Sri Lanka re-engages with India’s Petronet LNG for major energy project
The Sri Lankan Government has reinitiated its collaboration with India’s Petronet LNG Limited after a seven-year hiatus to enhance the infrastructure for the Sobadhanavi Combined Cycle Power Plant in Kerawalapitiya, according to sources from the Ministry of Power and Energy.
A memorandum of understanding (MoU) has been signed between Sri Lanka’s LTL Holdings Ltd and Petronet LNG Ltd. The project aims to reduce energy production costs, promote cleaner energy usage, and establish a local LNG market, as confirmed by Minister Kanchana Wijesekera.
The Sobadhanavi power plant, expected to be completed within 18 months, will be Sri Lanka’s largest independent power producer, primarily utilising LNG. This initiative is a crucial part of Sri Lanka’s broader strategy to transition from traditional thermal power to more sustainable energy solutions.
In June 2017, Petronet, along with a Japanese firm, announced plans to establish a US$250 million LNG import terminal, projected to be completed in 2.5 to 3 years, according to Ceylon Electricity Board (CEB) documents.
The terminal was to support a 300 MW LNG power plant in Kerawalapitiya, also being developed by the sponsors. The Public Utilities Commission of Sri Lanka (PUCSL) had approved the project, which will be executed on a Build, Own, Operate, and Transfer basis.
In February 2018, Petronet announced an MoU with Japanese investors Mitsubishi and Sojitz to construct a terminal with a capacity of 2.6-2.7 mtpa (million tonne per annum). By April 2019, the Ceylon Electricity Board secured funding from the Asian Development Bank to engage international expertise for preparing bid documents.
However in August 2022, the government cancelled its deal with Petronet LNG due to the sponsor’s slow progress, opting instead to award the tender to the Sino-Pakistan company Engro Consortium, a decision that was met with objections from the Indian government.
In August 2023, the government reversed its decision, awarding the tender back to Petronet LNG. As of June 2024, the Sri Lankan government is close to finalising a deal to grant Petronet LNG the rights to import LNG into the country, according to CEB sources.
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