The government is poised to award the largest contract by value to a Sri Lankan and Korean joint venture for the supply of Liquid Natural Gas (LNG) necessary to run the combined cycle power generating plants currently using heavy furnace oil and diesel, more expensive and environmentally unfriendly than LNG. Secretary to the Ministry of Power and Renewable Energy Dr. D.M.S. Batagoda, confirmed to the Sunday Observer yesterday that plans are already afoot to award the contract and that the procedure will conclude at least by mid February.
“While the proposal from the Korean Company was unsolicited, we propose to have a Swiss Challenge for this tender,” Dr. Batagoda said.
It is expected that approximately half a million to one million metric tonnes of LNG will be supplied annually for a period of 20 years under the Korean proposal. Gas supply is expected to begin by end of 2019, according to Dr. Batagoda.
Under the project Korea will build a Floating Storage Regasification Unit (FSRU) which will include a conversion unit and a storage unit.
An FSRU is a ship mounted terminal which is cheaper than building an on-shore terminal. Several FSRUs with average output of 1000 metric tonnes a day are already in operation in neighbouring countries including India and Pakistan. According to Dr. Batagoda, Korea is currently placed first in building ships and FSRUs and are better equipped with subject knowledge and technical know-how to get assistance.
However, experts who wished to remain anonymous claim that the procedure is not transparent. “For what will be Sri Lanka’s single largest contract, this procedure is completely opaque and rift with opportunities for corruption. There are many companies around the world who can supply LNG driven power at less than US$15 cents per unit using barge mounted solutions or even FSUs with the regassification units distributed at the locations where the power plants are,” said a sector expert.
Speaking to the Sunday Observer, the former Director General of the Petroleum Resources Development Secretariat, Saliya Wickramasuriya said that more than the duration of the contract period of which both countries enter, Sri Lanka must bear in mind what its end game should be, especially as a country that is able to provide gas to meet our domestic demands so that the resource can be obtained at a much lower cost.