China Machinery Engineering Corp (CMEC) is evaluating a 500 MW LNG-fuelled power project in Hambantota, southern Sri Lanka, which is meant to expanded to 1,000 MW at a later stage. President Maithripala Sirisena pushes for another 500 MW LNG-to-power plant just north of Colombo as he seeks to scrap coal-fired projects, or have them converted to natural gas.
Sri Lanka is part of China's ‘One Belt, One Road’ initiative that seeks to rekindle economic cooperation along the ancient Silk Road. CMEC has already realised a large-scale coal power plant in Sri Lanka and is now turning its attention to gas power.
The shift in fuel choice comes after Sri Lanka’s government made a bold move to abandon coal power projects – even such that are in advanced planning stages.
Deal cancelled – Indian developers bewildered
Sri Lanka’s President Maithripala Sirisena has now reportedly requested India to stop the planned 2×250 MW coal power plant in Sampur, Trincomalee, and turn it into running on LNG. The second coal power venture was meant to be a clean-coal plant, backed by Japanese project financing.
During his last visit to India, Mr Sirisena had requested Indian Prime Minister Narendra Modi not to proceed with the 500 MW coal power plant at Sampur but build a plant using LNG instead. His U-turn has puzzled some Indian project developers who are behind one of the projects, and infuriated others. Playing for time, Mr Modi reportedly asked to discuss this matter with his officials and developers of the project.
Plans for the $500 million coal power plant project were finalised in 2011, when state-run Ceylon Electricity Board (CEB) and India's state-run National Thermal Power Corporation (NTPC) agreed to form a joint venture for its construction. Following the U-turn of, it is not clear which Indian firms would be considered on the proposed gas-fired plant.
Engineers at Ceylon Electricity Board, a state run entity, adamantly oppose plans to scrap more advanced coal power projects – though they do not oppose the use of LNG as an alternative fuel.
Uncertainty over domestic gas supply
Record low prices for spot LNG on global markets, together with gas discoveries off the Kalpitiya peninsula, have prompted political leaders in Sri Lanka to now openly favour greenfield LNG power projects over more pollutive coal-fired plants. Startled local utilities and industry leaders fear a recurrence of power shortages.
Uncertainty surround domestic gas production, notably after the Cairn India last year withdrew from developing two gas blocks in Mannar. These blocks have since been awarded to Total but no significant discovery has been made as yet.
Any major shift to gas power in favour of coal would leave Sri Lanka exposed to jittery prices on global LNG markets. Upstream projects are slow-moving these days, as international oil companies have tightened their purse strings in the face of sustained low oil prices.