Govt. adopts policy on LNG for electricity generation

• Cabinet subcommittee recommends conversion of operation in three existing plants to LNG
• CEB to call for tenders to build the terminal and procurement for LNG
• Separate negotiations to kick off with Japan and India for two LNG plants

By Chathuri Dissanayake

Facing a looming energy shortage in the country, the Government this week decided to adopt a policy to use Liquid Natural Gas (LNG) for electricity generation with immediate effect with plans to convert existing plants as well.

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

The committee, headed by Sarath Amunugama as the Minister of Special Assignments, recommends technical conversions to be carried out in the Yugadanavi Power Plant in Kerawalapitiya generating 300 MW, the two power plants generating 163 MW each situated in the Kelanitissa Complex to be operated by LNG. Further, two more plants that are to be set up during the next two years which would add another 1,000 MW to the grid, to be operated by LNG.

“We have decided to convert the three plants which are currently being operated with diesel and furnace oil to be run by LNG in the future. They were originally meant to be run by LNG but as we still don’t have the terminal for LNG we have been running them with diesel and furnace oil which is very expensive for us,” a member of the committee, Power and Renewable Energy Minister Ranjith Siyambalapitiya, told Daily FT.

As per the recommendations given, the Government is to set up a Floating Regasification Storage Unit (FRSU) in order to receive and regasify liquefied natural gas 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.

Considering the urgent need for LNG once the power plants are converted, the Cabinet subcommittee has recommended proceeding with the procurement of the natural gas required. In selecting the investor to build the terminal, the committee recommends giving weight to urgency and the relatively small quantity of the requirement.

Further, the Government will separately negotiate with India and Japan on their proposals to build LNG plants with a generation capacity of 500 MW each, Minister Siyambalapitiya told Daily FT. “We will also negotiate to see if we can use the LNG terminals they build to obtain the LNG required for our plants as well. We will see what the best option is,” he said.

The Government will negotiate the options and decide if the FRSU terminal to be built by 2019 will be a temporary solution until the terminals are built by India and Japan for the two LNG plants, the Minister said.

Further, the committee recommends selecting a suitable investor through an open competitive bidding process to procure the LNG liquefied natural gas required for the power plants already in operation and for the establishment of a gas receiving terminal.

The Ceylon Electricity Board has been given powers to call for tenders for this purpose with the technical cooperation of the Ministry of Petroleum Resources Development, Ceylon Petroleum Corporation and Sri Lanka Ports Authority, the Minister said.