News

CEB GM forwards draft agreement giving exclusive rights to Chinese company

Published

3 years ago

2022/08/18

Sahan Weerasooriya

Supply of natural gas to power plants

By Ifham Nizam

The Ceylon Electricity Board (CEB) General Manager has forwarded a draft agreement to the Ministry of Finance recommending that exclusive rights be granted to a Chinese company for supplying natural gas (regasified LNG) to power plants at Kerawalapitiya and Kelanitissa.

The CEB invited international bids in February 2021 for the development of a floating storage and regasification unit (FSRU) at Kerawalapitiya on build, own and operate (BOO) basis on a 10-year contract.

Under this tender, the FSRU stationed offshore at Kerawalapitiya will regasify the natural gas delivered by ship in liquid form (LNG) and then deliver it to power plants at Kerawalapitiya and Kelanitissa through gas delivery pipelines to be constructed under a separate tender floated by the Ceylon Petroleum Corporation.

The CEB has engaged an Indian consulting firm using funds provided by the Asian Development Bank (ADB) to prepare the request for proposal (RFP) documents of this tender, which includes the FSRU agreement and the implementation agreement (IA).

The FSRU agreement is to be signed between the CEB and the project company that would be set up by the selected bidder. The IA is an agreement signed between the project company and the Sri Lankan government, which sets out terms on which the government will provide incentives (such as tax concessions) and assistance (for obtaining statutory approvals such as environmental permits) to the prospective project company.

Under the IA, the GOSL will guarantee the payment due to the project company from the CEB under the FSRU agreement. The IA published with the RFP in February 2021 has not offered exclusivity to bidders, as it is unnecessary to offer such a guarantee since the FSRU agreement will ensure that the project company will operate the FSRU for 10 years.

The bids were closed on 25 June 2021, and the CEB has received only two bids despite some 18 companies purchasing the bidding documents.

The CEB Engineers’ Union (CEBEU) at the time claimed that potential investors had been discouraged by the government’s decision to entertain an unsolicited proposal by the US Company New Fortress Energy (NFE) to supply LNG to two private power plants in Kerawalapitiya including the FSRU and delivery pipeline.

However, according to a senior CEB engineer, this allegation was baseless because another international tender for a combined cycle power plant at Kerawalapitiya published around the same time attracted only a single bid. Industry experts blame international developers’ lack of interest in the dire financial situation in the country that existed at the time.

Out of the two bids received, the offer submitted by a leading US firm that owns and operates a large fleet of FSRUs was rejected by the technical evaluation committee (TEC) because the bidder had sought to conduct on its own expense a complete hydrological study of the offshore location assigned for the FSRU.

Some experts, contacted by The Island agreed that such studies were required for designing the offshore mooring system of the FSRU, which is one of the most critical items in the FSRU operation.

They were of the opinion that it was not usual for FSRU developers to rely on preliminary studies conducted by a third party because mooring system design is a highly specialised job that was not entrusted to unknown parties. However, the CEB has refused the bidder’s request, citing the urgency of implementing this project as the proposed study would take approximately two months. Accordingly, the bid has been rejected without further consideration.

However, despite CEB’s claim of urgency, the TEC is yet to complete the evaluation of the single bid and award the tender, 14 months after the bids were closed. The then CEBEU President Saumya Kumarawadu told The Island in September 2021 that the CEB’s tender was based on a comprehensive feasibility study carried out by experts and the tender was in its final stage of evaluation.

He expressed confidence that the CEB would soon select a suitable investor through a transparent and competitive bidding process, to procure the LNG infrastructure to supply LNG for all existing and future power plants in the country at the most competitive prices.

The TEC has accepted the only remaining offer received from a Chinese company, which is already engaged in road construction contracts in Sri Lanka, submitted in partnership with the Pakistani supplier of the FSRU. It is understood that this “qualifying offer” had quoted a price that is nearly twice that of the offer rejected by the TEC.

Based on the prices offered in the two bids received and the total LNG throughput guaranteed by the CEB in the RFP for the FSRU operation (443 million MMBtu for the 10-year period), the Chinese offer would cost around USD 560 million more than the offer of the US company over the 10-year contract term.

Because of the substantially high price quoted by the selected bidder, it has been decided to negotiate with the bidder with a view to reducing the price. Although the government tender guidelines allow negotiating the price with the selected bidder, they do not permit amendments to original commercial conditions or technical specifications during price negotiations in BOO/BOT projects. However, it is understood that the TEC has agreed to several material changes to the bid conditions including the bidder’s demand to change the designated location of the FSRU, a request adamantly rejected by the CEB during tendering.

The CEB has turned down repeated requests from potential bidders during the pre-bid meetings to change the location of the FSRU specified in the RFP. These parties have claimed that the location specified in the RFP did not have sufficient depth of water needed to float the FSRU.

Industry experts contacted by The Island believed that the CEB’s refusal to change the location may have resulted in the CEB ending up with only two bids. In any event, changing the assigned location of the FSRU is a material deviation from the original tender conditions, especially since the CEB has been clear from the beginning that this change could not be allowed.

The amended IA forwarded by the CEB General Manger is believed to contain several other unfavourable conditions not included in the original IA published with the RFP.

One such amendment is the GOSL’s undertaking to grant exclusive rights to the Chinese company for FSRU operation and delivery of gas to power plants for 10 years. Such a condition will effectively give this company full control of gas supply to nearly 2000 MW of generation capacity in the country, regardless of who supplies LNG.

Ironically, the strong opposition by the CEBEU to the proposal by the US company NFE was based on the allegation that NFE would be given a five-year monopoly for LNG supply in the country under that proposal.

It is also understood that the amended IA has added a new section that will effectively prevent the proposed restructuring of the CEB. Some question whether this is a clever ploy by the CEB engineers, who are opposed to the government’s restructuring of the CEB, to force the GOSL to abandon its reform process.

It is also understood that the amended IA has shifted the burden of obtaining numerous governmental and statutory approvals to the GOSL and CEB. Obtaining such approval is the Project Company’s obligation and the government generally agrees in the IA to provide reasonable assistance.

A senior CEB official contacted by The Island agreed that changing mandatory tender conditions after the award was made would be unlawful and likely to be challenged in court. He stated further that it would be most unlikely that the Ministry of Finance would agree to the changes proposed in the amended IA forwarded by the CEB, as some of these conditions may impinge on the rights of the government.

All News Advertisement

Latest News

Foreign warships commended for their assistance during weather disaster in Sri Lanka

Published

1 hour ago

2026/01/1

Priyan

Highlighting the spirit of global and regional cooperation, the Sri Lanka Navy acknowledged the invaluable support by foreign warships, which had arrived to take part in the International Fleet Review (IFR) 2025, extending much-needed Humanitarian Assistance and Disaster Relief (HADR) operations, during the recent weather disaster in Sri Lanka.

The IFR 2025 was held off the Galle Face seas, marking the milestone 75^th anniversary celebrations of the Sri Lanka Navy.

Representing the Government of Sri Lanka, Prime Minister Dr. Harini Amarasuriya graced the event and received the traditional naval salute from onboard SLNS Gajabahu, as the participating foreign warships paid their honours.

Eight (08) foreign naval warships arrived in Sri Lanka by 27 November to take part in the IFR under the theme “Sailing Strong – Together”. The participating warships included the Bangladesh Navy’s BNS PROTTOY, the Indian Navy’s aircraft carrier INS VIKRANT and INS UDAYGIRI, Iran Navy’s IRIS NAGHDI, the Maldivian Coast Guard’s CGS HURAVEE, the Royal Malaysian Navy’s KD TERENGGANU, Pakistan Navy’s PNS SAIF and Russian Navy’s GREMYASCHCHY.

Due to the disaster-situation triggered by severe weather conditions across the island, foreign warships that arrived for the event were promptly redirected to support humanitarian efforts. Particularly, helicopters deployed from the Indian Navy’s aircraft carrier INS VIKRANT and Pakistan Navy’s PNS SAIF played a praiseworthy role in search and rescue missions for affected communities.

Accordingly, the warships representing each nation joined the IFR, honouring proud maritime traditions and in acknowledgement of Sri Lanka and its Navy. Their participation also reinforced collective cooperation and partnership needed to address non-traditional maritime threats in the region, as well as natural disasters driven by climate change.

The Prime Minister expressed gratitude to a group of diplomatic officials, present on this occasion, for their support in the disaster relief operations. The officials, who were present on the occasion, represented the High Commissions and Embassies of Bangladesh, India, Iran, Maldives, Malaysia, Pakistan, and Russia in Sri Lanka.

Latest News

I invite you to step into 2026 with renewed energy, hope, and determination – PM

Published

4 hours ago

2026/01/1

Priyan

Prime Minister Dr Harini Amarasuriya in her New Year message invited all Sri Lankans to step into 2026 with renewed energy, hope, and determination.

The PM’s New Year message:

“As we move forward to the New Year of 2026, it is timely to reflect on the year 2025 that has passed. The year 2025 can be granted as a year having made a number of decisive and progressive steps with a people oriented government.

I am confident that, within a new political culture, we were able to strengthen transparency in state governance and lay the foundation for an efficient and corruption free public service.

We can be satisfied with the progress achieved in several key areas during 2025, including economic stability, the increasingly positive and optimistic international perception towards our country, the establishment of transparent systems of governance, and the strengthening of the sovereignty of the legislation system.

However, the unfortunate disastrous situation we experienced towards the end of 2025 was a challenging period for our nation. While it deeply moved us all, the spirit of solidarity, compassion, and collectivity shown by Sri Lankans during that difficult situation received admiration across the world.

As we step into the New Year 2026, we hold commitment to overcoming those challenges, healing from the disaster, and restoring the lives and livelihoods that were affected.

Moving forward with the goals such as initiating qualitative and sustainable transformation in the education sector, digitalizing all sectors of the public service, creating an enabling environment for entrepreneurs, artists, and creators with innovative ideas to rise on the global stage, and building a compassionate, environmentally friendly society free from drugs and harmful substances I would like to remind, at this moment, that the responsibility of rebuilding this nation rests upon the entire nation, together with the government, transcending differences of ethnicity, religion, or political affiliation, and united by a strong Sri Lankan identity.

Transforming all the challenges we experienced in the past year into sources of strength, I invite you to step into 2026 with renewed energy, hope, and determination.

I extend wishes for a victorious New Year filled with peace, happiness, and prosperity.”

News

National Audit Office reveals NHSL lapses

Published

6 hours ago

2026/01/1

Thilina Walpola

Reagent scandal:

Deputy Director of the National Hospital, Dr. Rukshan Bellana, has been interdicted by Health Service Committee (HSC) of the Public Service Commission (PSC) following a preliminary inquiry into several complaints received against him, government sources said.

They said certain matters referred by the Secretary to the Prime Minister Dr. Harini Amarasuriya and Inspector General of Police (IGP) Priyantha Weerasooriya, too, had been taken into consideration.

A Health Ministry official said there was no truth in Dr. Bellana’s claim, as reported in the 30th December edition of The Island, that the Health Ministry had sacked him on the approval of the HSC of the PSC over him taking up the massive Rs 900 mn fraud involving the supply of chemical reagents to the laboratory of the National Hospital of Sri Lanka (NHSL) in Colombo, which is the premier hospital in the country.

Sources said that there was absolutely no basis for this allegation. The official said that Dr. Bellana had been interdicted for issuing statements that caused controversy and turmoil among the public. That’s the most serious offence that had been taken into consideration when the decision to interdict him was taken, sources said. “There will be a spate of charges in the charge sheet to be issued soon.”

The interdiction of medical officers could not be carried out by the Ministry of Health and Mass Media, as the Ministry was not vested with disciplinary authority, sources added.

Dr. Bellana said he stood by what he revealed and had evidence to support his claim.

Health Ministry sources acknowledged that the National Audit Office (NAO) on June 6, 2025, had called for information in respect of chemical reagents procured by the National Hospital Colombo NHSL laboratory from 2022 to 2024.

Responding to another query, sources said that a separate investigation by the Internal Audit of the Ministry of Health was on into issues raised by the Audit query pertaining to the lab of the NHSL.

Having pointed out that the government paid Rs. 894,186,168 (2022), Rs. 713,652,615 (2023) and Rs. 936,152,767, totalling Rs 2,543,991,550 for chemical reagents during that period, NAO sought an explanation from the Health Ministry as to how Rs 12,894,697 worth of chemical reagents past expiry dates were found in six laboratories at NHSL during examination carried out on April 7,8,10,21 and 22 in 2025.

The NAO also raised the failure on the part of the relevant authorities to secure the approval of the Medical Supplies Division (MSD) before placing orders with local suppliers for chemical reagents.

The Health Ministry was questioned over the absence of proper stock keeping regarding Rs 2544 mn worth chemical reagents issued to NHSL laboratories. The NAO ascertained that Financial Regulations 751 had been violated. As a result of the absence of credible stock keeping, the NAO hadn’t been able to ascertain whether shelf-life expired chemical reagents were misused, the government authority stated.

The NAO asked for an explanation regarding the payment of Rs 912,838 over the required amount to a local private supplier (NAO named the supplier) for chemical reagents obtained.

In one of the most serious observations, NAO pointed out that shelf-life expired chemical reagents had been used for tests. The NAO raised this while pointing out the Health Ministry violated a key prerequisite in the procurement of chemical reagents that their shelf life should be at least 85% at the time of receiving consignments. Instead, all stocks procured had less than six months shelf life, NAO stated.

NAO declared that some suppliers refrained from mentioning the date of manufacture and the time of expiry.

The above mentioned were some of the issues that had been raised by Audit Superintendent Y.M. Sugathadasa on behalf of the Auditor General who is the head of the NAO. The post of AG remains vacant since December 8, 2025. Earlier incumbent W.P.C. Wickremeratne retired on April 8, 2025 after having served as AG for several years. President Anura Kumara Dissanayake and the Constitutional Council haven’t been able to reach consensus on a permanent appointment yet.

By Shamindra Ferdinando ✍️