Energy experts complain of cheap feasibility study on expensive LNG facility

By Rathindra Kuruwita

Only USD 45,000 has been spent on a feasibility study for deploying a floating storage and regasification unit (FSRU) and a mooring system for liquefied natural gas (LNG) although Sri Lanka will spend about USD 4 billion annually for the infrastructure and the purchasing of LNG, energy experts claim.

They said that the feasibility study, commissioned by the Asian Development Bank (ADB), had been carried out by an Indian company that had little experience in LNG. High quality LNG and petroleum industry consultations were expensive by nature and around USD 3-4 million was usually charged for such a consultation.

Moreover, the CEB had already called for tenders for an FSRU, although the feasibility study had not been finalised. Given the fact that everyone in the industry knew that CEB was to float this tender by February, the ADB can’t deny knowledge of it, industry sources said.

The total allocation by the ADB for the feasibility study on identifying optimal LNG facility for Sri Lanka (i.e. land based or floating storage and regasification unit), most suitable locations to develop LNG power plants and associated facilitate) was USD 225,000. Out of this amount USD 150,000 was spent on meteorological and ocean data because both these factors affect the FSRU, according to the Terms of Reference (ToR) by the ADB. USD 45,000, out of the remaining USD 75,000, was given for international consultants for a feasibility study, according to the ToR.

“An experienced oil or gas expert is not going to work for that amount. This USD 45,000 was for three man months. Usually, an experienced consultant would at least charge USD 50,000 per month for such a consultation,” energy expert, Vidhura Ralapanawa said.

He said a study commissioned by JAICA about the feasibility of supplying gas for proposed LNG plants by India and Japan had run into several million dollars.

Ralapanawa said: “The FSRU is a serious business. The CEB is reported to have called for international proposals to deploy the FSRU and that the ADB feasibility study is not out yet. However, the fact that this was a study done very cheaply in a very expensive industry should also give us pause.”