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Wednesday, 5 March 2014 00:00 - - {{hitsCtrl.values.hits}}
Petroleum Resources Development Secretariat Director General Saliya Wickramasuriya speaking at the forum noted that the closest definition to the energy policy comes under the definition of ‘energy security’ an interesting term in itself, adding that when the term is applied to the network connection and grid connectivity as it is now it shows over 95% of the country being covered under the power grid.
Where are we today?
In 2010 the ‘Mahinda Chinthana’ development manifesto was updated and more details were added, listing CPC as the pivot in establishing Sri Lanka as an energy hub, mainly by increasing its oil and gas exploration activities. It also notes that the CPC intends to commission an additional state-of-the-art oil refinery while upgrading the one at Sapugaskanda in order to be a competitive force in the region, and proclaims CEB as a key driver to make Sri Lanka one of the viable energy hubs in the region while providing consultancies for designing and building power grids in South Asia and Africa.
“To be a competitive force in the region however, it must be aware that not too far, in Jamnagar one and half million of refined capacity of Reliance is in place,” Wickramasuriya said. However, we can be competitive, he asserted, as the policies in place have an outward looking focus and do not cover energy security and energy hub as an internal activity. “It aims to reach out to common relationships with external industries, countries and institutions that can help us achieve our focus.”
Energy consumption
In 2012, the total energy consumption from all sources, imported and indigenous, in Sri Lanka had been 482.5 Peta Joule, out of which petroleum oil has generated 218.5 PJ, mostly in the transport and power sectors. The energy content of oil burnt for electricity generation in all the thermal power plants was presented as 78.6 PJ.
He remarked that 40% of Sri Lanka exists on burning bio mass and that some 78.6% of petroleum is used to burn energy.
Future trends
“We do expect power and electricity demand to grow both domestically and commercially,” he commented. “We expect household demand to grow as people organise and move up the GDP ladder, while the new industries coming in as well as the growing industry of transport will add more demand to the system.”
As at now 80% of energy is consumed by transport, with close to US$ 2 billion being spent on transport fuel, which is steadily rising. The amount of transport fuel consumption within the next six years is supposed to grow by 2.5 times approximately, being even more dependent on external resources as oil is imported.
CEB’s Long Term Energy Generation Expansion Plan contains a plan to meet this demand from the power sector side, however there is no mention of how it will meet from the transport sector, he added.
Oil and gas exploration – the basin model
What Sri Lanka has is a basin model around Mannar Bay where gas and oil deposits have been predicted. “It is very likely to contain gas and oil,” Wickramasuriya said, adding that one small and one big field have been discovered in the north of Sri Lanka.
“The Sri Lankan Government recently put some of the identified blocks to international oil companies, which unfortunately did not meet with stunning success. They only received two good bids, which are currently being evaluated. Why were there large areas of the base not bid upon?” he questioned.
It is not because the global oil industry does not see them as potential gas deposits, but because gas brings a complete different set of challenges, whereas oil is extremely liquid and a commercially viable proposition, he explained. “The latter can be extracted, stored on the surface of the sea and transported without any interference.” Gas is different. Extraction from a deep marine environment is expensive and it requires infrastructure and policies we do not have in place.
Investors’ challenge – monetisation
There are three key questions asked by an investor when looking at gas and oil explorations, he maintained. They are: Are there reserves? Is there a market? Is it commercially viable?
So do we have oil and gas reserves? “Definitely yes,” answered Wickramasuriya. “Results of months of study which incorporate the input of 25 oil companies in understanding our assets note that we definitely do have reserves.” The country has invested heavily not only in hardware and software but for resource training of our own geo-scientists to address the asymmetry of information which hugely exist between the resource zone and international oil companies as well. “We are confident about this,” he reiterated.
Is there a market? In truth Sri Lanka does not have the policies in place that will allow the country to tell investors confidentially that we can or can’t export it to a certain country or the mechanisms between the potential firms and the Government. “Oil doesn’t require the same level of diligence in the response. Oil companies need to see a path to monetisation, if not they won’t invest. If we don’t have it now, it’s fine; they will come back to us later.”
Commercially viable? This is not an easy question to answer as it depends on whether technology exists to produce the market trends supporting the said resource extraction, the Government rules – taxation, restrictions and subsidies imposed by Government to be able to expedite the development. “Only the last is under Government control.”
LNG or natural gas?
Clearing up the misconception between LNG and natural gas, Wickramasuriya explained that the difference lies in the transferring process of gas; but that generally, both are one and the same: Gas. “In fact, anyone speaking of LG price is by definition telling you that this is the price that comes on frozen storage tanks; it needs to be offloaded by special facility, reclassified and distributed. Gas is that it just comes in the pipeline. The end user just gets gas.” LNG users always have the component of transport, and reclassification and gas will not.
Cost of LNG reclassification terminal itself is some US$ 700-800 million – and investment for this is required from the front end, middle end and backend of the process.
Points to ponder
Wickramasuriya listed the following as points to ponder:
Future of the energy industry: RenewablesThere is a need for statistics and data Aker Solutions Vice President and Key Accountant Manager Harry Kulasinghe noted that the country has the fundamentals such as good companies, leisure sector and schooling for oil and gas development when compared to some other countries. So what do we need to do to monetise the gaps?
“We need to have better statistics and data,” Kulasinghe said. “My view would be we are a relatively poor country so we need to somehow increase the quality of data so that the international oil companies can have a better understanding of the amount of reserves we have.”
By doing so, the industry will be able to assess the how much there is and find out whether it is big enough for LNG or if it needs to be moved domestic or in other avenues. The country will then have to see what the domestic market is like and what do we do with the additional resources.
Having his own energy company, the advice Kulasinghe could give is that the better option is to convert to electricity and export. “Electricity could be generated on the vessels themselves which is quite competitive,” we said.
No future for fossil, make way for renewable and ocean energy
During the next 20 years, the world will have to stop the burning of fossil fuel, despite having reserves to last another 40-50 years due to the environmental impact it has such as climate change and global warming, more so than the depreciating resources.
Energy Forum Executive Director Asoka Abeygunawardane expressed that with the exponential growth currently experiencing, it is not practicable to keep at fossil fuel for more than 20 years for the betterment of human civilisation in the long term.
What then is the next step? His answer was renewable energy, energy efficiency and sustainable lifestyles.
Some of the key questions governing the use of renewable energy are: How much do we have; Do we have enough? How costly is the exercise? Sri Lanka has enough renewable energy resources to cater to the existing demand. “Being a tropical country we have enough solar, we have good potential for wind, under bio mass we have enough land to grow integrating the existing culture and harvest,” Abeygunawardane observed.
Over and above, the major renewable energy Sri Lanka has is ocean energy which has not been tapped yet. “We have stable current, stable waves and enough energy in the waves. There is great potential there.”
Cost-wise when taking in to account the life span of a renewable energy plant, the costs are competitive. Renewable energy technologies are already cheaper than oil as well, he said. “Thinking of lifespan I can assure that renewable is cheaper than coal. In most instances, in most of the renewable technologies except for bio mass there is no fuel cost involved and hence is cheaper.” What is needed is storage and the energy could be stored using pump water storage.
“My firm belief is that renewable energy is the future. We need to use fossil fuel to establish the renewable energy infrastructure.”
In the long run Sri Lanka can be in the forefront in the world by pioneering ocean energy consumption as renewable energy, Abeygunawardane said. “We can then sell the technology.” Sri Lanka is already selling mini hydro technology to other countries.
Feasibility studies carried out by CEB for efficient energy
CEB Generation Planning Chief Engineering Buddhika Samarasekara noted that at present Sri Lanka’s energy composition is made up 40% of hydro, 50% thermal and 10% Non Conventional Renewable Energy (NCRE) which includes mini hydro and solar power.
He said that feasibility studies are now being carried out by CEB regarding the introduction of LNG as an option for Sri Lanka, studying in detail the impact on environment as well as the economic aspect.
“We are also carrying out preparation of a Renewable Master Plan, because even though there is a lot of potential in wind, solar, dendro, mini hydro, we must look at the intermittent nature as well as the transmission network limitations.” This Renewable Master Plan will come as part of the Long Term Energy Generation Expansion Plan of the CEB.
“We are already carrying out the feasibility study for pump storage power plants as well,” Samarasekara said. Three locations have already been identified for this; but this will only come in to the system post 2022, perhaps around 2025. “We are giving due consideration to the environmental conditions of coal power plants as we are now considering the high efficiency clean coal technologies.”
Feasibility studies are also being carried out regarding the construction of high efficiency clean coal power plant. Samarasekara said: “At present we want to find out a good energy mix, that doesn’t burden the people as well.” Right now coal is the cheapest source and has to be used efficiently and in an environmentally friendly manner.
“We are also carrying out demand side management activities and looking at shifting of peak demand to off-peak, mainly by using pump-storage as well as some other methods, which will save our high cost generation plants during the peak,” Samarasekara observed.
Sri Lanka has a long way to go to achieve renewable energy target
The 2005 Renewable Energy Policies has noted that a minimum of 15% of energy generation of power sector should come from renewable, which should reach and 20% by 2020, Wind Force Ltd. Director/CEO Manjula Perera said. “Unfortunately we are only at 6.3% today. It is a long way to go considering there is only six years more.”
The 20% mark has come through studies done by international scientists who have found out that energy production around the world as of now should be converted to 20% renewable. “Whether we like it or not, we have to go for renewable for the wellbeing of human beings.”
Looking at the long-term CEB plan, Perera stated that from here onwards it is all about coal.
As of today the private sector is contributing 360 mega watts to the national grid and the potential for the future is 300 mw more from small dendros, with a huge wind potential of close to 5000 mw at least, “but our system cannot take that 5,000 mw because it is a small system. The only possibility to make use of this is the link between India and Sri Lanka. Then we are connected to a very big network and there are no limitations.”
Another key parameter is cost. In 2012 what CEB paid to non-conventional renewable energy was Rs. 12.18 as average cost of energy, which is less than the CEB selling price. In 2013 this was at Rs.16.70, but was still less than the CEB selling price of Rs. 19.
Samarasekara noted that the general perception is that coal is the cheapest. “Capital cost of Norochcholai Coal Power Plant is coming to Rs. 15 and the agreement signed for Sampur is Rs. 17.84, which makes renewable cheaper still. We won’t say avoid coal power plants but due consideration should be given for renewable which is available in the country.” |
