Petronet, Japanese company to set up US $ 300mn liquefied natural gas terminal in Sri Lanka

ECONOMIC TIMES: Petronet LNG Ltd, India’s biggest importer of gas and its Japanese partners will invest US $ 300 million to set up Sri Lanka’s first liquefied natural gas (LNG) terminal near Colombo, its CEO Prabhat Singh said. 

The Indo-Japanese partnership will set up a 2.6-2.7 million tonnes a year floating LNG receipt facility off the island’s western coast, bigger than the previously envisaged 1.5-2 million tonnes a year facility. 

Petronet will hold a 47.5 percent stake in the project while Japan’s Mitsubishi and Sojitz Corp will take a 37.5 percent stake. The remaining 15 percent will be held by a Sri Lankan entity, he said. 

“We are in the process of signing an MoU with the Sri Lankan government for setting up of the LNG terminal,” Singh said. 

“Once the MoU is signed this month, some project-related studies will be done before beginning work on the terminal.” 

Explaining the reasons for setting up a bigger capacity LNG terminal, he said Sri Lanka requires 2.5-3 million tonnes of liquid gas to fire power plants. Besides, there is demand for compressed natural gas (CNG) and smaller industries. 

“Commercial details like the exact size of the plant and investment will be worked out in the detailed feasibility report to be commissioned after signing of the MoU. Broadly, it would be about US $ 300 million investment,” he said. 

The Sri Lankan government had in September last year issued a Letter of Intent to the company to build a floating LNG import facility to supply gas to power plants and the transport sector in the island nation. 

The import terminal is to be set up in Kerawalapitiya on the west coast. 

Sri Lanka has plans to build a 300-megawatte gas-fired power plant in Kerawalapitiya adjoining an existing power plant. The existing plant, which uses oil to generate power, will also be converted to LNG once the terminal is set up and gas imports start. 

LNG has become significantly cheaper in the last year and many countries have started switching their power plants to LNG. 
The LNG terminal, which will import super--cooled natural gas in ships, will take two to three years to build, the top executive said. 
The terminal in Sri Lanka is part of Petronet’s vision to own 30 metric tonnes per annum of LNG import and re--gasification capacity by 2020. 
Petronet already operates a 15 million tonnes per annum import facility in Dahej in Gujarat and has another five million tonnes terminal in Kochi in Kerala. It has signed the preliminary agreement to build a 7.5 million tonnes LNG terminal in Bangladesh and is also looking at setting up a smaller facility in Mauritius. 

Singh said Dahej is also being expanded to 17.5 metric tonnes over the next two years. 

The India-Japan collaboration comes after a string of Chinese successes in Sri Lanka. China has managed to revive its flagship US $ 1.4-billion Colombo Port City project and is also engaged in expansion of major infrastructure projects it built in the past.