News
Korean LNG project: Deadline extended again for counter proposals
The deadline has been extended yet again for international bidders to counter a South Korean proposal for an offshore floating storage and regasification unit (FSRU), pipeline and liquefied natural gas (LNG).
This is the third time the closing date for the controversial Swiss Challenge was changed by the Power and Energy Ministry. The bid was first advertised amidst political turmoil in October 2018 with the deadline being cited as December 12 or just five weeks later. This was extended till January 31 this year.
Then, under pressure from the Ceylon Electricity Board (CEB), the deadline was delayed to February 28. Three members of the CEB had resigned from the Swiss Challenge technical evaluation committee (TEC) protesting against the imposition of “ad hoc procedures” by the Power and Energy Ministry.
Now, the deadline has been shifted again to April 2, 2019. The project will serve the CEB, which is insisting that the bid be “unbundled” into separate contracts for LNG supply and LNG infrastructure development.
The original proposal came as an unsolicited bid from South Korea’s M/s SK E&S Company Ltd. It envisages a single contract for the provision of an FSRU, a pipeline and a 20-year supply of LNG.
The CEB opposes the Swiss Challenge, saying these are usually recommended where the buyer is not capable of developing an RFP (Request for Proposal) or where the seller is proposing an “extraordinary solution” having clear advantages over standard procedure. LNG procurement does not fall into either category, it states. And it says the CEB can develop a proper RFP with the assistance of a consultant.
Meanwhile, the Public Utilities Commission of Sri Lanka (PUCSL) has sought comments on a draft National Policy on Natural Gas. That initiative is being led by the Petroleum Resources Development Ministry, although the Power and Energy Ministry has called bids for LNG supply and power plants even before the policy is finalised.
The Petroleum Resources Development Ministry also recently invited international competitive bids for exploration and development activities in Block M2, Mannar Basin, which has two gas discoveries–Dorado and Barracuda–and a number of undrilled prospects. Bidders are expected to consider both development of the discoveries and exploration of the rest of the block. The closing date is in May.
The draft policy envisages the share of natural gas reaching at least one-third of the mix of Sri Lanka’s total fossil fuel consumption by 2030. It anticipates dependency on imported fossil fuels reducing to at least half of the present level in terms of physical quantity by 2030 and natural gas usage in all sectors maintaining a minimum 30% of the total energy mix.
Significantly, the policy prioritises the use of natural gas from indigenous sources, even as the Power and Energy Ministry moves towards signing a massive 20-year import deal. And it says the Ceylon Petroleum Corporation (CPC) or its fully-owned subsidiary will source the natural gas from import markets: negotiating directly with LNG suppliers, calling for competitive international bids from LNG suppliers for mid-term or long-term consignments and purchasing LNG directly from the market after calling competitive bids for short-term supply. This is also at odds with ongoing efforts by the Power and Energy Ministry to import LNG.
“Supplies from indigenous sources will be channelled to meet the local demand as the first call, to cater demand from export markets and to fulfil bunkering needs of the shipping industry, rationalising the supplies to each group of users so that maximum gains to the national economy can be achieved,” the policy states.
“Importation of natural gas will be facilitated mainly as an ancillary source of supply to fulfil the demand from local users before commercial supplies from indigenous sources are made available,” it adds.
“Foreign stocks will also be deployed to ensure uninterrupted supplies by buffering the fluctuations in supply from local sources and to create healthy competition for local gas industry so that affordable prices for users can be maintained.
“Preference will be given for locally produced natural gas within Sri Lankan territory, when such resources are available and accessible in commercial quantities at affordable prices, in all sourcing transactions involved by public sector agencies and State-owned enterprises,” it reiterates.