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Importing of liquefied natural gas – Past efforts and future prospects

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By Dr Janaka Ratnasiri

The Island of 29.12.2020 carried a write up by Eng. Parakrama Jayasinghe in which he queried about the “very severe uncertainty of the source and the means of supplying the LNG necessary to operate the 300 MW LNG plant and the necessity for pursuing options for more LNG plants with India and Japan and now with the USA”? Though the term “LNG” appears here, it is something new to people in the country. Hence this write-up is published to apprise the readers what LNG is and highlight the progress made so far in procuring the gas, based on information available in the public domain.

 

GLOBAL PRODUCTION AND TRANSPORT OF NATURAL GAS

Natural gas (NG), though a new energy source yet to be introduced in Sri Lanka, has been in use world-wide since the middle of the last century. NG has been used in a variety of applications such as power generation, space heating, household cooking, thermal energy generation in industries, running motor vehicles and as a feedstock for a wide range of industries including fertilizers. Today, natural gas has a share of about 27% in the overall global energy supply and 23% in the generation of electricity.

Natural gas is the preferred fuel today for generating heat and power because of its many benefits. It does not produce any ash or particulates or smoke or toxic gases such as Sulphur Dioxide or toxic heavy metals like Mercury, Arsenic, Cobalt, Chromium or radionuclides, on combustion like in the case of coal or oil. Even the Oxides of Nitrogen produced is minimal and Carbon Dioxide produced is no more than 50% of what a similar capacity coal power plant produces. Hence many countries switch from coal to NG with the objective of reducing the emission of Carbon Dioxide which the countries have committed to under the Paris Agreement on Climate Change.

Though nearly 100 countries have been producing NG world-wide, amounting to about 4,000 Billion cubic metres in 2019, only about 65 countries have produced more than 1 Billion cm each annually. Among the Indian Ocean rim countries, NG is produced in Qatar, Malaysia, Brunei, Tanzania, Myanmar, Indonesia and Australia. Natural gas is transported across continents in pipelines extending thousands of kilometres. For transporting across oceans, the gas is first converted into liquefied natural gas (LNG) by cooling down to -162 oC when its volume reduces to 1/600 of the original value.

Transportation of LNG across oceans is done in purposely built carriers with capacity between 150,000 and 250,000 cubic metres (cm) of LNG. Loading and unloading of LNG require special terminals having deep jetties which are costly to build. Once imported, LNG is converted into gas and stored under pressure for distribution among consumers in pipelines or as compressed natural gas (CNG) in cylinders. For distant consumers, LNG itself is transported in insulated containers by road trucks to consumer points.

 

PAST EFFORTS FOR IMPORTING LNG

During the past 20 years, there were several unsolicited proposals received for importing LNG, some through the Board of Investment (BOI) and others through political entities. Most of them were either rejected or withdrawn for various reasons, one being lack of transparency, but a few are still awaiting the green light from the Government. Though the Ministry of Petroleum had the authority to consider these proposals, they appeared to be rather reluctant to venture into a new area unknown hitherto, and took no action.

In the meantime, a representative of an Indian Gas Company visited Sri Lanka in mid-2016 and offered to bring LNG from their terminal in Kochin, Kerala. The terminal was being operated below capacity and the Company wanted to sell their surplus gas to Sri Lanka at the same rate they are paying for the imported gas with a slight mark up. They too did not receive any positive response.

When Sri Lanka PM met Indian PM in New Delhi in April 2017, the two heads of states entered into a Memorandum of Understanding (MOU) for collaboration in several sectors including the power sector, under which importing of LNG and building a 500 MW gas power plant were included. The same Indian Company who offered to bring LNG was named as the Indian counterpart.

In 2016, Japan also had offered to build a 500 MW coal power plant which the Sri Lanka Government had accepted. However, with the government’s change of policy to shift from coal to gas for power generation, the government requested Japan to change its offer to a gas power plant of same capacity which Japan agreed to. The Cabinet of Ministers (COM) on 11.07.2017 accepted the two proposals to build gas power plants each with capacity 500 MW offered by India and Japan.

This was followed up by a decision taken by the COM on 27.02.2018 to grant approval for Sri Lanka to establish a tripartite joint venture (TJV) comprising 15% equity held by Sri Lanka, 47.5% by nominee of India and 37.5% by nominee of Japan for the purpose of implementing the project.

The COM also decided to vest authority with the newly established Sri Lanka Gas Terminal Company Ltd. (SLGTC), a fully-owned subsidiary of Sri Lanka Ports Authority (SLPA), to enter into Agreements with the Indian and Japanese parties. The SLGTC was also nominated as the Developer for the Project. It is surprising why SLPA was authorized by the Government to import LNG when it has no mandate for it.

A MOU was signed among foreign members of the TJV and the SLGTC on 09.04.2018 probably confirming the responsibilities and commitments of each partner, which are still not made public. It is not known whether India and Japan would share the cost of the project and if so, in what ratio or jointly undertake its operation and maintenance or make in-kind contribution of transferring technology.

 

PRE-FEASIBILITY AND EIA REPORT ON THE PROJECT

A pre-feasibility study (PFS) was undertaken in 2017 by one of the Japanese partners of the TJV, which had recommended setting up a floating storage and regasification unit (FSRU) moored initially in the South Port breakwater of Colombo Port. According to the PFS, the FSRU will have a draught of 12.5 m. The cost is expected to be around USD 225 Million and can be set up in 2.5 years.

A report by ADB on the proposed National Port Master Plan– Volume 2 (Part 5) released in February 2020, includes a section on FSRU to be located within the Port premises and gives details of its design and operation. (https://www.adb.org/sites/default/files/project-documents/50184/50184-001-tacr-en_10.pdf). According to this study, the gas pipelines will connect the FSRU to the existing power plants at Kelanitissa and Kerawalapitiya laid part under water and part over land through the city and that the maximum send-out capacity of the of the terminal will be around 3.8 Mt LNG annually, which is on the high side.

Having found the project feasible, the TJV engaged the Environmental Resources Management (ERM) of Japan, to undertake an EIA study for the project which was completed in August 2019. The EIA Report was open for public scrutiny during December 2019. It is the general practice and a legal requirement to conduct a public hearing on the EIA report based on public comments received on it. However, there was neither a public hearing nor any announcement made as to whether the EIA Report was accepted or not, though almost one year has lapsed since closing of public comments.

The Writer responded highlighting shortcomings in many areas including discrepancies in capacity estimates, alternative supplies, exclusion zones, impact on Port operation, lack of mechanism for issuing operator licences and monitoring, issues with the site, safety aspects, lack of fire-fighting facilities, issues on routing the pipeline along city streets and issues on procurement of LNG, but received not even an acknowledgement or an invitation for a hearing.

 

FEASIBILITY STUDY OF THE PROJECT

In March 2019, the GoSL requested ADB for technical and financial assistance to conduct a detailed feasibility study on establishing the FSRU. The proposal named the CEB as the implementing agency and wanted the Technical Assistance Package (TAP) to include building the capacity of CEB to undertake the assignment. The ADB, in June 2009 approved an allocation of USD 225,000 as a grant to implement the feasibility study, including training of the CEB staff. The ADB study is expected to be completed by May 2020. (https://www.adb.org/sites/default/files/project-documents/53193/53193-001-tam-en.pdf).

The package envisaged hiring on short-term basis experts on LNG Infrastructure Design; Marine Engineering; NG Pipeline Planning & Design and Financial & Commercial aspects to work out the optimal capacity for meeting the demand for using the gas for operating the existing and proposed new gas turbine power plants. The package also included holding training workshops to build the capacity of CEB engineers to handle the operation of the gas supply to the power plants.

Though the consultancy requires initial assessment of capacity of CEB staff to handle LNG import, being electrical engineers, one may safely assume that their capacity to undertake this assignment is almost nil. It is expected that the operation of the FSRU itself will be the responsibility of the supplier. It is surprising why ADB agreed to train a set of electrical engineers who are not qualified to work with LNG when LNG importing is outside the mandate of CEB.

 

CALLING PROPOSALS AND IMPLEMENTING THE PROJECT

The findings of the feasibility study are not available in the public domain yet, though supposed to have been completed more than six months ago. The ADB report is expected to include draft of request for proposals (RFP) from prospective suppliers for establishing the FSRU. This needs Cabinet approval before announcing, appointment of Technical Evaluation Committee (TEC) and Cabinet appointed Negotiation Committee (CANC). Once bids are received, it is necessary to have them evaluated by the TEC and approval by the CNC and finally by the Cabinet before the award of the contract is made. All these will take a minimum of two years going by the past experience.

Once the contractor is selected, CEB will have to negotiate the financial package with the contractor and considering the country’s poor credit rating internationally, it will be difficult to raise the finances through commercial banks, unless a multi-lateral financial institute like IMF or World Bank comes to Sri Lanka’s rescue or the TJV partners will contribute and this process itself will take more than a year.

These negotiations including signing contracts and the lead time in securing a FSRU and setting it up will take a minimum of another 3 years. This means that the country cannot expect to have the benefit of LNG this side of 6 years.

 

AUTHORITY FOR IMPORTING LNG AND DISTRIBUTING THE GAS

 

During the Yahapalana regime, the function of importing LNG and its distribution was vested in the Ministry of Petroleum through a gazette notification announced on 15.09.2015. However, during the subsequent regime, this function was entrusted to CEB by a decision of the COM. In the interim Cabinet appointed under the current regime, the function of “importing, refining, storage, distribution and marketing, coordination and implementation of petroleum-based products and natural gas” was assigned to the Ministry of Power and Energy by the Gazette Notification No. 2153/12 of 10.12.2019. Subsequently, with the appointment of the new Cabinet after the general election in August 2020, the Ministry of Energy was assigned the above functions related to natural gas.

A separate ADB publication on “Sri Lanka Energy Sector Assessment, Strategy, and Road Map” released in December 2019 says with regard to building LNG delivery infrastructure that “Since the LNG terminal may be used by many stakeholders for importation and storage, the terminal need not be under the CEB or power sector utilities and a more suitable arrangement would be a multiuser terminal facilitated by petroleum sector institutions”.

Surprisingly, the recommendation of this ADB report contradicts what is included in the ADB’s TAP referred to earlier where ADB has agreed to build capacity of CEB staff to handle operation of the proposed LNG terminal. As a matter of fact, the establishment of SLGTC has already been authorized by the COM on 27.02.2018 to handle matters related to LNG and NG matters. Further, the CEB Act does not give CEB any mandate to import fuel.

It is therefore surprising that the Government has sought assistance from the ADB to build the capacity of CEB to import LNG for power plant operation, as described in the previous section. Regrettably, the two Government institutions, SLPA and CEB are moving in different paths to achieve the same objective.

While the Government has given clear directive that matters pertaining to natural gas should be handled by the Ministry of Energy, it is not prudent to allow the CEB to handle it on grounds that it is CEB who will be consuming natural gas. If this is allowed, next time CEB will want to import petroleum oil as well for use in power plants.

 

REGULATORY BODY FOR THE LNG/NG INDUSTRY

 

With the closure of the Public Utilities Commission, it is now necessary to have a separate body under the purview of the Ministry of Energy to serve as the regulator and monitor for the gas sub-sector in the country. This body should be responsible for granting approval for all LNG/NG projects, monitor their operation and ensure all safety aspects are complied with according to international classified society standards, grant licenses for LNG/NG system operators, maintenance and installation technicians and safety officers.

It should be granted authority to determine prices levied for selling LNG/NG for different purposes; power generation, industrial heating, commercial and domestic application and as industrial feedstock, and should have powers similar to what the PUCSL was granted. In order to make this body effective, it is necessary to recruit staff with good academic background and experience working in the petroleum field and given further training enabling them to undertake the expected assignments efficiently. However, if CEB is permitted to import LNG, it is doubtful whether CEB will want another body to regulate and monitor them, as happening currently.

 

CONCLUSION

The Government had received several proposals for importing LNG during the past 20 years, but none were considered seriously. Interventions by foreign governments in 2017 prompted commencement of negotiations with them for importing LNG through a Tripartite Joint Venture set up three years ago. During this period, a pre-feasibility study including environment impact studies was undertaken which has recommended setting up a floating terminal within the Colombo Port premises. Subsequently, a detailed feasibility study was also undertaken findings of which are yet to be published.

There is lack of clarity as to who should import LNG and distribute the gas. Calling for proposals from prospective suppliers, their selection, signing of contracts, raising finances, getting Cabinet approvals and actual construction of the terminal will take at least another six years going by the past experience, unless the President directs the relevant officials to fast tract the process, enabling early realization of the objectives given in the Saubhagye Dekma Policy Framework.

There are however, faster ways of getting LNG into the country at least to operate the first 300 MW gas fired power plant bypassing all these procedures, but their discussion will be kept for a later article to save space here.

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Govt.’s choice is dialogue over confrontation

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By Jehan Perera

Preparing for the forthcoming UN Human Rights Council cannot be easy for a government elected on a nationalist platform that was very critical of international intervention. When the government declared its intention to withdraw from Sri Lanka’s co-sponsorship of the October 2015 resolution No. 30/1 last February, it may have been hoping that this would be the end of the matter. However, this is not to be. The UN Human Rights High Commissioner’s report that will be taken up at the forthcoming UNHRC session in March contains a slate of proposals that are severely punitive in nature and will need to be mitigated. These include targeted economic sanctions, travel bans and even the involvement of the International Criminal Court.

Since UN Secretary General Ban Ki-Moon’s visit in May 2009 just a few days after the three-decade long war came to its bloody termination, Sri Lanka has been a regular part of the UNHRC’s formal discussion and sometimes even taking the centre stage. Three resolutions were passed on Sri Lanka under acrimonious circumstances, with Sri Lanka winning the very first one, but losing the next two. As the country became internationally known for its opposition to revisiting the past, sanctions and hostile propaganda against it began to mount. It was only after the then Sri Lankan government in 2015 agreed to co-sponsor a fresh resolution did the clouds begin to dispel.

Clearly in preparation for the forthcoming UNHRC session in Geneva in March, the government has finally delivered on a promise it made a year ago at the same venue. In February 2020 Foreign Minister Dinesh Gunawardena sought to prepare the ground for Sri Lanka’s withdrawal from co-sponsorship of UN Human Rights Council resolution No 30/1 of 2015. His speech in Geneva highlighted two important issues. The first, and most important to Sri Lanka’s future, was that the government did not wish to break its relationships with the UN system and its mechanisms. He said, “Sri Lanka will continue to remain engaged with, and seek as required, the assistance of the UN and its agencies including the regular human rights mandates/bodies and mechanisms in capacity building and technical assistance, in keeping with domestic priorities and policies.”

Second, the Foreign Minister concluding his speech at the UNHRC session in Geneva saying “No one has the well-being of the multi-ethnic, multi-lingual, multi-religious and multi-cultural people of Sri Lanka closer to their heart, than the Government of Sri Lanka. It is this motivation that guides our commitment and resolve to move towards comprehensive reconciliation and an era of stable peace and prosperity for our people.” On that occasion the government pledged to set up a commission of inquiry to inquire into the findings of previous commissions of inquiry. The government’s action of appointing a sitting Supreme Court judge as the chairperson of a three-member presidential commission of inquiry into the findings and recommendations of earlier commissions and official bodies can be seen as the start point of its response to the UNHRC.

 

 

NEGATIVE RESPONSE

 

The government’s setting up of a Commission of Inquiry has yet to find a positive response from the international and national human rights community and may not find it at all. The national legal commentator Kishali Pinto Jayawardene has written that “the tasks encompassed within its mandate have already been performed by the Lessons Learnt and Reconciliation Commission (LLRC, 2011) under the term of this President’s brother, himself the country’s Executive President at the time, Mahinda Rajapaksa.” Amnesty International has stated that “Sri Lanka has a litany of such failed COIs that Amnesty International has extensively documented.” It goes on to quote from the UN High Commissioner for Human Rights that “Domestic processes have consistently failed to deliver accountability in the past and I am not convinced the appointment of yet another Commission of Inquiry will advance this agenda. As a result, victims remain denied justice and Sri Lankans from all communities have no guarantee that past patterns of human rights violations will not recur.”

It appears that the government intends its appointment of the COI to meet the demand for accountability in regard to past human rights violations. Its mandate includes to “Find out whether preceding Commissions of Inquiry and Committees which have been appointed to investigate into human rights violations, have revealed any human rights violations, serious violations of the international humanitarian law and other such serious offences.” In the past the government has not been prepared to accept that such violations took place in a way that is deserving of so much of international scrutiny. Time and again the point has been made in Sri Lanka that there are no clean wars fought anywhere in the world.

International organisations that stands for the principles of international human rights will necessarily be acting according to their mandates. These include seeking the intervention of international judicial mechanisms or seeking to promote hybrid international and national joint mechanisms within countries in which the legal structures have not been successful in ensuring justice. The latter was on the cards in regard to Resolution 30/1 from which the government withdrew its co-sponsorship. The previous government leaders who agreed to this resolution had to publicly deny any such intention in view of overwhelming political and public opposition to such a hybrid mechanism. The present government has made it clear that it will not accept international or hybrid mechanisms.

 

 

SEQUENTIAL IMPLEMENATION

 

In the preamble to the establishment of the COI the government has made some very constructive statements that open up the space for dialogue on issues of accountability, human rights and reconciliation. It states that “the policy of the Government of Sri Lanka is to continue to work with the United Nations and its Agencies to achieve accountability and human resource development for achieving sustainable peace and reconciliation, even though Sri Lanka withdrew from the co-sponsorship of the aforesaid resolutions” and further goes on to say that “the Government of Sri Lanka is committed to ensure that, other issues remain to be resolved through democratic and legal processes and to make institutional reforms where necessary to ensure justice and reconciliation.”

As the representative of a sovereign state, the government cannot be compelled to either accept international mechanisms or to prosecute those it does not wish to prosecute. At the same time its willingness to discuss the issues of accountability, justice and reconciliation as outlined in the preamble can be considered positively. The concept of transitional justice on which Resolution No 30/1 was built consists of the four pillars of truth, accountability, reparations and institutional reform. There is international debate on whether these four pillars should be implemented simultaneously or whether it is acceptable that they be implemented sequentially depending on the country context.

The government has already commenced the reparations process by establishing the Office for Reparations and to allocate a monthly sum of Rs 6000 to all those who have obtained Certificates of Absence (of their relatives) from the Office of Missing Persons. This process of compensation can be speeded up, widened and improved. It is also reported that the government is willing to consider the plight of suspected members of the LTTE who have been in detention without trial, and in some cases without even being indicted, for more than 10 years. The sooner action is taken the better. The government can also seek the assistance of the international community, and India in particular, to develop the war affected parts of the country on the lines of the Marshall Plan that the United States utilized to rebuild war destroyed parts of Europe. Member countries of the UNHRC need to be convinced that the government’s actions will take forward the national reconciliation process to vote to close the chapter on UNHRC resolution 30/1 in March 2021.

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Album to celebrate 30 years

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Rajiv Sebastian had mega plans to celebrate 30 years, in showbiz, and the plans included concerts, both local and foreign. But, with the pandemic, the singer had to put everything on hold.

However, in order to remember this great occasion, the singer has done an album, made up of 12 songs, featuring several well known artistes, including Sunil of the Gypsies.

All the songs have been composed, very specially for this album.

Among the highlights will be a duet, featuring Rajiv and the Derena DreamStar winner, Andrea Fallen.

Andrea, I’m told, will also be featured, doing a solo spot, on the album.

Rajiv and his band The Clan handle the Friday night scene at The Cinnamon Grand Breeze Bar, from 07.30 pm, onwards.

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LET’S DO IT … in the new normal

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The local showbiz scene is certainly brightening up – of course, in the ‘new normal’ format (and we hope so!)

Going back to the old format would be disastrous, especially as the country is experiencing a surge in Covid-19 cases, and the Western Province is said to be high on the list of new cases.

But…life has to go on, and with the necessary precautions taken, we can certainly enjoy what the ‘new normal’ has to offer us…by way of entertainment.

Bassist Benjy, who leads the band Aquarius, is happy that is hard work is finally bringing the band the desired results – where work is concerned.

Although new to the entertainment scene, Aquarius had lots of good things coming their way, but the pandemic ruined it all – not only for Aquarius but also for everyone connected with showbiz.

However, there are positive signs, on the horizon, and Benjy indicated to us that he is enthusiastically looking forward to making it a happening scene – wherever they perform.

And, this Friday night (January 29th), Aquarius will be doing their thing at The Show By O, Mount Lavinia – a beach front venue.

Benjy says he is planning out something extra special for this particular night.

“This is our very first outing, as a band, at The Show By O, so we want to make it memorable for all those who turn up this Friday.”

The legendary bassist, who lights up the stage, whenever he booms into action, is looking forward to seeing music lovers, and all those who missed out on being entertained for quite a while, at the Mount Lavinia venue, this Friday.

“I assure you, it will be a night to be remembered.”

Benjy and Aquarius will also be doing their thing, every Saturday evening, at the Darley rd. Pub & Restaurant, Colombo 10.

In fact, they were featured at this particular venue, late last year, but the second wave of Covid-19 ended their gigs.

Also new to the scene – very new, I would say – is Ishini and her band, The Branch.

Of course, Ishini is a singer of repute, having performed with Mirage, but as Ishini and The Branch, they are brand new!

Nevertheless, they were featured at certain five-star venues, during the past few weeks…of their existence.

 

 

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