Sri Lanka will revive a previously suspended tender for a liquefied natural gas (LNG) terminal to supply fuel for at least two large combined-cycle power plants, aiming to reduce costs and enhance energy efficiency, Energy Minister Kumara Jayakody announced.
“There is a suspended tender. We will reactivate it and quickly implement it,” Minister Jayakody told parliament. He emphasized that two power plants intended to operate on LNG are currently running on costlier liquid fuel, highlighting the urgent need for the transition.
The tender was initially halted during the Gotabaya Rajapaksa administration, when an unsolicited “take or pay” agreement with New Fortress Energy gained prominence, sidelining the competitive bidding process.
Minister Jayakody affirmed that LNG would serve as a transitional energy source as the country works toward increasing its share of renewable energy. “LNG is not the cheapest, but it is relatively more affordable than liquid fuel and diesel,” he said.
Despite LNG’s cost-effectiveness compared to liquid fuels, coal remains the cheapest thermal energy source. However, Sri Lanka has committed to not expanding coal usage. Efforts to establish a second coal plant under the Ceylon Electricity Board’s long-term generation plan have been obstructed over the past decade, contributing to higher electricity costs.
The minister also noted that renewable energy sources, such as solar and wind, require standby power due to their intermittent and fluctuating nature, which underscores the importance of a stable and cost-effective transitional energy supply.
From a technical competence and worldwide scope point of view there’s nothing wrong with New Fortress Energy. It may be tarred by association in Sri Lankan technical circles by the coming into play during the Gotabaya regime but they are far from being some sort of cowboy outfit on the make.
Nevertheless, it is very true that take or pay arrrangement have to be carefully formulated to not give undue advantage to the provider but there are (or ought to be) sufficient technical expertise in Sri Lanka to objectively advise on this. Access to adequate LNG market information is the key.