Sri Lanka’s LNG strategy brings US Gas firm into focus
Sri Lanka is currently facing a transitional period in the energy field, using Liquefied Natural Gas (LNG) for a changeover, aiming for a target of 70 per cent of renewable-based power by the year 2030.
The government through the Power and Energy Ministry has brought back the plan to establish an import terminal for LNG, with the Minister Kumara Jayakody confirming the process and the start of the flow of the commodity in 2028.
The current situation is marked by the operational challenges of existing LNG-ready plants and significant delays in finalising necessary infrastructure and supply deals, leading to continued reliance on more expensive fossil fuels.
Due to the lack of progress and new government tenders with other companies, the US-based firm, New Fortress Energy‘s (NFE’s) plan to develop an LNG terminal and supply gas appears to have been on the back-burner.
The resuscitated NFE agreement, including other schemes in the energy/trade domain, represents Sri Lanka’s strategies to ‘deepen economic engagement’ with the US, covering the whole gamut from tariff talks to full-fledged trade arrangements.
Moreover, a MoU was signed in August 2024 for the supply of LNG to power plants with Indian Petronet LNG. However, in July 2025, the Ministry of Energy asked the Cabinet to withdraw this specific MoU due to its inconsistency, with the national priorities related to scalability.
This has caused diplomatic friction, several energy experts said. Minister Jayakody said that there are no immediate plans to import LNG from India because the necessary storage facilities have not yet been built and would take at least three years to construct.
Sri Lanka has a major, ongoing plan involving since 2021 to import LNG, with NFE set to develop an offshore LNG terminal to supply power plants.
NFE has acquired a 40 per cent stake in West Coast Power (WCP), which owns the Yugadanavi power plant. The plan involves an offshore Floating Storage Regasification Unit (FSRU) near Colombo.
However the deal faced legal challenges over contract clauses, but the Courts cleared the way, and the project was revived by the new government, with tenders reissued for a new 2028 launch of the project.
The 350 MW Sobadhanavi Power Plant is operational in its first phase (on oil) and is designed to run on LNG once the supply infrastructure is complete. The signing of the Power Purchase Agreement took place in April 2025, according to a senior official from the energy ministry.
The US-Sri Lanka deal regarding the gas imported from the US by the firm “New Fortress Energy” is a key element of Sri Lanka’s energy strategy, though it’s only one part of a larger energy agenda involving a variety of international actors and a series of tenders.
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