The Government has decided to cancel a tender awarded to a China-Pakistan consortium to supply Liquefied Natural Gas (LNG) and lay a pipeline network after being selected through an international open competitive bidding process and instead consider an offer by an Indian company.

The China-Pakistan Engro Consortium was selected last year as part of a step towards reducing the cost of power production.

However, last Monday, Power and Energy Minister Kanchana Wijesekera submitted a Cabinet paper titled “Revisiting the National Energy Policy Related to the Development of Natural Gas Infrastructure in the Country,” to suspend the ongoing LNG procurement process.

Accordingly, the suspension covers the Development of a Floating Storage and Re-gasification Unit (FSRU) off Kerawalapitiya on a Build, Own, and Operate basis and a compatible mooring system on Build, Own, Operate and Transfer basis. It also covers the associated projects – the development of Offshore and Onshore Re-gasification Liquefied Natural Gas (RLNG) Transmission Pipeline Network with an Onshore Receiving Facility (ORF) and an associated System from the Floating Storage and Re-gasification Unit (FSRU) to existing and future Kerawalapitiya and Kelanitissa Power Plants on Build, Own, Operate and Transfer (BOOT) basis.After following the proper tender process, the Cabinet-Appointed Negotiating Committee (CANC) in August last year granted approval to award the tender to the Engro Consortium.

Accordingly, although the Power and Energy Ministry had to submit a cabinet paper to enable the tender to be awarded thus, the ministry delayed the process, Ministry sources said.

The Sunday Times learns that the process had been delayed as the Indian government strongly objected to awarding this tender to the China-Pakistani company.

However, finally, the subject minister had requested cabinet approval to suspend this officially permitted tender, under these circumstances.The Ministry had instead attempted to award this tender to Petronet LNG Ltd. of India, as an unsolicited procurement, but since the company did not have any experience regarding FSRU, the ministry had rejected the request and said if the Indian government supported the company, they would be able to supply LNG in containers.

“This will badly hamper the investor confidence and no genuine investor will come forward in future to this country,” the official said.

A Ceylon Electricity Board (CEB) top official said, “It will be a costly solution as there would be no competition, with prices being determined by the Indian company”. He said it could have an impact on the electricity tariff which would be increased and all costs would be passed on to the consumers.

The CEB’s Least Cost Long Term Generation and Expansion Plan (LCLTGEP) (2018-2037), which was approved by the Public Utilities Commission of Sri Lanka (PUCSL) in 2018, identifies the need for converting furnace oil and diesel power plants to LNG power plants to reduce power generation costs.

Accordingly, the CEB called for international competitive open tenders from February 18, 2021 to June 25, 2021, and two bidders came forward.

At that point, the US-based New Fortress Energy Company which gave rise to much controversy in 2021, had, without submitting an open bid for this tender, presented an unsolicited proposal to the government. The then Gotabhaya Rajapaksa government which supported this unsolicited proposal had even signed an agreement to sell 40% of the shares of the 300 MW Treasury-owned Kerawalapitiya Yugadhanavi Diesel Power Plant to the New Fortress Energy.

However, due to strong objections to the deal, the agreement had not been implemented up to now.

Against this backdrop, the CANC granted approval on August 4 last year to award the tender to the China-Pakistan Consortium, one of the two companies which had submitted proper bids for the tender.