By Dr. Janaka Ratnasiri  Courtesy The Island

While appreciating Dr. Tilak Siyambalapitiya’s article on the present power crisis appearing in The Island of 25.03.2019, I would like to fill in some gaps in his article and also make some comments on the President’s statement about the power crisis as appearing in the media on the 27th.

The three issues

There are three main issues contributing to delay in adding generation capacity to the system. One is the delay in awarding the contract for building a 300 MW dual-fueled combined cycle gas turbine power plant at Kerawalapitiya and the second is the long delay taken to complete negotiations and do a proper environment assessment on the Sampur coal power plant. The third is the delay in building a terminal to import liquefied natural gas (LNG) to the country.

Delay in processing the tender for 300 MW power plant

In respect of the tender for building a 300 MW gas power plant, a call for requests for proposals (RFP) for this project was announced by the Ceylon Electricity Board (CEB) in November 2016. The closing date of the RFP was given initially as 22.02.2017, but later extended by a few months. According to the RFP, the letter of intent (LOI) to the selected bidder was to be issued in August 2017 after receiving approval of the PUCSL and the Cabinet of Ministers. The initial phase of open-cycle operation generating 200 MW is to be completed by mid-2019 and the second phase of combined-cycle operation to be completed by mid-2020.

However, even after more than two years of announcing the RFP, no award for the building of this power plant has been made. A series of articles appeared in The Island of 27th and 28th December 2018 under the caption “Delay in building new power plants – Who’s to be blamed?”, pointing the finger at the CEB for the delay. The article highlighted the fact that the main reason for the delay was the many shortcomings in the 500-page tender documents prepared by the CEB which failed to give the specification targets that should be met by the plant. Neither the CEB management nor the CEB Trade Unions has refuted these allegations. Had the tender evaluated and the award was made promptly according to the schedule, 200 MW of power could have been added to the national grid within a few months’ time. These shortcomings are described in detail in the two articles referred to above which may be accessed via:

http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=196713

http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=196764

PUCSL not approving the CEB Plan

Both the CEB and the Ministry of Power and Energy were heard over the electronic media recently saying that one reason for the current power crisis was caused by the Public Utilities Commission of Sri Lanka (PUCSL) not approving the CEB’s long term generation plan in time. The latest person to join this campaign against PUCSL is none other than the President himself. This was reported in all the media on the 27th, and according to the Island of 27.03.2019, the President was reported as saying that “some officials of the PUCSL and several Engineers of the CEB had links to the private power plant owners and they obstructed the implementation of the long-term power generation plan”.

Apart from the alleged link between officials and the private plant operators which I am unable to comment on, the statement that the present power crisis is caused by non-implementation of the CEB’s long term generation plan is far from the truth. According to Dr. TS, it was the non-implementation of the proposed Sampur coal power plant that has caused the present power crisis. It may be recalled that it was the President himself who decided to stop the construction of the coal power plant, announcing that he preferred a gas power plant instead. Perhaps, in view of many duties, he seems to have forgotten this.

The PUCSL was only recommending a plan comprising all gas power plants without including any coal power plants for base load generation in compliance with the provisions in the Electricity Act and it would also cause less pollution. Both the CEB management and trade unions vehemently rejected this plan and insisted that coal plants be included in the plan. Even if the PUCSL granted approval for the CEB plan promptly, it would not have prevented the present crisis. It is a pity that officials fail to advise the President and Ministers presenting the correct facts in this regard.

This dispute between the PUCSL and CEB went on for over a year and finally settled by the President by reversing his “no-coal” stand and approving the CEB plan to avoid CEB shutting down power to the country as they threatened intensifying their trade union action if their demand was not acceded. This is certainly not in keeping with ethical conduct expected from among the highest paid professionals in the country selected out of the best achievers at the GCE-A level examination. Was importing of coal a gold mine for them which prompted them to take such a drastic decision and trying to twist President’s arm?

The irony of the situation that though CEB engineers insisted on building more advanced coal power plants, they appear to be incapable of even maintaining the existing coal power plant. The Cabinet of Ministers at its meeting held on 26.02.2019 decided to award the contract for maintenance of boilers and turbines in the 3rd unit of Puttalam coal power plant to China Machinery Engineering Corporation, obviously because the local staff are unable to attend to this work, despite their working with the Chinese technicians for over six years. On the other hand, the existing combined-cycle power plants, one at Kerawalapitiya and two at Kelanitissa, are being operated and maintained by local staff without any problem. Isn’t this one more reason why CEB should opt for gas-fired power plants?

Delaying the commencement of the Sampur power plant

Even if the Sampur power plant was allowed to be built commencing in mid-2016, it would have taken at least five more years (typical period of construction for a coal power plant) to complete and would be available only in 2021. So, it is clear that stopping of the Sampur power plant could not have caused the present crisis as claimed by Dr. TS. Then, what is the real cause for the present power crisis? It may be recalled that the CEB entered into a memorandum of understanding with India’s NTPC Limited in December 2006 for the establishment of a 500 MW coal power plant at Sampur.

Subsequently, negotiations on modalities of executing the project with details of power plant specifications were commenced which continued for nearly five years, presumably because of disagreements between the two parties on such parameters as heat rate or efficiency, technology and unit capacity whether 250 MW or 300 MW. Finally, a Joint Venture was entered into by CEB and NTPC only in September 2011. Now, who is responsible for dragging the negotiations for nearly five years, which should not have taken more than one year, had the officials involved in the negotiations were competent and possessed negotiating skills.

Once the project was agreed upon, the proponent engaged an Indian Company to carry out an Environment Impact Assessment (EIA) which took another four years to complete and was released only in 2015. It took one more year to get CEA approval. In the meantime, work on the project commenced with ground clearing which caused many protests from the public. Subsequently, the matter was taken up by a public-interest organization who filed a court case highlighting many defects in the EIA report that was approved by the CEA.

The case, however, did not proceed in view of the President’s decision to cancel the project.

Disregarding President’s ruling to cancel the Sampur project, the delay in adding capacity to the system causing the present crisis is the undue long delay of over 12 years to complete the negotiations and getting the EIA report approved. Both the CEA and NTPC are totally responsible for this long delay.

If the negotiations completed as well as the EIA completed without any defects within say 5 years from 2006 when the work on the plant could have commenced in 2011 and that was before President Sirisena came to power. If the construction of the plant took all precautions to mitigate adverse impacts on the environment, it could have been completed without facing any protests within another 5 years. Then, by now, the country would have had the benefit of added 500 MW of power in the system. It is pointless blaming others for one’s own faulty decision making, and this applies to CEB and Ministry officials as well as all the ministers who were in charge of the power and energy portfolio.

Unsolicited proposals for building an LNG terminal

The third issue is the delay in deciding on building a terminal for importing liquefied natural gas (LNG). Here, Sri Lanka has been performing like a good-hearted lady who does not want to say no to anyone approaching her, as the local saying goes. First, India approached with an offer for a 500 MW gas power plant and a terminal and the government said “yes”. Next Japan too approached with an offer for a 500 MW gas power plant and a terminal and the government said “yes”. Thirdly, China approached with an offer for a 400 MW gas power plant and a terminal to be built at Hambantota, and the government said “yes”.

Finally, South Korea wanted to install a floating LNG terminal with a capacity of 1 million tonnes per annum at no cost to the government on condition SL purchases the agreed LNG volume from the Korean Company for 20 years at market prices, and pay a penalty if the agreed amount is not purchased. Though the President was keen to say “yes” to the offer as he personally submitted a cabinet paper on it when the offer was first made, the Cabinet has not so far approved the offer for reasons highlighted in Dr. TS’s article. The head of state has apparently signed memoranda of understanding for these projects committing SL for undertaking them, I believe, without any consultation with the relevant authorities.

Out of these 4 offers, apparently only the offer made by China is now proceeding. Initially, the power plant was to supply power to the industrial zone to be built for Chinese investors in Hambantota to be managed entirely by the Chinese. Later, because of the legal requirement that only CEB could operate a transmission line, CEB was drawn into the project as a collaborator. Since a deep jetty is already available at Hambantota Port which is sparsely used, construction of an LNG terminal there could be undertaken with minimum cost. It is not known whether the terminal will import LNG only to feed the 400 MW power plant or import in excess and feed the surplus gas to the industries for use as a source of thermal energy.

With regard to the Indian and Japanese offers, the government established a tripartite negotiating committee to work out the modalities of establishing a joint venture for operating and maintaining a terminal for importing LNG in the western coast. The negotiating committee however does not appear to offer a level playing field for Sri Lanka as representatives with wide experience and knowledge on natural gas and LNG are sitting on one side, while those sitting on SL side lack such experience or knowledge. It is not known how the South Korean offer which came later but pursued by the President would affect the negotiations of the tripartite committee.

Locating a site for the terminal

According to media reports, studies are being undertaken to determine the suitability of Colombo Port to locate the land terminal to be built by the joint venture and the service of a foreign consultant is being sought to assist in this. Even from a layman’s point of view, however, Colombo Port is not the best location to build an LNG terminal, considering its limited extent and the volume of traffic using Port facilities daily. It is an international requirement that any LNG facility should have prescribed exclusion zones away from other activities. There is also the likelihood of the insurance premium for vessels calling at Colombo Port getting enhanced in the event an LNG terminal is located within the Port premises.

The other option of getting a floating terminal installed as proposed by South Korea is also not straight forward. The advertisement inserted by the Ministry calling alternative proposals to challenge the Korean proposal has indicated that the floating terminal could be moored within 9 km from the Port in a North-Western direction. The operation of such a facility in open sea during the South Western monsoon wind regime is not easy as evidenced from the operation of unloading of coal onto barges from coal carrying vessels, which is limited to only the non-monsoon period.

The next best option would be to utilize small vessels with capacity in the range 10,000 – 30,000 cubic metres to transport the LNG to a suitable location on the western coast. These small vessels are shallow and do not need deep jetties unlike the standard LNG carriers having capacity in the range 150,000 – 250,000 cubic metres. These small vessels are widely used today to supply LNG to low-consuming countries where large vessels cannot have access. The necessary LNG requirements could be sourced from any of the neighboring countries trading LNG.

Dr TS mentions about the large number of unsolicited proposals for LNG power plants and terminals. In addition, at government -to- government level, there are several unsolicited proposals. The reason for foreign parties and governments offering such unsolicited proposals for LNG power plants is mainly the inaction by Sri Lankan authorities. They would have seen SL as a potential market for LNG and knowing that the country has no expertise in the field and the lack of initiative by the government to develop the expertise, would have wanted genuinely to assist SL by making the offers.

Conclusion

Once the President ruled out the Sampur coal power plant in favour of a gas power plant, had the government policy makers and stakeholders got together and planned out a strategy to introduce natural gas to the country identifying its requirements in all sectors, followed up by inviting proposals prepared free of defects enabling all interested parties to respond, the present situation of having so many unsolicited proposals in hand could have been avoided. These proposals prepared to suit our requirements could have been then evaluated and the best offer selected on competitive basis without allowing any external hands to influence. Sadly, Sri Lanka lost that opportunity.