Features
The global energy crisis
by Kumar David
Well no, that’s not true, the energy price and supply crunch is not global; North America and Russia are for the time being riding fine. It’s Europe, especially the UK and Germany, East Asia, China and India that are suffering bellyache. It is a conjunction of worldwide trends plus decisions in particular countries or regions that have triggered the crunch, but there are global trends at work as well. Supply side or supply chain hiccups will be reflected in shortages and high prices but this time there is a coincidence of more factors than the Covid pandemic to be blamed. It is not easy to depict the whole picture in a single essay but let me push some ideas in this column as world leaders gather for the COPE26 summit in Glasgow at the end of the month. Let’s get started by repeating a few facts that readers are familiar with.
Oil at this moment is over $80 a barrel and pointing upwards; the Dutch gas spot-market, the standard in Europe, is ten-times higher now than it was in the middle of 2020. Germany and Northern Europe are faced with severe gas and electricity bottlenecks; petrol shortages in the UK have led to mile long queues and inversely short tempers. There are short, medium and underlying longer term complications. The immediate problem in Northern Europe is that not enough Russian gas is reaching it through the existing pipeline and the EU has still to certify the recently completed Nord Stream-2 pipeline from Russia to Germany via the Baltic Sea. A further complication is that European buyers contracted for natural gas on long-term contracts which obligation Russia is dutifully fulfilling, but Europe’s additional needs will have to be bought at spot-prices on spot-markets. There is no obligation for Russia to supply additional amounts at any but prevailing market prices; selling gas is not a charity. This bottle neck will span the winter and how much further no one knows because the winds are metaphorically becalmed and post-covid recovery has no use-by date attached to it.
In the graph I have reproduced from the Institute of Energy Economics, JKM is the Japan-Korea Marker, Dutch TTV is a European spot-market and Henry Hub is a giant gas selling point in the USA. The huge difference between the first two (over $20 per MMBtu) and the last (less than $5 per MMBtu) is liquefaction and transport costs. It is not possible to foresee where future prices will go but it is certain that price volatility will dominate markets. What blithering bad luck just when we are toying with LNG fired electricity! Unfortunately for Sri Lanka at this time when the country is setting off down the unavoidable LNG road, prices are all over the place. Nevertheless gas is the least dirty of the fossil fuel options. It is imperative that the CEB and the CPC train staff for their future buying departments because market complexities are challenging and the LNG road is unescapable. (MM on the graph’s y-axis means million).
The medium-term outlook for energy supply and prices is clouded by the worldwide decarbonisation drive. Germany and the UK for example, decommissioned or mothballed coal-fired plant. They were in no rush to build gas-fired generation as there was a headlong rush for renewables, mainly wind-power. But the wind bloweth as it listeth, or to be more prosaic, wind generated electricity can change by large amounts at short intervals. Large unexpected changes in electricity output in Germany caused power-swings throughout the Northern European grid and destabilised the whole system. The European love affair with wind-power has fizzled but investment in conventional (carbon emitting) power-plant has been long neglected. Germany and the UK are now caught by the short and curlies. France, annoyed with the UK about a fishing dispute, has threatened to punch the UK well below the belt at a place where it hurts and that is slicing off virile electricity supplies.
India allowed its coal stocks to run down and is now a victim of power shortages. The electricity supply sector is influenced by green-lobbies (bless them) and so India dutifully switched on large scale to solar and renewables and went slow on gas-fired plant construction and mothballed coal-fired projects. This is a general remark as I am not in a position to name the actual power stations concerned. China is different; electricity supply is Central or Provincial state owned and subject to direction. Instructions were issued to cut-back coal power and now many provinces are suffering power shortages. Some industries are cutting back activity and the icy cold hand of winter beckons the northern parts of the country.
The long-term challenge is that the world must learn how to interface decarbonisation, the turn to renewables and futuristic alternatives within the big energy picture. Soon after you read these lines world leaders will be scratching their heads about how to achieve zero-carbon targets and hold global temperature rise to within 1.5 degrees C of pre-industrialisation levels. Will they manage or will we all be cooked in this earthly pressure cooker? I say they will fail and I am supported by the International Energy Agency which said on October 13 that the world will fall short of its 2050 energy reduction target by 60%! Let me explain why I am a pessimist. If it was only about fuel for electricity generation then technology can do it with some hiccups as we are well on the way; by about 2050 the world will get fossil-fuel fired electricity generation down to acceptable levels.
But the point is fossil fired electricity generation is not the biggest problem; it is industry, transport and all the rest that modern life involves. Eighty percent of global gross energy use at this time is from fossil-fuel. The big carbon polluting industries are steel, cement, plastics and fertiliser. Supply chains today are long, stretch overseas and are opaque; inputs manufactured in country X enter final products of country Z, so it is difficult to pinpoint the sources and distribution of carbon. About 70% of carbon releases are concealed in the supply chain and in most countries electricity generation is not guilty of more than a fifth to a tenth of atmospheric carbon releases.
The more intractable problem in the capitalist world is that big business, all round, will howl in protest if hard emission control targets are enforced by governments. “What will be the effect on productivity, on profit margins and on business models if strict carbon accountability is forced on our activities?” big business will holler. Capitalism and strict enforcement of emission goals is incompatible. China, one of the worst polluters, is able to make headway because party edicts run; but America has no Federal Laws enforcing decarbonisation nor a carbon tax. Europe is stricter thanks to its social democratic traditions. But this makes competition between capitalists of different continents “unfair”. A global carbon tax is going to be hard to get agreement on.
The interruptibility – within-minutes and medium-time probabilistic (stochastic) characteristics of wind and solar power are affecting power system operations to an extent not originally foreseen. This is a complication over and above the unavailability of land and renewable resources for electricity on an adequate scale. Now when the shortage problem has become acute globally the neglect of even moderate investment in coal, oil and gas – fossil fuel fired plant in general – in recent decades is taking its toll. Investors have been reluctant to plough money into what appeared to be a dying industry. The pre-green-era abundance of fossil-powered electricity paradoxically sounded the death knell of coal. Even the current predicament of shortage is not attracting private investment in fossil-fired plant because it takes decades to recoup big investments and who knows which deadly Covid variant is mutating in someone’s genes awaiting a chance to send the global economy tumbling again. The tocsin beckoning the death of king-coal has sounded loud and clear so why invest, they say. Such are the conflicts that beset electricity supply in most parts of the world. There is no solution, only survival strategies.
Coal and oil energy as sources for electricity production are past tense nouns and wind in its present avatar is an unreliable bastard. The cost of solar-panels however is falling like the centre of gravity of a drunken sailor. But solar power’s favours are as fickle as a lady’s affection unless supplemented big time by storage technologies; pumped storage where you pump water uphill to a reservoir for future use, battery storage and hydrogen production. As solar-panel prices nosedive locations with large dessert landmasses are in luck. Next on the horizon is hydrogen which right now is a wearisome teenager – hard to compress or liquefy, it is combustible and flatulent. But like a teenager who grows up it will have its uses, first for heavy trucks and storage of stochastic green energy as hydrogen production, storage and transport will become cheaper than pumped-storage and batteries. Conventional (fission) nuclear is still a no-go option because of waste disposal. The Eldorado of an energy addicted world of course is fusion which has been, coming, coming, coming for so long. But when this frigid companion reaches commercial scale, perhaps later this century, it will be energy-for-free, or nearly so except capital outlays. The even better option is to halve the world’s population within two generations but the scope of that discourse lies beyond the remit of this essay.
In summary the global energy availability and pricing picture is grim in the short-term but less daunting in a ten to fifteen year perspective. The longer term looks good, but don’t forget the aphorisms of John Maynard Keynes who was rather obsessed with death.
by Dr Gotabhya Ranasinghe
Senior Consultant Cardiologist
National Hospital Sri Lanka
When we sought a meeting with Hon Dr. Ramesh Pathirana, Minister of Health, he graciously cleared his busy schedule to accommodate us. Renowned for his attentive listening and deep understanding, Minister Pathirana is dedicated to advancing the health sector. His openness and transparency exemplify the qualities of an exemplary politician and minister.
Dr. Palitha Mahipala, the current Health Secretary, demonstrates both commendable enthusiasm and unwavering support. This combination of attributes makes him a highly compatible colleague for the esteemed Minister of Health.
Our discussion centered on a project that has been in the works for the past 30 years, one that no other minister had managed to advance.
Minister Pathirana, however, recognized the project’s significance and its potential to revolutionize care for heart patients.
The project involves the construction of a state-of-the-art facility at the premises of the National Hospital Colombo. The project’s location within the premises of the National Hospital underscores its importance and relevance to the healthcare infrastructure of the nation.
This facility will include a cardiology building and a tertiary care center, equipped with the latest technology to handle and treat all types of heart-related conditions and surgeries.
Securing funding was a major milestone for this initiative. Minister Pathirana successfully obtained approval for a $40 billion loan from the Asian Development Bank. With the funding in place, the foundation stone is scheduled to be laid in September this year, and construction will begin in January 2025.
This project guarantees a consistent and uninterrupted supply of stents and related medications for heart patients. As a result, patients will have timely access to essential medical supplies during their treatment and recovery. By securing these critical resources, the project aims to enhance patient outcomes, minimize treatment delays, and maintain the highest standards of cardiac care.
Upon its fruition, this monumental building will serve as a beacon of hope and healing, symbolizing the unwavering dedication to improving patient outcomes and fostering a healthier society.We anticipate a future marked by significant progress and positive outcomes in Sri Lanka’s cardiovascular treatment landscape within the foreseeable timeframe.
by Fr. Emmanuel Fernando, OMI
Jesuit Fr. Aloysius Pieris (affectionately called Fr. Aloy) celebrated his 90th birthday on April 9, 2024 and I, as the editor of our Oblate Journal, THE MISSIONARY OBLATE had gone to press by that time. Immediately I decided to publish an article, appreciating the untiring selfless services he continues to offer for inter-Faith dialogue, the renewal of the Catholic Church, his concern for the poor and the suffering Sri Lankan masses and to me, the present writer.
It was in 1988, when I was appointed Director of the Oblate Scholastics at Ampitiya by the then Oblate Provincial Fr. Anselm Silva, that I came to know Fr. Aloy more closely. Knowing well his expertise in matters spiritual, theological, Indological and pastoral, and with the collaborative spirit of my companion-formators, our Oblate Scholastics were sent to Tulana, the Research and Encounter Centre, Kelaniya, of which he is the Founder-Director, for ‘exposure-programmes’ on matters spiritual, biblical, theological and pastoral. Some of these dimensions according to my view and that of my companion-formators, were not available at the National Seminary, Ampitiya.
Ever since that time, our Oblate formators/ accompaniers at the Oblate Scholasticate, Ampitiya , have continued to send our Oblate Scholastics to Tulana Centre for deepening their insights and convictions regarding matters needed to serve the people in today’s context. Fr. Aloy also had tried very enthusiastically with the Oblate team headed by Frs. Oswald Firth and Clement Waidyasekara to begin a Theologate, directed by the Religious Congregations in Sri Lanka, for the contextual formation/ accompaniment of their members. It should very well be a desired goal of the Leaders / Provincials of the Religious Congregations.
Besides being a formator/accompanier at the Oblate Scholasticate, I was entrusted also with the task of editing and publishing our Oblate journal, ‘The Missionary Oblate’. To maintain the quality of the journal I continue to depend on Fr. Aloy for his thought-provoking and stimulating articles on Biblical Spirituality, Biblical Theology and Ecclesiology. I am very grateful to him for his generous assistance. Of late, his writings on renewal of the Church, initiated by Pope St. John XX111 and continued by Pope Francis through the Synodal path, published in our Oblate journal, enable our readers to focus their attention also on the needed renewal in the Catholic Church in Sri Lanka. Fr. Aloy appreciated very much the Synodal path adopted by the Jesuit Pope Francis for the renewal of the Church, rooted very much on prayerful discernment. In my Religious and presbyteral life, Fr.Aloy continues to be my spiritual animator / guide and ongoing formator / acccompanier.
Fr. Aloysius Pieris, BA Hons (Lond), LPh (SHC, India), STL (PFT, Naples), PhD (SLU/VC), ThD (Tilburg), D.Ltt (KU), has been one of the eminent Asian theologians well recognized internationally and one who has lectured and held visiting chairs in many universities both in the West and in the East. Many members of Religious Congregations from Asian countries have benefited from his lectures and guidance in the East Asian Pastoral Institute (EAPI) in Manila, Philippines. He had been a Theologian consulted by the Federation of Asian Bishops’ Conferences for many years. During his professorship at the Gregorian University in Rome, he was called to be a member of a special group of advisers on other religions consulted by Pope Paul VI.
Fr. Aloy is the author of more than 30 books and well over 500 Research Papers. Some of his books and articles have been translated and published in several countries. Among those books, one can find the following: 1) The Genesis of an Asian Theology of Liberation (An Autobiographical Excursus on the Art of Theologising in Asia, 2) An Asian Theology of Liberation, 3) Providential Timeliness of Vatican 11 (a long-overdue halt to a scandalous millennium, 4) Give Vatican 11 a chance, 5) Leadership in the Church, 6) Relishing our faith in working for justice (Themes for study and discussion), 7) A Message meant mainly, not exclusively for Jesuits (Background information necessary for helping Francis renew the Church), 8) Lent in Lanka (Reflections and Resolutions, 9) Love meets wisdom (A Christian Experience of Buddhism, 10) Fire and Water 11) God’s Reign for God’s poor, 12) Our Unhiddden Agenda (How we Jesuits work, pray and form our men). He is also the Editor of two journals, Vagdevi, Journal of Religious Reflection and Dialogue, New Series.
Fr. Aloy has a BA in Pali and Sanskrit from the University of London and a Ph.D in Buddhist Philosophy from the University of Sri Lankan, Vidyodaya Campus. On Nov. 23, 2019, he was awarded the prestigious honorary Doctorate of Literature (D.Litt) by the Chancellor of the University of Kelaniya, the Most Venerable Welamitiyawe Dharmakirthi Sri Kusala Dhamma Thera.
Fr. Aloy continues to be a promoter of Gospel values and virtues. Justice as a constitutive dimension of love and social concern for the downtrodden masses are very much noted in his life and work. He had very much appreciated the commitment of the late Fr. Joseph (Joe) Fernando, the National Director of the Social and Economic Centre (SEDEC) for the poor.
In Sri Lanka, a few religious Congregations – the Good Shepherd Sisters, the Christian Brothers, the Marist Brothers and the Oblates – have invited him to animate their members especially during their Provincial Congresses, Chapters and International Conferences. The mainline Christian Churches also have sought his advice and followed his seminars. I, for one, regret very much, that the Sri Lankan authorities of the Catholic Church –today’s Hierarchy—- have not sought Fr.
Aloy’s expertise for the renewal of the Catholic Church in Sri Lanka and thus have not benefited from the immense store of wisdom and insight that he can offer to our local Church while the Sri Lankan bishops who governed the Catholic church in the immediate aftermath of the Second Vatican Council (Edmund Fernando OMI, Anthony de Saram, Leo Nanayakkara OSB, Frank Marcus Fernando, Paul Perera,) visited him and consulted him on many matters. Among the Tamil Bishops, Bishop Rayappu Joseph was keeping close contact with him and Bishop J. Deogupillai hosted him and his team visiting him after the horrible Black July massacre of Tamils.
Sri Lanka-Singapore Free Trade Agreement
By Gomi Senadhira
senadhiragomi@gmail.com
“You might tell fairy tales, but the progress of a country cannot be achieved through such narratives. A country cannot be developed by making false promises. The country moved backward because of the electoral promises made by political parties throughout time. We have witnessed that the ultimate result of this is the country becoming bankrupt. Unfortunately, many segments of the population have not come to realize this yet.” – President Ranil Wickremesinghe, 2024 Budget speech
Any Sri Lankan would agree with the above words of President Wickremesinghe on the false promises our politicians and officials make and the fairy tales they narrate which bankrupted this country. So, to understand this, let’s look at one such fairy tale with lots of false promises; Ranil Wickremesinghe’s greatest achievement in the area of international trade and investment promotion during the Yahapalana period, Sri Lanka-Singapore Free Trade Agreement (SLSFTA).
It is appropriate and timely to do it now as Finance Minister Wickremesinghe has just presented to parliament a bill on the National Policy on Economic Transformation which includes the establishment of an Office for International Trade and the Sri Lanka Institute of Economics and International Trade.
Was SLSFTA a “Cleverly negotiated Free Trade Agreement” as stated by the (former) Minister of Development Strategies and International Trade Malik Samarawickrama during the Parliamentary Debate on the SLSFTA in July 2018, or a colossal blunder covered up with lies, false promises, and fairy tales? After SLSFTA was signed there were a number of fairy tales published on this agreement by the Ministry of Development Strategies and International, Institute of Policy Studies, and others.
However, for this article, I would like to limit my comments to the speech by Minister Samarawickrama during the Parliamentary Debate, and the two most important areas in the agreement which were covered up with lies, fairy tales, and false promises, namely: revenue loss for Sri Lanka and Investment from Singapore. On the other important area, “Waste products dumping” I do not want to comment here as I have written extensively on the issue.
1. The revenue loss
During the Parliamentary Debate in July 2018, Minister Samarawickrama stated “…. let me reiterate that this FTA with Singapore has been very cleverly negotiated by us…. The liberalisation programme under this FTA has been carefully designed to have the least impact on domestic industry and revenue collection. We have included all revenue sensitive items in the negative list of items which will not be subject to removal of tariff. Therefore, 97.8% revenue from Customs duty is protected. Our tariff liberalisation will take place over a period of 12-15 years! In fact, the revenue earned through tariffs on goods imported from Singapore last year was Rs. 35 billion.
The revenue loss for over the next 15 years due to the FTA is only Rs. 733 million– which when annualised, on average, is just Rs. 51 million. That is just 0.14% per year! So anyone who claims the Singapore FTA causes revenue loss to the Government cannot do basic arithmetic! Mr. Speaker, in conclusion, I call on my fellow members of this House – don’t mislead the public with baseless criticism that is not grounded in facts. Don’t look at petty politics and use these issues for your own political survival.”
I was surprised to read the minister’s speech because an article published in January 2018 in “The Straits Times“, based on information released by the Singaporean Negotiators stated, “…. With the FTA, tariff savings for Singapore exports are estimated to hit $10 million annually“.
As the annual tariff savings (that is the revenue loss for Sri Lanka) calculated by the Singaporean Negotiators, Singaporean $ 10 million (Sri Lankan rupees 1,200 million in 2018) was way above the rupees’ 733 million revenue loss for 15 years estimated by the Sri Lankan negotiators, it was clear to any observer that one of the parties to the agreement had not done the basic arithmetic!
Six years later, according to a report published by “The Morning” newspaper, speaking at the Committee on Public Finance (COPF) on 7th May 2024, Mr Samarawickrama’s chief trade negotiator K.J. Weerasinghehad had admitted “…. that forecasted revenue loss for the Government of Sri Lanka through the Singapore FTA is Rs. 450 million in 2023 and Rs. 1.3 billion in 2024.”
If these numbers are correct, as tariff liberalisation under the SLSFTA has just started, we will pass Rs 2 billion very soon. Then, the question is how Sri Lanka’s trade negotiators made such a colossal blunder. Didn’t they do their basic arithmetic? If they didn’t know how to do basic arithmetic they should have at least done their basic readings. For example, the headline of the article published in The Straits Times in January 2018 was “Singapore, Sri Lanka sign FTA, annual savings of $10m expected”.
Anyway, as Sri Lanka’s chief negotiator reiterated at the COPF meeting that “…. since 99% of the tariffs in Singapore have zero rates of duty, Sri Lanka has agreed on 80% tariff liberalisation over a period of 15 years while expecting Singapore investments to address the imbalance in trade,” let’s turn towards investment.
Investment from Singapore
In July 2018, speaking during the Parliamentary Debate on the FTA this is what Minister Malik Samarawickrama stated on investment from Singapore, “Already, thanks to this FTA, in just the past two-and-a-half months since the agreement came into effect we have received a proposal from Singapore for investment amounting to $ 14.8 billion in an oil refinery for export of petroleum products. In addition, we have proposals for a steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million), sugar refinery ($ 200 million). This adds up to more than $ 16.05 billion in the pipeline on these projects alone.
And all of these projects will create thousands of more jobs for our people. In principle approval has already been granted by the BOI and the investors are awaiting the release of land the environmental approvals to commence the project.
I request the Opposition and those with vested interests to change their narrow-minded thinking and join us to develop our country. We must always look at what is best for the whole community, not just the few who may oppose. We owe it to our people to courageously take decisions that will change their lives for the better.”
According to the media report I quoted earlier, speaking at the Committee on Public Finance (COPF) Chief Negotiator Weerasinghe has admitted that Sri Lanka was not happy with overall Singapore investments that have come in the past few years in return for the trade liberalisation under the Singapore-Sri Lanka Free Trade Agreement. He has added that between 2021 and 2023 the total investment from Singapore had been around $162 million!
What happened to those projects worth $16 billion negotiated, thanks to the SLSFTA, in just the two-and-a-half months after the agreement came into effect and approved by the BOI? I do not know about the steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million) and sugar refinery ($ 200 million).
However, story of the multibillion-dollar investment in the Petroleum Refinery unfolded in a manner that would qualify it as the best fairy tale with false promises presented by our politicians and the officials, prior to 2019 elections.
Though many Sri Lankans got to know, through the media which repeatedly highlighted a plethora of issues surrounding the project and the questionable credentials of the Singaporean investor, the construction work on the Mirrijiwela Oil Refinery along with the cement factory began on the24th of March 2019 with a bang and Minister Ranil Wickremesinghe and his ministers along with the foreign and local dignitaries laid the foundation stones.
That was few months before the 2019 Presidential elections. Inaugurating the construction work Prime Minister Ranil Wickremesinghe said the projects will create thousands of job opportunities in the area and surrounding districts.
The oil refinery, which was to be built over 200 acres of land, with the capacity to refine 200,000 barrels of crude oil per day, was to generate US$7 billion of exports and create 1,500 direct and 3,000 indirect jobs. The construction of the refinery was to be completed in 44 months. Four years later, in August 2023 the Cabinet of Ministers approved the proposal presented by President Ranil Wickremesinghe to cancel the agreement with the investors of the refinery as the project has not been implemented! Can they explain to the country how much money was wasted to produce that fairy tale?
It is obvious that the President, ministers, and officials had made huge blunders and had deliberately misled the public and the parliament on the revenue loss and potential investment from SLSFTA with fairy tales and false promises.
As the president himself said, a country cannot be developed by making false promises or with fairy tales and these false promises and fairy tales had bankrupted the country. “Unfortunately, many segments of the population have not come to realize this yet”.
(The writer, a specialist and an activist on trade and development issues . )
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