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LNG project: CEB calls for proposals before ADB releases feasibility study
The Ceylon Electricity Board (CEB) has called for international proposals to deploy a floating storage and regasification unit (FSRU) and a mooring system for liquefied natural gas (LNG) even before the Asian Development Bank (ADB) released the feasibility study it funded for the project.
Feasibility studies map out the pros and cons of undertaking a costly initiative before investing time and money into it. Under ADB rules, such documents must be publicly disclosed.
The ADB confirmed this week that it supported the LNG feasibility study using “Technical Assistance (TA) 9741-SRI: Supporting Feasibility Study and Survey to Adopt Liquified Natural Gas (LNG) Power Generation to Diversity Energy Mix”.
The studies were supported by experienced international experts, said a spokesperson. The report was submitted to the executing agency, the CEB, and the Ministry of Power for final approval. “After incorporating their comments on the draft report before disclosure, we will coordinate with the CEB and MOP [Ministry of Power] to expedite and ensure the disclosure of this TA report at the earliest,” she maintained.
But the CEB has already called requests for proposals (RFP) for the development of the FRSU at offshore Kerawalapitiya on a build, own and operate basis, along with a compatible mooring system on build, own, operate and transfer basis. The deadline for submissions is June 18.
The FSRU is expected to have a regasifcation capacity of 380 million standard cubic feet a day (a unit of measurement for gases) and an optimum LNG storage of 156,000 cubic metres. It will supply regasified LNG for power plants located in Kerawalapitiya and Colombo.
The required pipelines (subsea and onshore) will be established by the Ceylon Petroleum Corporation (CPC) on a build, own, operate and transfer basis. Whoever wins the tender will be expected to design, finance, procure, build, deliver, commission, operate and maintain the FSRU. The same applies to the mooring system which, additionally, will have to be transferred at the end of the term to the CEB.
One private sector source who evaluated the RFP called it “a mess” with the FSRU proposed to be run by one party, and the pipelines to be run by another. And the closely-guarded feasibility study clearly states LNG cannot be unloaded from FSRU for 130 days of the year as the sea is too rough.
“…downtime will be 130 days starting from mid-May to end of September when the SW monsoon is in effect,” it says. This means a breakwater will have to built, although there is no mention of it in the RFP advertised last week.
Meanwhile, a vessel of the capacity required by the CEB is not readily available (there are only 37 FSRUs in use worldwide). And the Government has specified in tender documents that it will require only half of the LNG stored in the vessel, although it will pay for the whole tank.
“This is going to be very expensive for the country,” the private sector source said. “And the CEB knows nothing about LNG but wants to handle supply.”
According to the RFP, an agreement will be entered into with the CEB and Sri Lanka Government for the establishment of the infrastructure. The term of the project is ten years from acceptance under the agreement.
“The plan is it to have a submersible pipeline, a landfall point and two onshore pipelines,” a CEB source said. “One will supply LNG to nearby plants including 300mw Yugadhanavi power plant run by West Coast Power. The other will go to Kelanitissa where there are certain plants now running on diesel which can be converted without too many problems to LNG.”
But projec’s critics say there will be economic and financial implications if LNG is procured in such large quantities before gas plants and infrastructure are in place. The plants scheduled for 2025 and 2033 have not yet been approved by the Public Utilities Commission of Sri Lanka. (The FSRU project will, however, take two to three years to complete and operationalise).
“What is the risk of this project if the President decides to push through his target to generate 70 percent of the country’s electricity through renewable energy?” one detractor asked.
It is also not clear what the sovereign commitment is for FSRU and mooring point. Regardless of the source of funds, all large-scale projects need Government backing to be financed and insured. It was widely pointed out by power sector sources that the CEB did not have the in-country expertise to answer clarifications or evaluate these bids but no foreign consultant has been hired.
Another fear is that the project–as designed–will block natural gas development in Sri Lanka. “This is why the feasibility and economic modelling are important,” he pointed out. “Normally, countries spend years doing detailed modelling and feasibility for such an initiative.”