Petronet-Japanese company to build Sri Lanka's first LNG terminal

New Delhi: Sri Lanka has invited Petronet LNG Ltd, India's biggest gas importer, and Japanese company to jointly build the Island nation's first liquefied natural gas (LNG) terminal near Colombo.

"The Sri Lankan Government issued a Letter of Intent to the Government of India" to build the LNG import facility that would supply regassified gas to power plants and transport sector, Petronet LNG said in a statement.

While the capacity of the import terminal to be set up at Kerawalapitiya on western coast is yet to be decided, Petronet had in its proposal to the Sri Lankan government proposed a 2 million tonnes facility that would cost about USD 250 million.

"The capacity of the LNG terminal will be decided upon the gas demand in Sri Lanka and is expected to be developed in two years after completion of initial formalities," it added.

Petronet will soon form a joint venture with Japanese and Sri Lankan companies.

Sri Lanka has plans to build a 300 MW gas-fired power plant in Kerawalapitiya adjoining an existing power plant. The existing plant which uses oil to generate power, would 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 begun switching their power plants to LNG.

The LNG terminal, which will import super?cooled natural gas in ships, will take 2-3 years to build.

The terminal in Sri Lanka is part of Petronet's vision to own 30 million tons per annum of LNG import and re? gasification capacity by 2020, chief executive Prabhat Singh said.

Petronet already operates a 15 million tonnes per annum import facility at Dahej in Gujarat and has another 5 million tonnes terminal at Kochi in Kerala.

It has signed preliminary agreement to build a 7.5 million tonnes LNG terminal in Bangladesh and is also looking at setting up smaller facility in Mauritius.

Singh said Dahej is also being expanded to 17.5 million 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 USD 1.4 billion Colombo Port City project and is also engaged in expansion of major infrastructure projects it built in the past.

The Colombo Metropolitan Area is inhabited by more than 5 million people or roughly 25 per cent of the total population of Sri Lanka generating over 50 per cent of the GDP.

"The LNG terminal near Colombo would improve economics of various power plants and also generate immense direct and indirect benefits for vast majority of Sri Lankan people," the statement said.

Sri Lankan economy is growing at 4 to 5 per cent and primary energy consumption is estimated to increase to 19 million tonnes of oil equivalent by 2030.