News
LNG switch: Cabinet paper contains flawed projected savings
View(s):By Namini Wijedasa
A Cabinet paper presented by Energy Minister Kumar Jayakodi to promote the use of liquefied natural gas in the electricity sector has projected a US$ 711 million saving over ten years starting from 2028—but that figure appears to be the result of a flawed calculation published in an “expert” committee report on LNG infrastructure development in Sri Lanka.
Based on the average cost of LNG and the estimated yearly requirement printed in the committee report—available in tables included in their report—the savings from using LNG over ten years is US$ 375 million. This is a difference of a massive US$ 336mn when compared with the US$ 711mn estimated savings communicated to the Cabinet.
It was not immediately clear how the Cabinet had been given this “highly inflated number” in the memorandum when the committee report attached to the same paper showed the calculation to be erroneous. Repeated attempts throughout yesterday to contact the Energy Minister as well as Energy Secretary Udayanga Hemapala failed. They also did not respond to text messages.
One committee member, an additional secretary to the Energy Ministry, refused to take questions, while another member—a Ruhuna University professor—did not answer the phone or messages over two days. The head of the committee did not respond to an email.
The Cabinet memorandum titled “Revisiting the Strategies to Source Liquefied Natural Gas” is due to be taken up for deliberation by ministers. It states that the Government has identified the requirement to introduce natural gas as an optimal fuel for power generation, “giving due consideration to the cost-effectiveness as well as cleanliness.”
The “urgent requirement” to procure LNG for existing power plants and future power plants was discussed at a meeting chaired by President Anura Kumara Disanayake. A committee was then appointed and chaired by Prof. Saliya Jayasekara from the Department of Mechanical Engineering of the Moratuwa University. The other members were drawn from the University of Ruhuna, the Ceylon Electricity Board and the Ceylon Petroleum Corporation.
The Cabinet paper states that the direct saving in fuel switching “from liquid petroleum fuel to LNG is US$ 711mn over the 10 year period”.
The annexed committee report contains a table that projects the country’s LNG requirement alongside an anticipated integration of 70% renewable energy. In 2028, this is said to be 12.12 million MMBtu (metric million British thermal units). The forecasted fuel price is given as US$ 11.2 per MMBtu. And the total LNG cost is published as US$ 220.61mn for that year.
However, in calculating the total LNG cost, the committee has inexplicably used less than US$ 10 per MMBtu instead of its own projected figure of US$ 11.2. This same error is made across ten years. As such, the total cost of LNG for 10 years is published as US$ 2,954. However, once revised with the correct figures (that is, at the rate of US$. 11.2 per MMBtu), the cost rises to US$ 3,291.
This means that the cost of LNG over ten years from 2028 to 2037 is vastly more than what has been presented to Cabinet.
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