Sri Lankan government to open Swiss Challenge on LNG terminal

Source: Heren

2018/01/17

South Korean gas and power company SK E&S has approached the government of Sri Lanka with a proposal to build the country’s first LNG import terminal.

“We are currently in negotiations with SK to finalise the terms of the proposal before using it as the basis for a Swiss Challenge Process,” a source at the energy ministry said.

A Swiss challenge is a method of procurement, which invites third parties to match or surpass an unsolicited bid for a project.

The offer by SK E&S includes a supply deal for 1mtpa of LNG on a take-or-pay basis over a 20-year period, from 2020 to 2040.

The company has proposed to fund the terminal without government participation but this does not cover the necessary pipeline infrastructure.

Underpinning future LNG demand, the government has initiated a procurement process to build a 300MW combined cycle power plant in Kerawalapitaya, near the capital of Colombo.

Proposals were opened in April 2017 but the timeline for completing the process is still uncertain.

The period of construction is expected to take two years after a project has been selected, the source said.

The plant is likely initially to run on diesel and the country also has 700MW in existing generation capacity, which could be converted to gas, he said.

SK E&S is not the first foreign company to propose an LNG terminal in Sri Lanka.

India’s largest LNG importer Petronet announced in September 2017 that the Sri Lankan government had decided to go ahead with a project that had first been submitted in the previous year.

Petronet plans to develop the project in cooperation with a Japanese consortium, including Mitsubishi and Fujitsu, according to media reports.

The Petronet proposal is handled by a separate government division, according to the source, who was unable to confirm whether the projects would compete directly in the Swiss Challenge Process. joachim.moxon@icis.com