paper, it could have commenced right away as informed sources on the matter commented.

“Any delay or diversion in implementing these critical projects may be detrimental to Sri Lanka and Government’s plans to make Sri Lanka energy secure/independent and might create significant value chain losses which can only be avoided by robust, righteous, and timely decision-making,” sources pointed out.

As an essential energy infrastructure, after multiple studies, the projects were the only proven feasible way out to LNG in Sri Lanka, which is deemed a clean energy source with lower carbon emissions and higher economic efficiency. The projects are of the potential to serve up to 8 power plants with capacity of 2,400 MW. By replacing diesel with LNG for power plants, the projects will facilitate the diversification of the energy mix. Hundreds of million US dollars in foreign exchange per year are expected to be saved, and the public will meanwhile reap benefits by way of reduced tariffs.  

Sources alleged that plans underway by the Government to suspend this procurement process and the move ahead of President Ranil Wickremesinghe’s historic visit to India was an indication of the Government bowing down under the pressure from the giant neighbour.

They said numerous attempts of interference over the past 2-years by ways of impractical “unsolicited proposals”, to which it is unfeasible to implement within a short period of time, have taken place during this international competitive bidding process, trying to undermine the sanctity of the procurement process. 

It was pointed out that compared with the unsolicited proposals which have high ambiguity, the tendering Projects are of international standard whose feasibility study was funded by the multilateral financial institution, ADB, and contains stringent requirements which could only be met by the best in the industry. 

Considering the prevailing adverse economic conditions of the country, continuing the tendering Project is the only prudent way to ensure energy security, ease the financial burden, and restore the confidence of international investors in bringing FDI to Sri Lanka.  

Sources warned that unreasonable failure of awarding the projects under such political pressure would definitely exert a deterrent signal on the large Chinese companies operating in Sri Lanka who seek fair competition. Despite the same, investors are expecting a fair treatment on what they deserve through a transparent manner, and a well-functioning, and effective investment environment. Whilst such action would definitely kick out Chinese investors and even investors around the world, sources opined. 

They charged that the long-term master plan of energy development is being compromised to appease political pressure and agendas. “While the public is still desperate for cheaper and clean alternative energy sources, the Government seems to be kicking the can further down the road, at a very large cost,” sources alleged.