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Korean LNG firm’s Swiss Challenge proposal sees fifth deadline extension
The deadline for international bidders to counter a Korean proposal for an offshore floating storage and regasification unit (FSRU), pipeline and liquefied natural gas (LNG) has been extended for a fifth time.
Bidders have now been given till July 23 to submit counter proposals under the Swiss Challenge procedure for the project which will serve the Ceylon Electricity Board (CEB), and some crucial changes have been made in the request for proposals (RFP).
Key among them is that the Ministry has succumbed to pressure to unbundle the project into three components: LNG supply; development, operation and maintenance of the FSRU in the offshore of Colombo Port; and development, operation and maintenance of pipeline infrastructure.
This was a major demand of the CEB. Three members of the utility even resigned from the Swiss Challenge technical evaluation committee (TEC) in protest. The General Manager and engineers’ union wrote separately to Ministry Secretary Suren Batagoda opposing moves to award the 20-year take-or-pay contract for LNG to a single entity.
Both CEB General Manager A.K. Samarasinghe and the Ceylon Electricity Board Engineers’ Union (CEBEU) called for the bid to 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 envisaged a single contract for the provision of an FSRU, a pipeline and a 20-year supply of LNG.
In another significant departure from the original RFP, what is now required is an LNG supply agreement for a 10-year term which may be further extended. The pricing formula is explained. The contract term for the FSRU remains 20 years.
The Swiss Challenge was first advertised amidst political turmoil in October 2018 with the deadline being cited as just five weeks later, on December 12. This was extended till January 31 this year, then till February 28, till April 2 and, finally, till April 30.
An addendum (dated April 5) has been added to the RFP. It states that, after issuing the RFP documents, the Ministry received many comments from stakeholders and prospective bidders. It has, therefore, decided to revise the document “without losing the overall project concept”.
The SK E&S proposal was opened out to other bidders “in order to allow this proposal to compete with other possible investors”. “If the original proponent is unable to match the counter proposal the tender will be awarded to the prospective bidder provided the agreement to pay the development cost of the original proponent,” the Ministry’s advertisement said.
The project included the design, construction and installation of an FSRU to be moored approximately 9 km north-northwest of the Colombo Port entrance; supply of LNG (including transportation) by LNG carrier vessel to be moored near the FSRU; LNG to be re-gassified on board the FSRU with re-gassified LNG sent into two subsea pipelines. Each pipeline will then be routed to the power plants located at Kelanitissa and Kerawalapitiya.
Dr Batagoda earlier opposed unbundling the project, saying that the Korean proposal ensures that the CEB gets the FSRU and pipeline for free. The CEB contended, however, that “the cost of the LNG terminal is almost negligible” when compared with the financial value of a 20-year LNG supply deal.