Features
Should Sri Lanka engage LNG floating regassification vessel for electric power?
by Nalin Gunasekera
In many countries, an LNG project is the largest investment ever undertaken, and a country’s future creditworthiness may hang in the balance. Unfulfilled commitments for any reason can lead to millions of dollars of losses.
LNG – A Non-Technical Guide by Michael Tusiani, 2011
The writer Nalin Gunasekera (nalin.gunasekera@hotmail.com) has spent 40 years in the oil and gas industry and many years in leasing and operating floating LNG regassification vessels in more than 10 countries, representing Royal Dutch/Shell, Mitsui and Mitsubishi, the largest LNG vessel owner/operators and LNG traders in the world. Shell is the licensee for the largest gas reserves in the world and the custodian of gas and floating systems technology. Nalin received the Anniversary Technical Excellence Award from Shell for a floating system regarded as a ‘market trend setter’. He trained as an engineer in the University of Ceylon and at University College London as a government post-graduate scholar. He lives in Australia, the largest global LNG producer in 2021 and host to the highest density of floating production vessels in the world, and the technically most advanced ever built, Prelude, by Shell, costing US$ 12 billion. Nalin has participated in the roles of client, consultant and contractor, representing the largest institutions in the industry.
Part 1
(Part 2 to follow will cover FSRU technology, commercial transactions, LNG procurement, LNG suppliers, HSSE (health, safety, security, and environment), insurance, jurisdictions, future challenges to LNG, and regional energy policy changes.)
Where are these FSRUs today and where are they planned in the region?
Government of Sri Lanka (GoSL) seeks to join the region consisting of India, Pakistan, Bangladesh, Indonesia, Malaysia, Thailand, Myanmar, Philippines, Vietnam, and Cambodia, in turning to regassified LNG as an energy source to supplement others by installing an FSRU. South and South-East Asia are becoming the epicentre in LNG regassification, with these countries turning to a gas-based-economy to benefit from increasing LNG supply globally with lower harmful emissions compared with coal and oil.These countries have recognised that LNG although not ‘green’ will nevertheless be needed to assist the economy to transition to net zero carbon emissions (NZE), even if the immediate outcome is not NZE. Some countries in the region have more than one FSRU in operation or planned since India, Pakistan, Indonesia, Bangladesh already have their LNG regassification initiatives proven to be wise decisions.According to Natural Gas World, in 2020, eight new FSRU terminals were installed/commissioned in Bahrain, Croatia, Brazil (two), India, Indonesia, Myanmar and Puerto Rico (out of a total of about 50). Vietnam with its long shoreline is planning for 130 GW of power generation with LNG, supported by four FSRUs, with Exxon-Mobil investing in their transition to gas. Cambodia is planning to have 3,600 MW of LNG powered power generation by 2030 with Japanese and Chinese assistance and have FSRUs planned.Countries such as India, Bangladesh, Brazil, Indonesia with two FSRUs, have their own natural gas domestic reserves currently in production; they are however supplementing with regassified LNG from an FSRU. Their LNG may be sourced overseas rather than locally.
The current self-funded proposal by NFE for Sri Lanka (SL) is with payment guarantees by the US Government. This is most welcome at a time when SL is desperate to attract foreign direct investment to provide confidence and credibility to the global investor community.
Would Mannar Basin reserves development be threatened by the FSRU?
The Mannar reserves if developed will supplement natural gas from the FSRU, it will not be a threat.
Australia and Qatar are the largest LNG suppliers worldwide supplying about 75mtpa (million tons per annum) each out of a global total of about 350 mtpa. Despite this LNG trade dominance, Australia is planning to have at least three FSRUs: one by Vopak, in Port Philip Bay Victoria, the second by Viva Energy, in Geelong, Victoria for delivery in 2024, and the third in Port Kembla NSW. This is because LNG shipped to FSRUs is more cost-effective than installing long pipelines from remotely located natural gas production plants. Australia may not be regassing their own LNG (locked up in long term contracts) but will be regassing LNG from the open market on possibly long-term-take-or-pay contracts. They have sought two guaranteed gas buyers on take-or-pay terms to finance the project who possess AAA high investment-grade-credit-ratings to minimise risk to the investor.
Indonesia, a major exporter of LNG of about 25 mtpa with their own natural gas production network is turning to FSRUs.
What are the prospects for the Mannar development?
Deep water reservoirs for development are for those with very deep pockets. Their risks are severe and the outcomes uncertain.
An overhead slide from a deep-water presentation
The Mannar field is a deep-water development with two wells drilled 30 to 60 km from shore in 1,350m to 1,500m water-depth. If this field had been appraised to be feasible, its development would have competed with the FSRU.In countries such as in India, Bangladesh, Indonesia, Thailand, Myanmar, Brazil and in many others, domestic natural gas production supplements the FSRU. The two complement each other. However, the prospects of the Mannar basin must be reviewed in the current context.
The development of petroleum resources requires the government to enter into a partnership with oil companies. It is the oil companies that have the financial strength, expertise, and capacity/capability to explore the resources. They possess the requisite technology and skills to develop the resources and are willing to assume the financial risk.
The parties have different goals and agenda. The government’s primary focus is the benefit of the country, while the oil companies’ goal is maximising shareholder returns. There is tension in reconciling the value‐laden goals of governments with profit-oriented goals of the companies. Yet there is also some synergy for the two parties, government and oil company, in trying to maximise returns to their respective stakeholders.
The oil industry has already lost its appeal to investors. Any financing from capital markets will face challenges given the need to be transparent in disregarding policies of monetary authorities and investor banks concerning divestment and avoidance of fossil fuel investments. The banks would face a backlash from the public who would be concerned about their shareholder returns, in the context of today’s focus on COP 26 goals. Fossil fuel projects will therefore largely require self-funding, for which the oil companies have no appetite today. Having made losses in the past years, oil companies are selling off their assets to pay dividends, and do not see a future. They are cutting staff regularly.
Deep water developments are costly requiring much larger reservoir sizes to justify investment. Since the Indian exploration company Cairn left SL in Jan 2007 due to the discovery of low reserves, there has not been any noteworthy investment in appraising the Mannar field. Further, the field is not close to landfall and may require subsea infrastructure and high pressure boosting of the reservoir. The writer is able, from his own experience, to confirm that these sub-sea facilities are prone to failure. These marginal fields for development require a recognised, credible, independent-third-party-verification for investment. This has not been done.The expectation today is that several viable fields ready for development will not be monetised, being unable to access finance. The projection is that 30% to 40% of viable fields may never be monetised. This is given the ‘perfect storm’ created by the recent crash in oil and gas prices (now rising suddenly, which may be temporary with future trajectory unknown) as well as Covid-19 and UNFCCC COP 26 potential mandates against fossil fuel. However, this may change if the 2050 NZE targets are unviable.
Deep water technology is largely with the majors such as Shell, Exxon-Mobil, Chevron, TOTAL, etc. They have made significant losses in recent years and are unable to self-fund having no access to finance.
Complex subsea architecture in deep-water Mannar is remotely located and in the event of failure require subsea intervention. Physical diver intervention is not possible due to the depth of water in excess of 1.3 km. The intervention facilities, DP DSV ROV (dynamically positioned diving support vessels with remote operated vessels) are extremely expensive to mobilise/demobilise, costing USD 10 mil or more when remote. (The writer was involved in remote deep-water interventions where fields have been abandoned due to intervention costs being unjustifiable and the outcomes uncertain).
SL’s investment grade is so low that for any field development the financing costs above LIBOR (London Interbank Offered Rate) will be extraordinarily high. This is reflected in the country’s status of ‘default category with no prospect of recovery’ by rating agencies such as S&P.
These marginal investments are considered high risk being still at the pre-development exploratory stage and since Jan 2007 have not been able to attract an oil company for exploratory wells.
Given their marginal nature, oil companies expect a disproportionately high return with minimal or no taxation/royalties for their investment as they have significant outgoings. It is not unusual for governments who are new to the industry to end up with minimal or no revenue; ultimately left with facilities with a significant negative value to be removed at the taxpayer expense.A typical project to be executed may take several years as seen above with many uncertain outgoings. Australia’s major gas field Browse which commenced exploration in 1967, and has already been appraised to be viable for investment with 12 TCF (Trillion cubic feet) of recoverable gas, is continuously postponed given the global uncertainties.However, when the future of the industry was certain, there have been oil fields that were delivered in 14 months after appraisal, unlike today when the future is uncertain.
The Mannar field, at best, may have to wait to be developed until the investment climate improves and the uncertainties are minimised.
Is there a risk to SL if the FSRU is not installed by NFE?
The past three/four GoSL FSRU tender invitation attempts, were only meaningless academic exercises with no guarantee of payment by an investment grade credible entity. The GoSL is akin to someone seeking to purchase a new Rolls Royce with insufficient money to buy an old Morris Minor, and then engaging highly paid consultants who see ‘cash in chaos’, and take the GoSL for a ride. The last invitation to tender proposed under Swiss Challenge process against SKE&S’s unsolicited proposal did not attract a single prospective bid after more than four or five extensions to the closing date of tender over about eight months.
The current CEB tender is no different with no guaranteed payment security package by a credible investment grade party offered to the bidders. This will eventually be required. A toxic combination of misinformation in the public domain and unregulated malfunctioning of the electricity sector by the Ministry of Power and CEB has crippled SL’s economy perhaps beyond repair. Understandably they will attempt to wrest control over this project from any other competing ministry.India faced many challenges similar to SL in these projects in countering misinformation in the public domain by self-appointed experts, who had no exposure to industry norms, complex technology, or any understanding or experience in the highly specialised nature of offshore oil and gas business and their complex commercial transactions. SL is not any different with misinformation from (a) ideologues who see energy transition to NZE without intermediate steps such as LNG or other realistic options, (b) those with vested interests in importing coal and diesel, (c) ignorance of the complexity of industry norms, and (d) complete ignorance and disregard of the industry state of play. These cannot be understood overnight by those with vested interests, and others in isolation who are making outlandish demands. They create confusion amongst themselves, with the public at large, policy formulators and decision makers.If this FSRU is not installed, there is a likelihood that the power generation with diesel will continue and expand with increasing unbearable losses and environmental damage, which has been the past record in power generation. Under the new international consensus that may develop following UNFCCC COP26, countries continuing with heavy reliance on coal and oil may face punitive measures such as carbon tariffs on exports and other trade and commerce.
What is an FSRU? How does an FSRU work?
A Floating Storage and Re-gasification Unit (FSRU) is a floating vessel that is permanently moored at a site where it can receive LNG from tankers/carriers, store and regasify the LNG and send it as natural gas to shore via a subsea pipeline at a rate required by the natural gas users. The natural gas upon receipt at landfall from the FSRU would be transferred via pipelines on land to the end user power generators such as at Kerawalapitiya.
NFE will be supplying an FSRU and the associated pipelines. The project components are leased being supplied under EPCIC (Engineering, Procurement, Construction, Installation and Commissioning) and O&M (Operation and Maintenance) terms of responsibility for a specified period called the ‘fixed term’ with a period of optional extensions at predetermined commercial terms.
The figure above shows Moheshkhali FSRU Bangladesh with its submerged turret loading mooring and dynamic riser which is exposed to monsoons, operating since 2018. The vessel has a disconnectable mooring which disconnects from the vessel by lowering the swivel during high storm surges (such as monsoons as experienced in SL) and reconnects when the weather is benign. The vessel ‘weathervanes’ (rotates) about the single-point-mooring with the meteorological oceanographic variations in wind, wave and current. The vessel motions are determined analytically and verified by model tests to meet Classification Society requirements. There are other forms of shallow water moorings.
The mooring and riser technology is proprietary and technically complex in which the writer has specialized along with their commercial transactions in vessel leasing and operations.
A dis-connectable mooring system is where the floating installation has a propulsion system and a means of disengaging the installation from its mooring and riser systems to allow the installation to ride out severe weather or seek refuge under its own power for a specified design environmental condition.
A disconnectable moored vessel requires a full marine crew, must be flagged as required by IMO (International Maritime Organisation) with the vessel likely being in transit during its tenure. The writer has supplied many of these complex mooring systems which remain proprietary technology.This is completely new technology to SL, lacking any exposure to offshore oil and gas industry standards, codes, practices, industry norms, risks, analytical methods, Classification Society Rules under which they are designed and constructed, their insurance requirements, health safety and security and environmental practices, and complex multiple jurisdictions. Their commercial transactions are notoriously complex.NFE would remain as the single point responsible for all components up to the end user of the gas. The removal of the installation or transfer to the GoSL at the end of the lease is an option. In the case of SL, the vessel will be handed over to GoSL for continued operation after 10 years. In some countries the vessel when handed over has been a liability being a ‘rust bucket’ having a considerable negative value requiring the taxpayer to fund its removal, costing more than USD 50 mil. The ability of GoSL to undertake the operation and maintenance at hand over may raise questions (as in securing insurance such as P&I insurance, to be explained in Part 2), when the operator’s competency will be questioned by the insurer. This is a form of due diligence in determining GoSL’s capability to operate the facility by an independent third party. These are lessons to be learnt from cases in South East Asia, when vessels were handed over with unintended consequences.
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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