By Maheesha Mudugamuwa
The topics of renewable energy and LNG (liquefied natural gas) have resurfaced in the news yet again, with Minister of Power Dullas Alahapperuma recently stating that two LNG power plants will be constructed by the year 2023 as a solution to the prevailing power crisis in the country in the future.
He said that although discussions have been going on since 2007, not a single LNG plant has been built during the past 13 years. The proposed LNG power plants have also been mentioned in the Ceylon Electricity Board (CEB)’s Long-Term Generation Expansion Plans prepared annually since 2015.
Nevertheless, so far, only one LNG power plant – the Kerawalapitiya LNG power plant with a capacity of 300 MW – has been awarded by the CEB, of which the construction is yet to commence.
In January this year, the Cabinet of Ministers approved a 300 MW LNG plant to be built in Kerawalapitiya as a joint venture between the CEB, Japan, and India, with the financial support given from Asian Development Bank (ADB). Along with this, the approved coal power plant with a capacity of 600 MW was also approved as an extension to an existing complex in the Norochcholai Coal Power Plant (Lakvijaya Power Station), partly in order to solve the looming power crisis and mainly to reduce the losses incurred by the CEB as a result of purchasing and generating high-cost diesel electricity.
According to the US Energy Information and Administration (EIA), LNG is natural gas that has been cooled to a liquid state (liquefied) – at about -260° Fahrenheit – for shipping and storage purposes. The volume of natural gas in its liquid state is about 600 times smaller than its volume in its gaseous state in a natural gas pipeline. This liquefaction process, developed in the 19th Century, makes it possible to transport natural gas to places natural gas pipelines do not reach, and also to use natural gas as a transportation fuel.
Oil and gas exploration
With plans underway to build more LNG power plants in the country, the CEB also sought the possibility of introducing indigenous natural gas in the Mannar Basin, although the determination of the quantity and the appropriate price are still to be validated.
Reportedly, oil and gas exploration was recommenced last year after three years of waiting, and the Petroleum Resources Development Secretariat (PRDS) reopened the ex-Cairn M2 block in the Mannar Basin for development and commercialisation through a limited tender offer.
As of last year, Sri Lanka had received three proposals from two consortiums and an operator based in the UK, Southeast Asia, and the Middle East.
Speaking to The Sunday Morning in earlier September, former Minister of Petroleum Resources Development Chandima Weerakkody lamented that his successors had abandoned his project and as a result, the whole process was delayed by over two years.
“Earlier, the Secretariat (PRDS) had planned to have gas production by 2023 with the existing developments of the M2 block for which we have already advertised. Then we need Total (a French oil and gas company) and Equinor (a Norwegian petroleum refining company) to interpret the existing data from JS5 and JS6 blocks in eastern Sri Lanka basin and then to decide on future steps,” he said.
As explained by Minister of Energy Udaya Gammanpila, a decision has also been taken by the Government to recommence oil and gas exploration as well as to attract more investors to the industry. He said the country has already prepared a natural gas policy to attract more investors to explore oil and gas in Sri Lanka.
Moreover, due consideration was given to the availability of natural gas in the Mannar Basin and the utilisation of natural gas as a fuel option for the power sector. The discovery of natural gas resources is still at an early stage in the Mannar Basin. However, it is learnt that high priority for local natural gas utilisation will be given when the price is competitive with foreign markets.
The development of natural gas power plants is linked with the development of necessary natural gas infrastructure to import LNG. However, the LNG import contracts are governed by “take or pay” restrictions. In addition, having a proper mix of long-term, spot, and short-term contracts for the varied demand according to the weather patterns and seasonal aspects related to ore projects should also be considered. The total present value of implementing the Base Case Plan 2020-2039 in the next 20 years is approximately $ 16,675 million, with a discount rate of 10%.
Until local gas production begins, the CEB is to call for tenders for the LNG supply next month, parallel to the construction of the power plant. Apart from the already awarded LNG tender to Lakdhanavi Ltd., the CEB is to call for tenders for the construction of the second LNG power plant in Kerawalapitiya next month.
Ground work yet to begin
When contacted by The Sunday Morning, a spokesman for LTL Holdings (Pvt.) Ltd. said the power purchasing agreement between Lakdhanavi and the CEB is yet to be signed, adding that once the agreements are finalised, the construction of the LNG power plant would begin.
The power purchasing agreement at present is at the Attorney General’s (AG) Department, he said.
Meanwhile, as learnt by The Sunday Morning, negotiations between Sri Lanka and India for the construction of a 300 MW of LNG power plant is at a standstill, as the new Government is yet to take a decision on whether or not to continue with it.
A well-informed source attached to the Ministry of Power said that several rounds of discussions took place between the two parties under the previous Government, but the new Government is yet to give its consent to the agreements reached between the two parties.
“India was keen on funding a LNG power plant of around 500 MW, but under the CEB Long-Term Energy Generation Plan, the system could accommodate only another 300 MW and therefore, several rounds of discussions were held,” the source said, adding that at present, negotiations are at a standstill as the CEB has decided to go on project tendering.
When contacted by The Sunday Morning, CEB Chairman Eng. Vijitha Herath said that negotiations had not yet begun under the new Government and the CEB is fully focused on the tendering processes.
However, yet, the unsolicited proposals (such as government-to-government) will be considered in the future if there is a request, he said.
Already delayed
As explained in CEB’s Long-Term Generation Expansion Plan, LNG-fired combined cycle power plants and associated LNG import infrastructure – 2 x 300 MW dual fuel combined cycle power plants – must be commissioned in the western region by 2022. The associated LNG importing infrastructure is to be developed on a fast track process with sufficient capacity to cater to both the new power plants and the conversion of other oil-fired combined cycle power plants in the western region. Furthermore, an additional 3 x 300 MW natural gas combined cycle power plants are expected to be commissioned by 2026 in either Kerawalapitiya or Hambantota.
Minister Alahapperuma had stated at a meeting held at the CEB last week that during the last five years, only 300 MW were added to the national grid, although the demand for electricity is growing at 6% a year.
He had said that to address the potential power crisis in the future, in line with the President Gotabaya Rajapaksa’s “Vision for Prosperity” policy statement, the contribution of green and renewable energy to the country's power grid should be increased to 70% by 2030.
In this regard, CEB Chairman Eng. Herath said the construction of the already tendered LNG power plant would commence next month.
It is further learnt that the CEB is incurring a loss of around Rs. 250 million per day due to the higher electricity production cost while the annual loss of the CEB is at around Rs. 85 billion.
As explained by Eng. Herath, the CEB incurs losses as it sells a unit at around Rs. 16, while the production cost is at around Rs. 23. To reduce these losses, the CEB should go for low-cost electricity, the Chairman added.
“We are finalising the LNG projects and several other low-cost electricity projects. Unless we commence such projects, the losses incurred by the CEB cannot be reduced,” he stressed.
Furthermore, the CEB Chairman said the reason for the delay in commencing the construction of low-cost power plants was the delay in procurement processes, adding that given the present documentation speed, it would take another year to finalise the construction of the power plants.
Accordingly, the incorporation of LNG-fired power plants to the Sri Lankan power system has been considered in the Long-Term Generation Expansion Plan 2015-2034.
In preparation of the Long-Term Generation Expansion Plan 2020-2039, the present trend of LNG fuel prices was considered with the possibility of recovering the capital cost of LNG infrastructure. The option of adopting a floating storage regasification unit (FSRU) as an immediate requirement, along with the possibility of a land-based LNG terminal as a long-term solution, is considered.
However, LNG infrastructure must be established at least by 2021 in order to gain the maximum benefit of avoiding high-cost fuel oil. The combined cycle plants that are operating using oil in the western region will be converted to natural gas immediately after the facility is made available. The delays in procuring LNG infrastructure will cause the power plants to operate on oil, which would result in an enormous cost overrun and increased environmental emissions, the CEB plan explains.
The main load centre of Sri Lanka is also located in the western region. In order to minimise the transmission losses, the development of power plants closer to the load centre is identified. Therefore, the development of natural gas-operated power plants in the western region is identified as a priority, which will comply with the environmental requirements in the western region. Meanwhile, Hambantota is identified as the second location to develop natural gas power plants with its available port facilities.
Meanwhile, Minister Alahapperuma said in Parliament on Thursday (8) that the CEB has incurred a loss of Rs. 181.5 billion between 2015 and 2019. Accordingly, the CEB has incurred a loss of Rs. 2.3 billion in 2015, Rs. 14.4 billion in 2016, Rs. 47.5 billion in 2017, Rs. 31.9 billion in 2018, and Rs. 85.4 billion in 2019.
The factors for the losses, as explained by Alahapperuma, included the inability of the previous governments to build new power plants during the past few years and also the failure to amend the electricity tariffs in line with the increased cost of generation.LNG power plants | Vast area for exploration
11 Oct 2020
LNG power plants | Vast area for exploration
11 Oct 2020
By Maheesha Mudugamuwa
The topics of renewable energy and LNG (liquefied natural gas) have resurfaced in the news yet again, with Minister of Power Dullas Alahapperuma recently stating that two LNG power plants will be constructed by the year 2023 as a solution to the prevailing power crisis in the country in the future.
He said that although discussions have been going on since 2007, not a single LNG plant has been built during the past 13 years. The proposed LNG power plants have also been mentioned in the Ceylon Electricity Board (CEB)’s Long-Term Generation Expansion Plans prepared annually since 2015.
Nevertheless, so far, only one LNG power plant – the Kerawalapitiya LNG power plant with a capacity of 300 MW – has been awarded by the CEB, of which the construction is yet to commence.
In January this year, the Cabinet of Ministers approved a 300 MW LNG plant to be built in Kerawalapitiya as a joint venture between the CEB, Japan, and India, with the financial support given from Asian Development Bank (ADB). Along with this, the approved coal power plant with a capacity of 600 MW was also approved as an extension to an existing complex in the Norochcholai Coal Power Plant (Lakvijaya Power Station), partly in order to solve the looming power crisis and mainly to reduce the losses incurred by the CEB as a result of purchasing and generating high-cost diesel electricity.
According to the US Energy Information and Administration (EIA), LNG is natural gas that has been cooled to a liquid state (liquefied) – at about -260° Fahrenheit – for shipping and storage purposes. The volume of natural gas in its liquid state is about 600 times smaller than its volume in its gaseous state in a natural gas pipeline. This liquefaction process, developed in the 19th Century, makes it possible to transport natural gas to places natural gas pipelines do not reach, and also to use natural gas as a transportation fuel.
Oil and gas exploration
With plans underway to build more LNG power plants in the country, the CEB also sought the possibility of introducing indigenous natural gas in the Mannar Basin, although the determination of the quantity and the appropriate price are still to be validated.
Reportedly, oil and gas exploration was recommenced last year after three years of waiting, and the Petroleum Resources Development Secretariat (PRDS) reopened the ex-Cairn M2 block in the Mannar Basin for development and commercialisation through a limited tender offer.
As of last year, Sri Lanka had received three proposals from two consortiums and an operator based in the UK, Southeast Asia, and the Middle East.
Speaking to The Sunday Morning in earlier September, former Minister of Petroleum Resources Development Chandima Weerakkody lamented that his successors had abandoned his project and as a result, the whole process was delayed by over two years.
“Earlier, the Secretariat (PRDS) had planned to have gas production by 2023 with the existing developments of the M2 block for which we have already advertised. Then we need Total (a French oil and gas company) and Equinor (a Norwegian petroleum refining company) to interpret the existing data from JS5 and JS6 blocks in eastern Sri Lanka basin and then to decide on future steps,” he said.
As explained by Minister of Energy Udaya Gammanpila, a decision has also been taken by the Government to recommence oil and gas exploration as well as to attract more investors to the industry. He said the country has already prepared a natural gas policy to attract more investors to explore oil and gas in Sri Lanka.
Moreover, due consideration was given to the availability of natural gas in the Mannar Basin and the utilisation of natural gas as a fuel option for the power sector. The discovery of natural gas resources is still at an early stage in the Mannar Basin. However, it is learnt that high priority for local natural gas utilisation will be given when the price is competitive with foreign markets.
The development of natural gas power plants is linked with the development of necessary natural gas infrastructure to import LNG. However, the LNG import contracts are governed by “take or pay” restrictions. In addition, having a proper mix of long-term, spot, and short-term contracts for the varied demand according to the weather patterns and seasonal aspects related to ore projects should also be considered. The total present value of implementing the Base Case Plan 2020-2039 in the next 20 years is approximately $ 16,675 million, with a discount rate of 10%.
Until local gas production begins, the CEB is to call for tenders for the LNG supply next month, parallel to the construction of the power plant. Apart from the already awarded LNG tender to Lakdhanavi Ltd., the CEB is to call for tenders for the construction of the second LNG power plant in Kerawalapitiya next month.
Ground work yet to begin
When contacted by The Sunday Morning, a spokesman for LTL Holdings (Pvt.) Ltd. said the power purchasing agreement between Lakdhanavi and the CEB is yet to be signed, adding that once the agreements are finalised, the construction of the LNG power plant would begin.
The power purchasing agreement at present is at the Attorney General’s (AG) Department, he said.
Meanwhile, as learnt by The Sunday Morning, negotiations between Sri Lanka and India for the construction of a 300 MW of LNG power plant is at a standstill, as the new Government is yet to take a decision on whether or not to continue with it.
A well-informed source attached to the Ministry of Power said that several rounds of discussions took place between the two parties under the previous Government, but the new Government is yet to give its consent to the agreements reached between the two parties.
“India was keen on funding a LNG power plant of around 500 MW, but under the CEB Long-Term Energy Generation Plan, the system could accommodate only another 300 MW and therefore, several rounds of discussions were held,” the source said, adding that at present, negotiations are at a standstill as the CEB has decided to go on project tendering.
When contacted by The Sunday Morning, CEB Chairman Eng. Vijitha Herath said that negotiations had not yet begun under the new Government and the CEB is fully focused on the tendering processes.
However, yet, the unsolicited proposals (such as government-to-government) will be considered in the future if there is a request, he said.
Already delayed
As explained in CEB’s Long-Term Generation Expansion Plan, LNG-fired combined cycle power plants and associated LNG import infrastructure – 2 x 300 MW dual fuel combined cycle power plants – must be commissioned in the western region by 2022. The associated LNG importing infrastructure is to be developed on a fast track process with sufficient capacity to cater to both the new power plants and the conversion of other oil-fired combined cycle power plants in the western region. Furthermore, an additional 3 x 300 MW natural gas combined cycle power plants are expected to be commissioned by 2026 in either Kerawalapitiya or Hambantota.
Minister Alahapperuma had stated at a meeting held at the CEB last week that during the last five years, only 300 MW were added to the national grid, although the demand for electricity is growing at 6% a year.
He had said that to address the potential power crisis in the future, in line with the President Gotabaya Rajapaksa’s “Vision for Prosperity” policy statement, the contribution of green and renewable energy to the country's power grid should be increased to 70% by 2030.
In this regard, CEB Chairman Eng. Herath said the construction of the already tendered LNG power plant would commence next month.
It is further learnt that the CEB is incurring a loss of around Rs. 250 million per day due to the higher electricity production cost while the annual loss of the CEB is at around Rs. 85 billion.
As explained by Eng. Herath, the CEB incurs losses as it sells a unit at around Rs. 16, while the production cost is at around Rs. 23. To reduce these losses, the CEB should go for low-cost electricity, the Chairman added.
“We are finalising the LNG projects and several other low-cost electricity projects. Unless we commence such projects, the losses incurred by the CEB cannot be reduced,” he stressed.
Furthermore, the CEB Chairman said the reason for the delay in commencing the construction of low-cost power plants was the delay in procurement processes, adding that given the present documentation speed, it would take another year to finalise the construction of the power plants.
Accordingly, the incorporation of LNG-fired power plants to the Sri Lankan power system has been considered in the Long-Term Generation Expansion Plan 2015-2034.
In preparation of the Long-Term Generation Expansion Plan 2020-2039, the present trend of LNG fuel prices was considered with the possibility of recovering the capital cost of LNG infrastructure. The option of adopting a floating storage regasification unit (FSRU) as an immediate requirement, along with the possibility of a land-based LNG terminal as a long-term solution, is considered.
However, LNG infrastructure must be established at least by 2021 in order to gain the maximum benefit of avoiding high-cost fuel oil. The combined cycle plants that are operating using oil in the western region will be converted to natural gas immediately after the facility is made available. The delays in procuring LNG infrastructure will cause the power plants to operate on oil, which would result in an enormous cost overrun and increased environmental emissions, the CEB plan explains.
The main load centre of Sri Lanka is also located in the western region. In order to minimise the transmission losses, the development of power plants closer to the load centre is identified. Therefore, the development of natural gas-operated power plants in the western region is identified as a priority, which will comply with the environmental requirements in the western region. Meanwhile, Hambantota is identified as the second location to develop natural gas power plants with its available port facilities.
Meanwhile, Minister Alahapperuma said in Parliament on Thursday (8) that the CEB has incurred a loss of Rs. 181.5 billion between 2015 and 2019. Accordingly, the CEB has incurred a loss of Rs. 2.3 billion in 2015, Rs. 14.4 billion in 2016, Rs. 47.5 billion in 2017, Rs. 31.9 billion in 2018, and Rs. 85.4 billion in 2019.
The factors for the losses, as explained by Alahapperuma, included the inability of the previous governments to build new power plants during the past few years and also the failure to amend the electricity tariffs in line with the increased cost of generation.Kapruka
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Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!