Features
A productive way out of the LNG dilemma
by Eng Parakrama Jayasinghe
Both Liquid Petroleum Gas (LPG) which recently saw a sharp price increase and is now the preferred cooking fuel even in some rural areas, and yet-to-be-used Liquefied Natural Gas (LNG) have received widespread public attention.
Natural Gas (NG) , which is mostly Methane (CH4) , the fossil fuel promoted as the alternative for dirty coal used for power generation, has to be brought in to the country in concentrated form liquefied at low temperature for transport logistics and economies. This makes it LNG when the source of supply is foreign. We will therefore have to depend on LNG as long as it is imported and would also need the storage and regasification facilities such as the Floating Storage and Regasification Units (FSRU) to convert the LNG to the form usable at a power plant. These are the issues under hot debate right now.
Ignoring the sordid details of the major decision making processes of Sri Lanka, particularly in the energy sector, let us face the realities
* A 350 MW power plant designed to use natural gas is being built without any arrangements in place for the supply of the gas needed.
* The 300 MW Yugadhanawi power plant, pushed as designed for easy conversion for the use of Natural Gas, has been running on low sulfur furnace oil as expensive as diesel since 2011.
* The natural gas price in the world is soaring compared to what it was when it appeared to be the best option to get away from coal
* Renewable energy based electricity is now undoubtedly cheaper than any form of fossil fuel based generation including NG , and this is true for Sri Lanka too.
* There is a proven indigenous natural gas reserve in Mannar in Blocks M2 in close proximity to the 900 MW Norochcholai coal power plant
* Coal prices have gone through the roof making coal power, once considered the cheapest when all its ill effects are ignored, is no longer an option financially, economically, environmentally and socially
* Sri Lanka has declared a policy to achieve a 70% contribution by RE sources for electricity generation by 2030, and an international commitment to reach zero carbon emission status by 2050
* There is significant interest backed by actual commitments and multi million dollar investments for the purchase of the Mannar data, by big players in the oil and gas industry targeting the balance blocks offered by Sri Lanka for exploration. This process is underway, supported by an immediate captive demand for the proven sources to be developed
* Sri Lanka is in the throes of a foreign exchange crisis which makes an offer of US $ 250 Million to appear as manna from heaven. However the annual drain of over $ 4,000 Million for the import of fossil fuels, of which nearly $ 1,000 Million is consumed for power generation, is the main contributor to the crisis which is exacerbating due to the current world trends.
* In the government sector, the left hand does not seem to know what the right hand is doing
* Thus a national asset in a company making good profits is being sold through a midnight deal by the Treasury owning the shares, accepting conditions gravely affecting the performance of the Ministry of Power and Energy and the plans and programs of the Ministry of Energy, without any consultation with them.
* In this background it is worthwhile considering if there is still a way out and to eat the cake and keep it. This can be shown to be possible.
The Current State of Play in the Electricity Sector
There has been doomsday predictions of impending energy shortages in the past, most recent being in 2019, which did not come to pass. The next prediction is for 2023 unless the present dependence on imported fossil fuels is arrested. This may come true not because of lack of generation capacity but due to inability to pay for the import of fossil fuels – both oil and coal.
There has been some progress in the development of indigenous renewable energy which fortunately for us is non-fuel based in case of wind and solar. Some impediments imposed by vested interests on this progress has now been removed by the present administration and coupled with the laudable target to achieve 70% RE by 2030 would help accelerate this progress. This goal clearly limits the space available for non-renewable power generation. As the table below indicates there is no room to add any more fossil fuel based power plants including Natural Gas, except perhaps as replacement for the units due to be retired shortly at the end of their economic life.
Notes.
1. Projected total electricity demand in 2030
2. Fossil fuel generation allowable under 70% RE scenario
3. Renewable Energy Capacity to be reached by 2030 to achieve 70% RE target
Therefore the 350 MW Subadhanwi Power Plant under construction may have a role to play as several plants in the Kelanitissa complex are due to be retired.
Although the commitment to achieve zero emission by 2050 would be further challenged by the target of carbon free power generation by 2040, the introduction of natural gas (also a carbon emitter) as a transitional source of fuel to occupy the 30% space up to 2030 is not illogical.
The game plan
As stated above there is no room for adding any more NG power plants at Kerawalapitiya or for fuel switching at Kelanistissa, proposed as the means of absorbing the minimum Take or Pay (TOP) condition of 35 Million MBTU per year in the present deal with New Fotress Energy ( NFE) . Therefore the suggestion that we will only pay for the 25 Million MBTU per year that we can consume, during the first five years and the balance would be accumulated, but nevertheless is payable, will be a Damocles Sword hanging over us. This would also be a strategy to extend the contract for a further five year period. It is futile to make calculations of the amount we have to pay, for something we will not consume at present, as the crystal ball is quite cloudy as to the rate at which the NG prices would escalate. The recent price trends shown below is a good indication.
As such depending on imported natural gas which makes it LNG is not an option we should pursue, if not for any reason other than the drain on the foreign exchange.
Do we have an option? Fortunately based on the opinion of the officials of the Petroleum Development Authority of Sri Lanka (PDASL) now formally established under the Act No 21 of October 8, 2021, we do have a more attractive option. The hard work of these officials who never lost faith in spite of setbacks, unequivocally confirm the proven resources in the Block M2 in Mannar named Barracuda and Dorado of the presence of almost 1.85 Trillion Cubic Feet of Natural Gas (mid-level estimate). This is equivalent to 1,850 Million MBTU, to be compared to the present numbers being bandied about, of 175 Million MBTU over five years as the TOP offered by the NFE. There is adequate gas to operate these two power plants for over 50 years from this one gas field alone.
The prospects of the wider Mannar Basin, inc. Block M2, is estimated to hold 9 TCF of Natural Gas based on analysis of all available data.
So we can operate the Norochcholai, Yugadhanawi and Sobhadhanawi power plants for 30 years with our own gas, if we take the trouble to develop these two reservoirs alone.
But naturally we do not have the expertise or the economic capacity to develop this resource and would need a competent company in the Oil and Gas industry to come to a contractual arrangement with Sri Lanka. May I mention in passing that I hope these negotiations will be done by competent people who have interest of Sri Lanka as the utmost aim, while accepting the realities of the commercial world.
Take or Pay for Natural Gas Development in Mannar
As much as a supplier of an FSRU and supply of LNG would expect a minimum guaranteed of off take, the potential developer of our own gas fields would also have similar expectations, which we cannot deny. It is up to Sri Lanka to evaluate the minimum quantities we can afford to consume without having to pay for gas or services beyond that amount. This becomes even more critical when that payment will need to be in dollars that we don’t have.
It has often been said that the minimum off take that would be acceptable would be in the range of 1000 MW of power generation. This is verified by the NFE terms which targets the two plants at Kerawalpitiya adding up to 650 MW and the passing references to another power plant of capacity 350 MW at the same location, which has not received much attention. It is clear that this cannot happen if we accept the 70% RE target.
But how can we reach the 1,000 MW target but not violate the 70% RE target? Fortunately the recent events have opened a most attractive opportunity to offer a viable level of off take without having to construct any new power plants. The phenomenal rise in the coal prices now exceeding $ 240 per MT at source, could be a blessing in disguise in many ways. No amount of fancy accounting can now prove the cost of coal power generation to be at an acceptable level, even if we can find the dollars to buy the coal.
So the most obvious step to be taken is to covert the three units of 300 MW coal power plants at Norochcholai to operate on natural gas from our own gas resources. Not only does this not require any FSRUs, as the gas will be supplied in gaseous form, which can be pumped directly to the power plant, we will not have to pay for the gas in dollars. There would be some payment on the extraction, processing and piping costs. But this is not linked to any world gas prices. However, the benefits that would accrue, financially, economically and environmentally are massive and too numerous to list here.
Before anyone objects to this proposal by saying that this is not proven technology or has not been done anywhere, I must say that over 100 coal plants have been converted to gas in USA alone.
No doubt this kind of leap would require much planning and analysis in addition to the political wisdom and will. Some temporary measures would need to be taken if the planned time schedules are disturbed. But the realities on the ground and the dire situation faced by Sri Lanka presently and in the foreseeable future, behooves us to look for innovative solutions and maximize the utilization of our own resources that nature has bestowed on us.
But as mentioned before, the principle ingredient required is the commitment to achieve the best for Sri Lanka and the integrity of the decision makers. These unfortunately has been the missing ingredients in all of the past events.
I await responses from those who can appreciate the validity and value of these proposals, as well as those from among the doubting Thomas’s to which I will respond, as the space limits me to preempt such queries.
Has Sri Lanka got the courage to reject the current proposals driven by short term expediencies and possibly other reasons, which will definitely block any chances of our chances of ever developing our proven resources and take this step to make us a net energy exporter?
(E Mail : parajayasinghe@gmail.com Telephone : 0777269970)
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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