ADVOCATING NATURAL GAS POLICY IN SRI LANKA
Director General of the Public Utilities Commission of Sri Lanka Damitha Kumarasinghe (pictured) and Eng. D. T. K Preeni Withanage, Director of Benefits at the Petroleum Resource Development Secretariat, Ministry of Petroleum Resource Development, spoke to Echelon on the draft natural gas policy and the way forward.
WHAT IS THE AVAILABILITY OF NATURAL GAS LOCALLY AND HOW IMPORTANT IT IS TO THE COUNTRY’S ENERGY MIX?
Eng. Withanage: NG supplies 22% of energy used worldwide, and makes up nearly a quarter of electricity generation.
The offshore exploratory drillings in 2011 have made two NG discoveries in one of the exploration blocks (Block M2 of 2924 sqkm area) in the Mannar basin with estimated volumetric mid-case capacities in excess of one Trillion Cubic Feet (TCF). Recent studies done with regional experts also show that the Mannar basin also has substantial unexplored potential close to 9TCF (equivalent to 182 million tons of LNG).
Mr Kumarasinghe: The electricity generation mix approved by the cabinet of ministers on May 2018 clearly states that the energy mix of the country by the year 2030 would be 20% coal, 20% natural gas, 17% major hydro and 33% other renewables. Therefore, fast implementation of what we have discovered in the Mannar basin is important economically and in terms of energy security of the country. The country spends a substantial share of its foreign exchange earnings for fossil fuel imports. Local resources will allow Sri Lanka to reduce the dependency on fossil fuel imports with potential prospects for earning foreign exchange through bunkering and exports.
WHY IS A POLICY NEEDED?
Eng. Withanage: Introducing NG and related infrastructure as a novel source of energy and an industrial feedstock involves value chain development from upstream reserves commercialization activities to downstream distribution operations, which needs to be properly administered to ensure optimum benefits and sustainability. These are long-term project commitments linked to take or pay contractual terms that requires policy interventions to ensure sectoral offtake assurance together with smooth administrative cum operational stream for the effective use of natural gas in a wide range of economic sectors satisfactorily. A robust government policy is one of the key governing factors to enhance the market competition with the active participation of the private sector.
WHAT IS PUCSL’S ROLE IN SRI LANKA’S NATURAL GAS MARKET AND IN PREPARING THIS POLICY?
Mr Kumarasinghe: In 2006, Parliament passed a resolution to designate petroleum – which includes NG – as a public utility overseen by PUSCL. To formalise this, an Industry Act is required. Until it is passed, PUCSL is advising the Ministry of Highways, Road Development & Petroleum Resources Development overseeing petroleum on policy and regulation of various petroleum product(s) and markets. In addition, as the acting regulator of the midstream and downstream natural gas market, PUCSL is assisting the Ministry in preparing the National Policy on Natural Gas.
As the first step, together with The Ministry and PRDS, PUCSL conducted a public consultation for the draft policy on NG where more than 250 people including experts, exporters, importers, business chambers, investors, research institutions, government organizations and public participated.
WHY DOES THIS POLICY NEED A PUBLIC CONSULTATION?
Eng. Withanage: The policy will address specific issues involved with the introduction of natural gas as an alternative source of energy and industrial feedstock into multiple sectors. It aims to establish a transparent, accountable and inclusive process of governance with a well-defined near and long-term implementation strategy to effectively cover all roles by the government, private sector and other stakeholders.
Mr Kumarasinghe: Public Consultation is the best way of ensuring public participation in the decision-making process, resulting in smooth implementation and allowing us to identify the real needs and issues that can be converted into solutions. It also provides the best path to get everything in order and to make it acceptable to everyone.
CAN THIS PROVIDE INVESTMENT OPPORTUNITIES?
Eng. Withanage: It provides investment opportunities through its value chain that includes exploration, exploitation, refining, processing, importation, regasification, storage, liquefaction, transmission, distribution and downstream consumption applications.
The NG industry opens the opportunity for engaging the private sector, which can reap significant economic and environmental benefits by using NG as a source of energy in power, industrial, transportation, household and commercial applications. This industry will progressively create a lucrative market opening avenues for Compressed Natural Gas (CNG), Gas to liquid(GTL), City gas/CNG cylinders, Production of hydrogen, manufacture of urea , methanol, ethanol, and a wide range of industrial and consumer products. In addition to local uses, this industry can promote bunkering facilities to ocean-going vessels operating on LNG at Sri Lankan Ports and explore the option for supplying natural gas to export markets.
WHAT’S THE NEXT STEP?
Eng. Withanage: The next step is to compile all the public comments and prepare the final policy for review by key stakeholders, and thereafter obtain necessary approvals to enact the policy in accordance with the given implementation strategy.
STAKEHOLDER COMMENTS – PUBLIC CONSULTATION (NG)
“A country needs a proper policy if we want to attract investors. That is why the Ministry initiated and prepared the policy, to allow more investments into NG market, establish the legal and regulatory mechanisms, develop necessary human capital, and develop clean energy for Sri Lanka.”
“Sri Lanka should develop a stable, credible, sustainable policy framework to engage many players of international standing through a transparent ethical selection process that minimize fiscal exposure and optimizes the benefits. We can’t engage ourselves in transactions that expose our country’s balance sheet which will destroy us, because these are not small investment, but mega ones.”
“Despite the private sector wanting to have a free market, regulation is really important. A regulator has a pivotal role to protect all stakeholders and that no one stakeholder is benefiting at the cost of the others.”
“Can we introduce a system like Alaska where the royalties of all the fossil fuel in the country is equally divided on to the people rather than letting the politicians plunder it? Why are we not talking about equity even though the policy talks about CSR?”