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Forget G-to-G power projects, go for competitive bidding: CEB tells new Power and Energy Minister
The Ceylon Electricity Board (CEB) wants the new Power and Energy Minister to shun Government-to-Government power projects or force them to stand against open competitive bids, referring particularly to the liquefied natural gas (LNG) terminal to be run as a joint venture between India, Japan and Sri Lanka.
The utility insists that G-to-G projects, as they are known, are often the worst option because nominated private companies creep in through State sponsorship and there is no opportunity to compare their terms against those of competitors. The previous administration consented to the India-Japan joint venture to placate the global powers over a Chinese LNG power plant it approved for Hambantota.
The Power and Energy Ministry also invited international bidders to counter a Korean offer for an offshore floating storage and regasification unit (FSRU), pipeline and LNG supply. The CEB staunchly opposed this initiative (termed a Swiss Challenge), even resigning from the technical evaluation committee. It was not immediately clear if the new administration will proceed with it.
Power sector analysts have repeatedly criticised the policy of dishing out projects on geopolitical imperatives. The India-Japan joint venture, too, comprises an FSRU and pipelines. And the CEB insists the country needs just one terminal.
“Various Governments have proposed various terminals,” said CEB General Manager S. D. W. Gunawardana. “We don’t need that many. One terminal is enough for the CEB for the next ten years.”
The utility now seeks to call an open tender for the project put forward by Petronet LNG Ltd of India, Sojitz Corporation and Mitsubishi Corporation of Japan and the Sri Lanka :Gas Terminal Company Ltd, a Sri Lanka Ports Authority (SLPA) subsidy. The parties signed a memorandum of understanding (MoU) in April last year.
“We have already formulated tender documents with Asian Development Bank (ADB) assistance,” Mr Gunawardana said. “Whoever brings the gas to Sri Lanka, the CEB is the main consumer. And gas is not cheap in small quantities.” Onshore and offshore pipelines will connect from the FSRU at the Colombo Port to two of the utility’s existing power plants at Kelanitissa and Kerawalapitiya.
These matters were raised at Power and Energy Minister Mahinda Amaraweera’s inaugural meeting this week with institutions in his charge. For the first time in many years, both CEB and the Ceylon Petroleum Corporation (CPC) are under the same person.
The CPC is playing a key role in the LNG project and submitted the MoU and its environmental impact assessment (EIA) at the meeting. At this point, the CEB raised its concerns about the project and its objection to G-to-G ventures.
“Our suggestion is to let the G-to-G proposal also progress while going for competitive bidding,” Mr Gunawardana said.
The EIA for the India-Japan project is now open for public comment. It estimates its cost to be around US$ 375mn or Rs 67bn for the FSRU and offshore and onshore facilities, including the pipelines. It does not include land acquisition costs.
Approximately 500 workers will be needed during peak construction time. Post-commissioning, the FSRU will require up to 30 full-time employees onboard.
The EIA says the potential impacts of the project will be mainly during construction phase on the marine and terrestrial environment within and near the Colombo Harbour areas and proposed pipeline route. During the operational phase, impacts will be within the Colombo harbour area and, that too, nothing on land.
Construction of the offshore pipeline is expected to require about 20 days spread over a period of three months. It will be laid in stretches at the rate of 0.6 to 0.8 km per day.