Dr. Dayan Jayatilleka
Who says the economic crisis cannot be dented? The prerequisite is that the austerity approaches of both the militarist-ultranationalist GR regime and the ‘IMF plus debt consortium’ option of the neoliberals, are rejected. An out-of-the box, but hardly unique approach is needed.
The present economic epidemic can be dented by a ‘double-vaccination’ alternative policy:
(A) Cut the ‘bloat’ of the Defence budget. There is hypertrophy, if not metastasis, of defence spending. Bring defence expenditure to the level of sufficiency in peacetime. Reassess and right-size it.
(B) Increase appropriately the direct taxes (not transferrable to the consumer) on the biggest corporates and wealthiest citizens. If anyone thinks that’s my residual radicalism rising, they’ve not read US President Joe Biden and more especially, US Treasury Secretary Janet Yellen.
Sri Lanka’s agrarian crisis was not caused by the Covid-19 pandemic. It was the result of deliberate presidential policy which could have been abandoned at any point, but has not.
Unlike India, Sri Lanka after Independence never had a rebellious peasant movement, though it has a long history of peasant associations. The sole exception was when a peasants struggle was led (in Anuradhapura, I think) by the All-Lanka Peasants Congress (‘Samastha Lanka Govi Sammelanaya’) led by Ariyawansa Gunasekara of the Communist Party.
That struggle ended in a very Ceylonese way. The highly literate, brilliantly articulate (and witty) young cadre sent fresh from the university by the Communist Party to ideologically guide the struggle, Tissa Wijeratne, and the daughter of the rapacious large landowner the peasants were rebelling against, fell in love and married– and that was that.
All that’s ended, gone with the wind, thanks to President Gotabaya Rajapaksa’s incredible agrarian policy of a shock ban, nationwide, on chemical fertilizer, weedicide and pesticide.
His stand on this flies in the face of scientific evidence as well as of political good sense.
The smartest and toughest-minded of rulers, Lenin, reversed his agrarian policy twice. The first-time round was when, just before the Revolution, the Bolshevik party abandoned its peasant program of collectivization and literally stole the far more moderate peasant program, sensitive to the needs of the individual peasants, of its political rival the Socialist-Revolutionaries (the ‘SRs’).
The second time is better known. When the tight economic policy of War Communism which included forced requisitioning of grain by the Red Army to feed the citizens of the cities, exploded in the Kronstadt rebellion (which was suppressed by Trotsky), Lenin swiftly adopted the New Economic Policy (NEP) which liberalized the economy and enabled peasant prosperity.
Vietnam’s Ho Chi Minh, a strong and sagacious leader also reversed the harsh agrarian policy of his comrade Truong Chinh, and won back the peasantry. Then of course there is Deng Xiaoping, who kicked-off China’s economic miracle by liberalizing the rural economy and facilitating prosperity in the countryside.
The lesson is that the toughest leaders who were also the smartest, never went against the peasantry and when they found they had done so, unhesitatingly reversed course and beat a retreat.
The fact that Sri Lanka’s rulers think they know better, and don’t have to do likewise, tells us, the peasants and the world, a great deal about them. What makes them think they are immune to the political and socioeconomic fate that even Lenin wished to avoid, sure beats me.
The answer may lie in a specialized field of medical knowledge in which I have neither training nor experience and therefore will not venture into.
Gamani Corea-Godfrey Gunatilleke-Lal Jayawardena Tradition
It is not only the discourse of the regime’s policy elite in all domains that are embarrassingly outdated in translation into any universal language. The anti-regime neoliberals, writing in English, are no less embarrassing by international standards.
The latest issue of The New Yorker (October 8th 2021) carries in the Annals of Inquiry column, essay entitled ‘Is it time for a New Economics Curriculum?’ and introduces “‘The Economy’ a new textbook, is designed for a post-neoliberal age”.
Sri Lanka’s neoliberals, most conspicuously but not only the economists, just do not know that it is a “post-neoliberal age”. Their writings and pronouncements show that they still live in a time-warp of a unipolar post-Cold War world of free-market neoliberal globalism. For them the Great Recession of 2008 never happened and even if it did, it may no difference to their theoretical and policy constructs.
During the Great Recession of 2008, I was the elected Chairman of the ILO in Geneva, and had the privilege of working with ILO Director-General Juan Somavia, in launching the Decent Work agenda globally, starting with an event in Portugal hosted by the Socialist Prime Minister. As Chilean ambassador/Permanent Representative to the UN in New York, Somavia had organized the 1995 UN Social Summit in Copenhagen which already intellectually upended the neoliberal-globalist ideological construct that most Sri Lankan economists continue to adhere to and advocate.
In 2008 we worked closely with UN General Assembly President Miguel D’Escoto, former foreign minister of Sandinista Nicaragua, who came over to Geneva. He had appointed a Commission to report on globalization and the crisis, chaired by Nobel prize winner Joe Stiglitz, former chief economist of the World Bank.
Geneva was a town in which Dr Gamani Corea, former Secretary-General of UNCTAD and later, head of the South Center was remembered with great respect. Whether it was in my work as ILO Chairman, or a Vice-President of a UN Human Rights Council or Ambassador to the Conference on Disarmament, a cluster of Sri Lankan names kept cropping up: Gamani Corea, Godfrey Gunatilleke, CG Weeramantry and Lal Jayawardena. Miguel D’Escoto, a former Catholic priest of the Maryknoll order (during and after the 1979 revolution even as Foreign Minister, he was “Padre Miguel”), held Fr. Tissa Balasuriya in high esteem. Prof Emeritus of International Law at Princeton, Richard Falk asked me for Godfrey Gunatilleke’s email address to renew his old acquaintance.
Which is why I am amused at those rightwing economists who mention Gamani Corea without mentioning Godfrey Gunatilleke, which is rather like mentioning Karl Marx and associating his name with someone other than his co-thinker Fredrick Engels. Certainly, in Geneva and Paris, the Sri Lankan economist mentioned with the most respect together with Gamani Corea and Godfrey Gunatilleke, is the late Dr Lal Jayewardena, student of Eric Hobsbawm and Director of the World Institute of Development Economic Research (WIDER) in Finland.
It is also ridiculously illogical for those who detest and revile the Raul Prebisch-Gamini Corea tradition and sanctify Dr. Corea’s antipode in Sri Lanka’s economic policy-making, BR Shenoy, to take it upon themselves to classify one of their free-market/free-trade co-thinkers and academic heroes in the same category as Gamani Corea, while ignoring both Godfrey Gunatilleke and Lal Jayawardena.
Contrary to Colombo’s rightwing economists, President Premadasa’s most noteworthy developmental contribution was NOT a deepening or ‘second wave’ of liberalization. Non-sequential fusion of rapid growth with social upliftment and equity was.
Janasaviya, the housing programme, redistribution of state lands free to the landless, free schools uniforms, free mid-day meals for schoolchildren, strict conditionalities on labor conditions (air-conditioning, free meals including buns at teatime, etc.) imposed on the 300 garment factories program in exchange for state bank loans, and the 15,000 projects program, provide empirical evidence.
The SJB’s identity crisis
by Uditha Devapriya
Who is winning the battle of ideas? Not the government, it’s mired in too many crises to claim victory of any sort. The Opposition, perhaps, but it depends on what opposition you are talking about. The anti-regimists are split into two camps: those who want the party in power out, and those who want a new party in. The SJB subscribes to the former strategy, the JVP to the latter.
Caught in-between are the likes of Champika Ranawaka, who more or less sway between acceptance of a major crisis of legitimacy and acceptance of a pragmatist course of action. The JVP obviously idealises itself as the next party in power, and through its parliamentary avatar, the NPP, it is trying to win constituencies the government has lost, massively. Being the idealists that they are, they also spurn the SJB.
Despite what the naysayers will say and despite concerns about social gatherings during a pandemic, the SJB turnout was a success. People may not have been consciously joining the SJB, and it’s futile to conflate protests with votes, but this was the biggest such rally since Nugegoda 2015. In that sense Kumar David is absolutely right when he writes that the party “made a correct judgement call.” The government erred by trying to stop the protests, but then that is what governments do. That the SJB continued despite these obstacles and that it brought in urban and suburban elements revealed the seething discontent that threatens to undermine this regime and any semblance of order. This is why the rally was significant: it underscored the need to channel discontent through democratic outfits.
It remains to be seen whether people will respond to these developments this way. On the one hand, the need for a real Opposition has surfaced. On the other, frustration at there not being a proper Opposition has also gained ground. People may want the SLPP out, but does that necessary mean they want the SJB in? Colombo’s upper and upper middle classes seem more beholden than ever to the UNP’s policies, while an increasingly proletarianised lower middle class seem attracted to the JVP’s message. That leaves the peasantry, which frankly speaking no organisation appears to be considering seriously.
A multi-class resistance is the call of the hour. But multi-class resistance makes sense only if there is multi-class political mobilisation. Split on so many points, the Opposition has failed to bring about such mobilisation. This does not augur well for the SJB. As I have mentioned many times in this column, part of the problem lies in the SJB itself. For a party that formed and identified itself as an alternative to the UNP, it is fascinating how so many of its MPs are touting the UNP line on so many matters, calling for a return to the past.
When Tharaka Balasuriya, one of the more intelligent MPs in the present administration, asked if the SJB followed Mangala Samaraweera’s foreign policy, Imthiaz Bakeer Markar deftly deflected the question. Such a tactic will not work if the SJB does, in this instance, tout Mr Samaraweera’s line, or for that matter his ideology, which as Ramindu Perera in a recent piece (“Was Mangala ‘progressive’?”) has outlined is progressive only for those who conflate liberal rhetoric with commitment to social justice.
It must be mentioned here that Mr Bakeer Markar is one of the few who identify the Samagi Jana Balawegaya in opposition to and not in line with such policies. Yet this is a strategy the need for which very few of his colleagues seem to realise, much less concede.
Mr Markar was frank in his response to Mr Balasuriya. He made his argument, that the SJB should not be judged by the actions of the UNP, using the analogy of the SLFP under S. W. R. D. Bandaranaike and the UNP under J. R. Jayewardene. He effectively argued that just as Bandaranaike had forged a new party and Jayewardene a new set of policies for the old party, Sajith Premadasa had left the old party and the old policies for a new programme. This is what Dayan Jayatilleka has underscored as well: that if new parties and new political personalities have to be held against the actions of the old, then Mahinda Rajapaksa would have to be blamed for the Chandrika Kumaratunga government’s P-TOMs arrangement and Ranasinghe Premadasa for the Jayewardene government’s excesses.
The argument is logically sound, almost impeccable, but it does not ring true enough. Why do I say this? While Mr Markar is taking great pains to distinguish Ranil Wickremesinghe’s UNP from Sajith Premadasa’s SJB, not a few MPs from the latter are emphasising their links to the former. Some time back I drew a line between three groups in the SJB: the Old Guard, whose political careers were boosted by Wickremesinghe’s UNP, the Young Turks, who were overlooked in favour of Wickremesinghe’s Royalist Cabal at the height of the UNP’s power, and everyone else in-between, who feign neutrality but make statements highlighting their allegiance to the one or the other from time to time. While no conflict has arisen between these groups as yet, in the almost contradictory despatches they issue to the media and the public, one notices a lack of ideological cohesion, indeed of unity.
Thus, while Mr Markar and Dr Jayatilleka carry on their campaigns, differentiating the son from the father, a great many SJB MPs are emphasising the need to carry on with a very different campaign, of bringing the son back to the father. To borrow Mr Markar’s analogy again, this would be akin to S. W. R. D. Bandaranaike returning to Dudley Senanayake’s and John Kotelawala’s UNP before the 1956 election, or Ranasinghe Premadasa recycling J. R. Jayewardene’s policies. It would be tantamount to saying that the yahapalana experiment under Ranil Wickremesinghe’s UNP was a success and that its economic, social, and foreign policies constitute the ideals which the SJB ought to aspire to.
As far as yahapalanism is concerned, those in the SJB who advocate a return to it frequently emphasise two points: that regime’s jaunts to Geneva and Washington, and its repackaging of neoliberal economics under a social market veneer. This explains why Harsha de Silva’s eloquent and fine speech on the foreign policy blunders of the SLPP government detoured to a commendation of the Resolution that Sri Lanka co-sponsored, essentially against itself, in 2015. It also explains the view, held by some SJB MPs, that Sri Lanka needs an economic package involving neoliberal free market reforms. Contrasted with Mr Markar’s arguments distancing the UNP’s policies from the SJB, such invocations of yahapalanism seem to me a case of chalk and cheese: some want to avoid the grand old party and its not so grand legacy, but others seem to be in favour of bringing that party to their platform.
This is the fatal contradiction that explains the SJB’s less than stellar performance so far, one and a half years on. Sarath Fonseka was correct in his view that the SJB has not proved itself as a viable alternative. But while many have diagnosed the problem correctly, they have not given the correct prognosis. To me the issue is clear enough: if you want to differentiate the new party from the old, why advocate a return to the old party, indeed even joining up with the old, frequently? You may advocate everything the UNP stood for, but what’s the point if a great many of your fellow MPs, particularly the younger Turks, are emphasising an identity for the SJB that is different in almost every respect from the UNP? When Mr Markar makes his claims in parliament, at day, and other MPs betray their belief in the ideology of a party he disavows, at night, what’s the message voters are going to get?
If the government has been saved by a divided Opposition, the Opposition, the SJB, has been saved by the government’s blunders. The idea has formed that the SJB, had it been in power, wouldn’t have been as bad as the SLPP. But so has the idea that the SJB would not have been as good as the SLPP. Meanwhile, the JVP, or the NPP, continues to canvass votes from the impoverished middle-class and other sections of the population, and Champika Ranawaka’s 43 Senankaya, after a promising start, continues to go nowhere.
As of now, the only party that has the numbers in parliament is the SJB. True, it has a major liability with partners like the SLMC, which has time and time again proved that its loyalties lie with anyone that will offer its members cushy posts. But this is an in-house problem, and it can be resolved. Not so easy to resolve is that paradox I outlined at the beginning: while distancing itself from the UNP, it is also getting close to it. Why anyone would want to vote for an outfit that can’t make head or tail of where it wants to go beats me. In that sense the SJB has a major identity crisis. The more it refuses to engage with or address that crisis, the bleaker its electoral prospects will be. It cannot afford to be complacent.
In the marketplace of votes, political parties should know what they are saying, and more importantly, why. The SJB may be aware of what it is saying. But does it know why? On this question rests no less than its future, and no less than the future of the country.
The writer can be reached at firstname.lastname@example.org
Is there a credible political alternative for Sri Lanka?
by Tissa Jayatilaka
Why do Sri Lankan voters elect and re-elect corrupt and discredited politicians? This topic has been much talked about and commented on in newspapers and social media ever since Gotabaya Rajapaksa, in a rare moment of self-realization, asked the above question from the voters of Sri Lanka. Why indeed?
Two years before the president posed this question in November 2019, I asked myself the very same question when, to my disbelief and dismay, 6.9 million voters elected Gotabaya Rajapaksa (GR) as executive president. For the purposes of this essay I consider GR to have been a politician since 2005 when, as a political appointee to the post of secretary to the ministry of defence, he wielded more power than any other politician except his older sibling, the then executive president.
A few months after the presidential election, when the results of the parliamentary polls held in August 2020 were announced, the disbelief and dismay I experienced in November 2019 deepened on seeing the re-election of Mahinda Rajapaksa (this time around as prime minister), together with some of his family members and toadies in tow.
This habit of electing and re-electing corrupt and discredited politicians seems second nature to our voters. How else is one to explain the outcomes of the 2019/2020 polls? Regardless of the spectacular failure of the Maithripala Sirisena – Ranil Wickremesinghe National Unity government of 2015, was it a wise decision to vote in yet another Rajapaksa-led administration given the track record of its predecessors; a track record dominated by authoritarianism, rampant corruption, a flagrant disregard for law and order and a pronounced Sinhala majoritarian mindset to boot? Had the Sri Lankan voter forgotten in a space of a few years the perfidy, to put it mildly, of the Rajapaksa-led United People’s Freedom Alliance administration which so dreadfully mis-governed us from 2005 -2014?
What made possible the return of the Rajapaksas in 2019/20 was a fresh infusion of the Sinhala majoritarian politics which has a long and checquered history in our country. Historians consider that the Reforms of the colonial Governor Sir William Manning (1918-1925) led initially to the disruption of the relative inter-ethnic harmony that then prevailed in the country. Until Manning came on the scene, the Sinhalese and Tamils formed the majority community while the Burghers, Moors and the rest were the minorities. In fact, relations between the Sinhalese and Tamils in the first two decades of the 20th century proved sufficiently durable for Sir Ponnambalam Arunachalam to be elected the president of the Ceylon National Congress that came into being in 1919. The twin principles on which the Congress were founded were communal harmony and national unity. But barely two years later thanks to personal conflicts and communal wrangling, Congress was reduced to a hard core of low-country Sinhala activists. The resignation at this point (June 1921) of Arunachalam and the bulk of its Tamil members from the Congress is attributed to differences of opinions among its members arising from the machinations of Governor Manning. Soon thereafter the Tamil Mahajana Sabai was established in August of 1921 to give expression to the demands of Tamils as a minority community. Sinhala- Tamil relations now were on a slippery slope.
With the grant of universal adult franchise in 1931, given that the Sinhalese formed 70% of the island’s population the temptation to exploit its numerical superiority for their political advantage was too great a temptation for the Sinhalese politicians to resist. The notable efforts of D.S. Senanayake, the first prime minister of independent Sri Lanka to revive national unity did not bear fruit, much to Sri Lanka’s future misfortune. Our politicians, in particular the Sinhalese, sacrificed the future well-being of our island home for short-term political gain by resorting to communal politics. Instead of treating all citizens as equal, regardless of their ethnicity, religion and social status, a majority of the Sinhalese politicians determined that the Sinhalese are more equal than the other citizens. Consequently, the early 1950s witnessed a resurgence of Sinhala nationalism propelled by post-independence euphoria. The newly formed Sri Lanka Freedom Party (1951) and its founder leader S.W.R.D. Bandaranaike contested the general election of 1956 as head of an electoral alliance of smaller parties – the Mahajana Eksath Peramuna (MEP). The political campaign of the MEP exploited successfully, if cynically, the prevailing socio-political mood and secured a landslide victory. That unsavoury trend of seeking political power based on ethno-religious nationalism persists even today as we witnessed in 2019/20 as noted above. As in 1956, so too today, a majority of Sinhala voters and politically inclined Buddhist clergymen continue to believe, however mistakenly, that Sri Lanka belongs to the Sinhalese.
What has Sri Lanka achieved by disregarding national harmony and playing ethno-nationalist politics? Have we solved our economic problems and improved our educational and health sectors? Have we even made a dent in our problems of unemployment and underemployment? Today we are on the brink of economic, political and societal collapse. Meantime two of our South Asian neighbours, Bangladesh and Pakistan, despite the many challenges they have had to face, are forging ahead with visionary leaders at the helm. What has happened to “the best bet in Asia” that Sri Lanka was considered to be by many in the early post-independence years?
Despite the doom and gloom around us, in my less cynical moments I feel we have a fifty-fifty chance of turning the corner. For that to happen, though, we will need to turn our back on Sri Lanka’s inglorious post-independence past and begin from scratch. We need to form a new social contract and dramatically reform our political culture to make it genuinely inclusive. To the extent it is practically feasible, we must also find a new set of politicians and discard ‘those over the hill’, corrupt and discredited. If we are serious about a new beginning, shedding our Sinhala majoritarian mindset is a sine qua non. For without such a pluralist foundation, we will continue to produce governments that will never make Sri Lanka whole again; and our talented and educated young will continue to desert their country. The results of a new survey conducted by the Institute of Health Policy to assess public opinion as the country recovers from COVID-19 reveal among other things, that a majority of our youth and the educated want to leave the country probably more than at any other time in the past five years. Desperate situations call for desperate measures!
Who will provide the required political leadership in our quest to regain our true national ethos free of Sinhala, Tamil or Moor nationalisms so that we might, just might, save us from ourselves? In other words, who or what is the credible alternative to the dismal government currently in office? Realistically the only two options available to us are the Samagi Jana Balaveygaya (SJB) and the National People’s Power-Janatha Vimukthi Peramuna (NPP-JVP). The SJB bestirred itself recently to organise a massive protest rally to show its strength. That’s all well and good, but it must not get carried away by the numbers it was able to muster because a majority of that crowd would doubtless have been from the disenchanted and disillusioned 6.9 million who only 24 months ago voted for the present dispensation. The members of both the SJB and the NPP-JVP have caught the public imagination by their spirited parliamentary performances to-date in exposing a government that is at sixes and sevens. The carefully- researched, well-crafted and effective contributions of the opposition to parliamentary debates are indeed impressive. Talking of political speeches, here is a suggestion for the consideration of the leader of the SJB. Would not it be more effective for him to use simpler language that the public would be able to understand more readily? Most times when he speaks in Sinhala or English, the SJB leader sounds overly-formal and stiff. A more relaxed tone and choice of words may make his speeches easier on the ear and hence more effective.
Good as their parliamentary performances have been, the SJB and the NPP-JVP have to do way more than organizing rallies and making rousing speeches. First and foremost, they need to spend the better part of the next three years to re-educate our voters. They have to help to change the sense of Sinhalese Buddhist entitlement based on mytho-history (to quote Neil de Votta, Wake Forest University’s Professor in Politics and International Affairs) that these voters have been brainwashed to believe in over the decades by scheming politicians including those in government today. As stated above, without such a careful and sensitive promotion of inter-ethnic and inter-religious understanding among the citizenry, no meaningful political or economic progress will be possible in Sri Lanka.
The next need, equally important and urgent, is for the SJB and the NPP-JVP to place before the citizens their respective alternative political programmes by which they propose to get Sri Lanka out of the unholy mess the country presently is in, on all fronts. The release of their political manifestos cannot wait until the next elections are announced. It is imperative that they do so at the earliest possible time and arrange sessions to debate and discuss policy issues with a cross section of the voting public, so that these political programmes could be fine-tuned and refined based on inputs from the voters. Such an exercise would also result in a politician-voter joint-ownership of these manifestos so that they will have greater authenticity come election time.
There is an additional challenge for the NPP-JVP to address at the present time. Perhaps fearful of their perceived rise in popularity, constructive critics and foes alike are talking of its history of violence. It will do their prospects at the forthcoming elections more than a world of good if they were to engage with the electorate in candid discussions on this issue.
In 2015 and in 2019/20, we witnessed two governments being swept into office by an enthusiastic electorate in the anticipation that they will implement promised policy changes for the greater good of the country. The enthusiasm swiftly changed to despair and anger as the promised policy changes never saw the light of day. The pressing need of the hour is that the public should not be led up the garden path one more time with promises that the governing powers fail to fulfill. The public should not have to wait five long years to throw out a government that fails to deliver in order to elect another which also fails to deliver, as has been happening ever since independence. There should perhaps be a referendum on the performance of the government midway through its tenure to determine its success or failure in policy implementation. In the event that the outcome of the referendum proves negative, the government should be forced to take appropriate action to change course. Such a provision should be seriously considered for inclusion in the draft constitution now being formulated. In the ultimate reckoning the government should be made to serve its people rather than vice versa.
Should Sri Lanka engage a LNG floating regassification vessel for electric power?
What are the Health Safety Security and Environment (HSSE) requirements? What are the key insurance requirements?
What are the legal complexities and the means of resolving disputes?
What are the risks to the Sri Lankan Tax payer?
This Part 3 is largely in response to questions raised via email by readers of Parts 1 and 2.
has spent 40 years in the offshore oil and gas industry with Royal Dutch/Shell, Mitsui and Mitsubishi, global leaders in leasing vessels and in the LNG business. His experience has been in Australia, NZ, South East Asia, PRC, West Africa and South America. The writer trained in Engineering in University of Ceylon and was a post graduate Colombo Plan scholar at University College London and is the recipient of Anniversary Technical Excellence Award from Shell for project recognised as a ‘market trend setter’.
What are the Health Safety Security and Environment (HSSE) requirements?
Safety and security are always major concerns to those unfamiliar with such installations.
Offshore installations such as FSRUs are regulated by various authorities who have jurisdiction over them. These are subjected to regulation and standardization by the coastal state GOSL, flag state, class (Classification Society), international and national standardization bodies and maritime regulators such as IMO, MARPOL, SOLAS and their regional directives. In view of the floating nature of the FSRU there are several parties involved, whose relationships should be clearly understood.
A Classification Society
is an independent, impartial, technical organization that establishes and administers standards, known as the Rules, for the design, construction and periodic survey of ships, offshore structures including floating systems and their facilities. Their principal concern is safety of the facilities and its personnel. Classification is the process of verifying compliance to their prescriptive Rules. It is often a prerequisite for obtaining insurance, fulfilling regulatory requirements or may be voluntarily elected as a means of demonstrating due diligence or as a component part of project quality assurance. Classification societies are empowered to act on behalf of national authorities in a number of aspects in most countries. This is because most countries do not have specific rules, design codes and standards specific for such specialised offshore installations. The FSRU will be classed by the likes of Lloyds, DNV-GL, ABS or Bureau Veritas.
It was noted during a presentation by the writer in about 2018 in Colombo that there are no items classified by Class Society that were then in operation in SL (as reported by the then Lloyds Register representative in SL). This reflects the poor adherence to international standards by the agencies of GOSL, by not mandating even basic industry practices.
A Flag State Authority
is the regulatory authority of the government of the state whose flag a vessel is entitled to fly. Flagging of the FSRU is not mandatory should the vessel not be in transit, however most countries that do not have codes and standards for offshore installations register the vessels in a port of registry. Usually, the vessel carrying a flag of convenience offers the vessel as collateral for financing purposes, which is an important factor in securing bids in a tender. The Flag State also prescribes safety measures. The term ‘’ describes the business practice of a in a country other than that of the ship’s owners, and flying that state’s on the ship. Ships may be registered under flags of convenience to reduce operating costs by avoiding regulations, inspection and scrutiny by the owner’s country. Normally the nationality (i.e. flag) of the ship determines the taxing jurisdiction. The Flag State has the and responsibility to enforce regulations over registered under its flag, including those relating to inspection, certification, and issuance of and prevention documents. As a ship operates under the laws of its flag state, these laws are applicable if the ship is involved in an such as maritime and nautical issues and disputes. This should be understood by agencies of GOSL.
is Sri Lanka. The regulatory authorities of GOSL exercise administrative control over the waters and seabed in which the FSRU is operating.
The relationships, requirements, and responsibilities between them are complex and not easily understood. This is because of (a) the number of regulatory authorities that may have jurisdiction on a particular project, (b) differences in scope and content of the regulatory systems in different countries (and to a lesser extent the Flag states) (c) the fact that few regulatory authorities have adopted their requirements to specifically address FSRUs.
In the writer’s experience, the scope and certification the classification society is empowered to perform are different for each flag and coastal state authority involved on a particular project as well as for different types of floating systems. Based on the writer’s experience in a number of countries, it is essential to identify and define, as early in the project as possible, all the relevant regulatory jurisdictions and requirements and to identify any unique technical and jurisdictional issues for early resolution with the Classification Society and the relevant regulatory authorities. The classification societies assist in defining these areas and resolving interpretations of relevant technical requirements, when engaged for this purpose, then report to all parties.
Gas leaks and subsequent explosions are not like oil leaks. Oil leaks pose relatively minor risks. Gas explosions engulf the entire region, when the flammable gas is under pressure. In a few seconds the explosion could destroy the entire infrastructure and the results are catastrophic. If the FSRU is to be located at the entry to the port, this could pose the threat of destruction to the entire ports’ activities. FSRUs are now typically located well away from port activities, and in open water.
The natural gas is to be piped from the FSRU via offshore and land pipelines meeting stringent oil and gas industry practice requirements. Installation of natural gas lines on land in populated areas raises safety issues with natural gas leaks being highly volatile and a high fire and explosion risk. They are usually subject to NIMBY (Not In My BackYard) protests and have led to project cancellations and delays. Now they are subject to BANANA (Build Absolutely Nothing Anywhere Near Anyone) constraints given the very high risk with gas lines, leading to catastrophic environmental disasters. The existing oil lines in the Colombo Port to Kolonnawa region are known to be poorly maintained, although leaking oil lines are exposed to a much lower level of risk. Proposals to run highly explosive natural gas lines in densely populated areas should expect louder protests than those during the Port City project. An option for GOSL to avoid high levels of risk in densely populated areas is to locate the FSRU in the vicinity of power generating plants in sparsely populated locations.
The fact that NFE would be responsible for the pipeline operation and maintenance (and not the GOSL/CEB) is a consolation given that NFE is concerned with their global reputation with their large operational portfolio where any failures would impact on their current and future broader business opportunities. Such operational records are closely monitored and reported by the industry and any failures will impact on insurance premiums as well, which concerns NFE. Sri Lanka has a poor duty of care record, an example being the emissions from coal-fired power generation which has led to mass protests.
ISPS (International Ship and Port Facility Security)
is a security measure put in place in response to the 9/11 attacks by the IMO (International Maritime Organization) as part of the Safety of Life at Sea (SOLAS) Convention. With the continuing threat of terrorism, the FSRU is expected to provide ISPS security provisions. In the writer’s experience, measures in excess of the standard provisions may be sought, which are project specific. The residual threats to Sri Lanka from the civil war that ended in 2009 should be noted. Regrettably, the nation continues to face terrorism threats, with the 2019 Easter Sunday bombings being a tragic example.
FSRU will have a high focus on the Environmental Impact Assessment (EIA) process which is now mandatory for such projects. EIA is a process of evaluating the likely environmental impacts of a proposed project or development, considering inter-related socio-economic, cultural and human-health impacts, both beneficial and adverse.
An EIA will be carried out for the project as a tool used to identify the environmental, social and economic impacts prior to decision-making. This project has implications of the vessel being in the ocean in open water with a subsea pipeline as well as the pipeline on land via areas of high population density. Natural gas pipelines on land are always a concern and their operation and maintenance are covered by codes of practice such as by API and others. The EIA will identify the hazards and their mitigation of the complete installation, a risk analysis conducted, and methods of mitigation proposed. Today even the removal of the vessel is covered by EIA, in terms of what items are being left behind such as moorings and offshore structures.
The EIA to be carried out aims to predict environmental impacts at an early stage in project planning and design, find ways and means to reduce adverse impacts, shape the project to suit the local environment and present the predictions and options to decision-makers. By using EIA both environmental and economic benefits are achieved, such as reduced cost and time of project implementation and design, avoiding post project execution costs and in defining all the statutory consents required. The EIA reviews all hazards and their mitigation, assess and evaluate the impacts of the project and report the EIA including an Environment Management Plan and a non-technical summary for the general audience for public feedback and raise any concerns to be aired and resolved. The EIA should indicate whether the FSRU could provide the emergency response on a ‘stand-alone’ basis or with the support of facilities of SLPA or any other GOSL authority.
Safety systems continue to evolve as oil and gas operations become more challenging and they predominantly operate in a regime where the systems must meet requirements of prescribed standards. However, the legacy standards may not meet the requirements of highly complex industrial or technical systems such as offshore oil and gas installations in highly explosive environments where consequences of an accident can be catastrophic.
Thus, Safety Case is now being mandated by statutory authorities. Given the complexity of these operations most similar installations prescribe a Safety Case for these FSRUs. Major oil companies have mandated a Safety Case for all such installations since about 1995, which emerged from the Piper Alpha incident in 1988 with 167 fatalities. The writer has mandated a Safety Case for all the writer’s installations since about 2005. There have not been any reports of incidents where the facilities operated under a Safety Case regime. It is noteworthy that where major incidents with catastrophic events occurred, the facilities were not operating under a Safety Case regime, such as the Deepwater Horizon disaster in the Gulf of Mexico.
A safety case is a document produced by the operator of a facility which:
Identifies the hazards and risks
Describes how the risks are managed and controlled
Describes the safety management system in place to ensure that controls are effectively and consistently applied.
Safety cases must be produced by the operator of an installation such as NFE. The principle here is that those who create the risk must manage it. It is the operators’ job to assess their processes, procedures, and systems to identify and evaluate risks and implement the appropriate controls, because the operator has the greatest in-depth knowledge of their installation. The Safety Case must identify the safety critical aspects of the facility, both technical and managerial. Analysis of disasters almost always show a combination of technical and managerial flaws which have led to the event occurring.
This is an excellent opportunity for countries such as Sri Lanka to be exposed to global HSSE practices rather than be lagging behind having no duty of care as evidenced in recent events. The writer’s insistence in mandating a Safety Case in the region has been appreciated long after the writer’s departure having an incident free record in their operations.
Notably an EIA was issued by Sojitz (Sojitz ref project 0443480) based on their proposal for an FSRU dated 21 Aug 2019, for public comment. Extensive comments were issued by the writer to GOSL, having been responsible for similar EIAs in New Zealand, Australia, Indonesia and Thailand. The comments were ignored by GOSL which appears to be a total lack of very basic duty of care to the public at large, which is a serious concern in exposing these high risk complex projects to the oversight of the GOSL representatives today. Such disregard by the government sets a dangerous precedent when GOSL’s agencies such as CEB is clamouring to undertake such complex projects, unaware of even the basics of this industry.
What are the key insurance requirements?
There are a host of insurance requirements, the key items being the following.
The installation will require to procure Protection and Indemnity insurance, more commonly known as P&I insurance, this is a form of mutual maritime insurance provided by a P&I Club. Whereas a company provides “hull and machinery” cover for shipowners, and cargo cover for cargo owners, a P&I Club provides cover for open-ended risks that traditional insurers are reluctant to insure. They are backed by a group of reinsurers who spread the risk. Typical P&I cover includes: a carrier’s third-party risks for damage caused to cargo during carriage; war risks; and risks of environmental damage such as oil spills and pollution and damages by any catastrophic event due to any explosion. P&I insurance for these offshore floating installations are now mandatory, which typically exceed about USD 400 mil. P&I insurance has been a serious omission in the recent CEB tenders. The importance of P&I insurance should be known after the recent X-Press Pearl disaster, a Singapore-flagged container ship that caught fire and sank north of Colombo, causing extensive environmental damage. The P&I insurance will indemnify and include wreck and debris removal and a pollution liability in respect of the FSRU.
The replacement value of the vessel will be covered under marine hull and machinery insurance.
There are occasions when Business Interruption insurance must be procured when (a) the performance of certain items in the facility cannot be guaranteed for the duration of the contract when only warranties apply (b) as a form of relaxing the terms of payment guarantees, and (c) as required by the bankers to guarantee their revenue stream.
Disproportionately high demobilisation and removal costs (often in excess of USD 50 million) are being incurred globally with these moored floating systems . Statutory authorities are planning to introduce trailing liabilities to hold previous owners liable for decommissioning costs if they sold ageing assets to new owners that lacked the financial and technical capacity to decommission the facilities. Such incidents have taken place where the taxpayer has to fund such expenses running into more than USD 100 million. Some form of insurance to cover such eventualities is now being proposed. The best example is in Australia where the removal cost has exceeded USD 200 million paid for by the tax payer in removing the vessel. See Northern Endeavour debacle hits $209M with much more to come
The insurance is procured via brokers to whom the attributes as such as Safety Case will be given credit to lower the premiums, given the lower risk exposure from the extensive analysis and the precautionary measures taken. Naturally the lower insurance premiums would be reflected in lower electricity prices.
The EIA will give an estimate of the above scope for P&I cover and the scope of the emergency response required. The EIA should indicate whether the FSRU could provide the emergency response on a ‘stand-alone’ basis or with the support of facilities of SLPA or any other GOSL authority. Often regional facilities available are considered when determining the emergency response, such as from India. It is hoped that minimum standards of insurance be covered in these projects as practiced elsewhere with the minimum cover stipulated, without burdening the taxpayer. The buck stops with the insurance companies.
What are the legal complexities and the means of resolving disputes?
These vessels operate typically under multiple jurisdictions some of which overlap, which are notoriously complex to understand. It is necessary to check Sri Lanka’s cabotage policy of permitting foreign flagged vessels operating in Sri Lanka’s waters. The FSRU will be foreign flagged as explained under HSSE above and offered as collateral to banks. The cabotage policy governs the operation of vessels between two places along coastal routes in the same country by a transport operator from another country, practised by many nations worldwide including developed nations. For some of these nations, it is so strictly implemented that no foreign-flagged vessels are even allowed to operate within their domestic waters for long periods. Obtaining waiver in some cases have involved seeking parliamentary approval in the host country should there be no precedent. In the writer’s experience the powerful maritime lobbies of host countries prevent foreign flagged vessels from operating in their waters and the employment of expatriate foreign personnel, in the operation of the FSRU. These may cause delays should there be no such precedent; the writer has faced such challenges elsewhere.
The vessel will be under the jurisdiction of the port of registry of a flag of convenience such as Liberia and Panama. Marshall Islands is becoming popular as a flag of convenience as explained under HSSE. As a ship operates under the laws of its flag state, their laws are applicable if the ship is involved in an such as maritime and nautical issues and disputes. Admiralty law or maritime law is a body of that governs nautical issues and private maritime disputes. This should be understood by GOSL, who has limited jurisdiction.
The governing law of the contract for the lease and supply of LNG and export of natural gas would not be based on laws of Sri Lanka. This is because these companies, banks and financiers who participate, do not have the time and resources to scrutinise Sri Lanka’s laws and usually laws of Sri Lanka do not apply to such contracts. Applicable laws familiar to the lawyers from these companies and banks such as the laws of UK, New York or Singapore are common in these transactions which have been proven over the years offering a good balance between the parties involved in transactions.
Usually, the expectation is that these disputes are eventually settled by arbitration outside the host country such as in London, via London Maritime Arbitrators Association. Singapore International Arbitration Centre (SIAC) is becoming increasingly popular for disputes arising from leased FSRU type vessels. Singapore has well trained lawyers involved in drafting these contracts known to the writer. Several cases have been assigned to SIAC since these vessels are also typically converted in Singapore shipyards and Singapore’s banks are also involved in syndicate financing. A record of present case studies are available to settle disputes. Several banks who provide equity finance and debt finance for these projects in the region are in Singapore and their disputes have been settled via SIAC.
What are the risks to the Sri Lankan Tax payer including the ‘end-of-life-burden’?
One of the great risks from CEB’s tender is in separating the FSRU contractor from the pipeline contractor. Unforeseen delays with pipeline installations are common. Offshore installations rarely run-on schedule, with some being delayed by six months or more being extremely sensitive to weather downtime in Sri Lanka, which is subject to monsoons. Further delays in laying gas pipelines across high density populated areas are extremely likely with land acquisition issues, environmental protests by politicians and the public. Usually, FSRUs are delivered on time, within 22 months, with similar conversions gained over more than 100 conversions in Singapore, where the writer has worked since 1994. FSRU suppliers wish to have their revenue stream early from the date of award of contract and would impose liquidated damages for any delay in pipeline delivery, whilst unable to supply regassified LNG. This could be of the order of USD 150,000 to 200,000/day for six months coming from the taxpayer’s account.
Usually the installation of FSRU and the offshore pipeline would be undertaken by the same contractor, which would not be the case with separate contractors as with CEB’s tender. These mobilisations/demobilisations could be of the order of USD 10 mil, which could have been saved, if performed by the same contactor as proposed by NFE.
The above are the advantages of a single point responsibility as proposed by NFE versus CEB’s attempt to separate the tenders where CEB would be responsible for the interface, with CEB lacking any exposure, inter alia, to any form of offshore oil and gas industry standards, codes, practices, industry norms, risks, Classification Society rules, insurance
requirements, offshore health, safety, security, and environmental practices.
There has been a trend to contract an overall tolling rate where payment is on the basis of LNG regassified and is expressed as $/mmbtu (million BTU). However, the actual rate will be dependent on the terminal utilisation (load factor). The utilisation cannot be determined accurately without carrying out detailed met ocean studies which should be (a) acceptable to a Classification Society and (b) acceptable to by Insurance companies. Usually utilisation could be of the order of 50%, which would double the actual rate. QED Consulting quotes estimated tolling rates (tariffs) in the range $0.60-0.94/mmbtu based on a 50% load factor. The contract with Excelerate for the Puerto Rico FSRU Aguirre terminal states $0.47/mmbtu. The rate for the first Bangladesh terminal is also stated to be $0.47/mmbtu. For the second Bangladesh terminal $0.45 has been stated. Assuming a 50% load factor the actual rates will again be around $1/mmbtu. The above rates are based on studies carried out by Oxford Institute of Energy Studies.
CEB lacking any exposure to highly specialised offshore oil and gas business and taking responsibility for the complex contractual and technical interface between the pipeline and FSRU would be a monumental disaster in the making. NFE poses no such interface risks with a single point responsibility for the whole project.
The removal costs of the FSRU could be of the order of USD 50 million as a minimum, could even well exceed USD 200 million, which is a significant ‘end-of-life-burden’ to the taxpayer. Its mitigation via insurance and relevant contractual obligations are noted above.
FSRUs are generally leased for longer periods than 10 years proposed by CEB for the vessel, examples being Lumpung Indonesia 20 years, Grace Columbia 20 years, Bahrain FSU 20 years, Armada Mediterrana Malta 18 years, Punta-de-Sayag, Uruguay 20 years, Port Qasim-3, Pakistan 20+5+5 years. Amortising the vessel in 10 years incurs a higher lease rate for the vessel depreciated over a shorter term, incurring a higher charge to GOSL. The short lease period exposes a lower period of depreciation of the vessel for amortisation with a higher lease rate, with a higher cost of electricity payable by the taxpayer.
CEB’s tender has omitted both Bureau Veritas who has classed 17 FSRUs worldwide and ABS and included only Lloyds and DNV. Such omission could cost the taxpayer in change of class of a vessel when converting a candidate vessel and reflects preferential treatment in a open tender.
It is questionable whether GOSL/CEB would be in a position to ‘take over’ the FSRU operations, for which a highly specialised skills set is required and a competency audit in the form of due diligence to secure P&I insurance.
Typically, these FSRU projects are leased, operated and removed by the vessel owner, particularly in countries such as Sri Lanka, which is incapable of running even a very basic coal generation plant without interruption. Sri Lanka could well be left with an inoperable facility of negative value such as the Urea Fertiliser Plant which was sold as scrap soon after start up. FSRU is cutting edge technology. GOSL is taking unnecessary risks in placing CEB to undertake this project, unlike NFE taking responsibility for the entire project. NFE has inherited the portfolio of the previous owner GOLAR who pioneered this industry in 2009, it comes with a wealth of experience.
The Urea Fertiliser Project was a multibillion rupee project which was sold as scrap soon after starting. Ronnie de Mel, then Minister of Finance and Planning, said in an address to Parliament on 21 December 1977: “We propose to introduce legislation very soon to make chairmen and directors of corporations personally liable for their actions in those corporations. They will make it a point to study their projects a little more carefully when they know that they will be personally held liable and that they will be charged and surcharged for any losses or lapses on their part.”
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