First gas: Sri Lanka and Russia can create an LNG terminal in four years

The construction of an LNG terminal in Sri Lanka with the participation of companies from Russia could take from three to four years, said the country's Energy Minister Kumara Jayakody. Stable gas imports at fair prices are extremely important for Sri Lanka, as it regularly experiences energy shortages, experts say. Novatek and Gazprom could participate in the creation of LNG infrastructure in the country, according to the State Duma. About the export of Russian LNG to the countries of East and Southeast Asia and the position of the Russian Federation in this market - in the material of Izvestia.

Cooperation between Russia and Sri Lanka

Sri Lanka expects that Russian companies will participate in the creation of the infrastructure necessary for receiving liquefied natural gas (LNG). Then the Russian Federation could export its LNG to Sri Lanka, they say in the republic. The parties are discussing the prospects of joint projects in the field of energy.

Photo: RIA Novosti/Pavel Lvov

— We already have three power plants with a total capacity of 1 thousand. MW that can run on LNG, but they run on diesel fuel. We plan to convert these power plants to LNG, but we have neither storage facilities nor the capacity to supply it. Now we are looking for a way to start building the first LNG facilities," Kumara Jayakody, the country's energy minister, told Izvestia. — We need developers and investors to do this with a long-term contract. We need to increase capacity together. That is why we are looking for a partner from Russia.

The construction time of the terminal will depend on the terms of the agreement, he explained.

"It can be built within three to four years," the minister believes.

Prospects for cooperation in the energy sector between the Russian Federation and Sri Lanka were discussed on October 15: Kumara Jayakodi held talks with the head of the Ministry of Energy Sergey Tsivilev. The Sri Lankan side expressed interest in cooperation in the supply of coal, oil, oil refining and LNG.

Sergey Tsivilev and Sri Lanka's Minister of Energy Kumara Jayakodi

Photo: vk.com/Министерство Energy of the Russian Federation

In April, the Russian Ministry of Energy announced that Russian companies could modernize and build energy infrastructure in Sri Lanka, including for LNG. In addition, Russia and Sri Lanka are considering the possibility of increasing the volume of supplies of raw materials to the republic.

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For the first time, a tender for the creation of an LNG terminal was announced in 2021. Then it was about a floating storage and regasification unit (FSRU). In June of this year, the authorities announced a new tender. Using liquefied natural gas instead of diesel fuel would reduce electricity prices. By the way, energy shortage is one of the most acute problems for Sri Lanka. So, in 2022, as a result of protests against the background of the fuel crisis, Sri Lankan President Gotabaya Rajapaksa resigned.

— The problem of energy shortage in Sri Lanka is generally permanent, because there are no gas fields there. At the same time, gas is actively used in everyday life (gas cylinders), and it is imported," Alexey Kupriyanov, head of the Indo—Pacific Region Center, said in a conversation with Izvestia. — Problems with supplies, including gas, became a powerful trigger for the economic crisis and popular discontent at the time.

People stand in line near a gas station in Colombo, the capital of Sri Lanka.

Photo: Global Look Press/Amitha Thennakoon/Keystone Press Agency

Novatek and Gazprom could supply LNG to Sri Lanka, said Pavel Zavalny, first deputy chairman of the State Duma Committee on Energy. He stressed that cooperation in the energy sector is, as a rule, of a strategic nature.

"Cooperation on the development of the LNG industry, including terminals, is of course possible and necessary," Pavel Zavalny told Izvestia. — After the decisions that will be taken in the same European Union (on the ban on LNG imports from the Russian Federation. — Ed.), we will be releasing the volume of gas production for export. Of course, we need to increase cooperation with the countries of the Asia-Pacific region.

LNG is exported from Russia by several large and medium-tonnage enterprises.: Sakhalin-2 and Gazprom LNG Portovaya (controlled by Gazprom), as well as Yamal LNG and Cryogaz-Vysotsk (controlled by Novatek).

Novatek and Gazprom are interested in LNG supplies to Sri Lanka, Igor Yushkov, a leading analyst at the National Energy Security Fund and an expert at the Financial University, said in a conversation with Izvestia. At the same time, both companies do not yet have the technology to build large-capacity LNG projects, such as liquefaction plants and regasification terminals.

A plant for the production of liquefied natural gas (LNG) in the village of Prigorodnoye, Sakhalin region

Photo: RIA Novosti/Sergey Krasnoukhov

"These companies can invest in the construction of LNG infrastructure, of course, but Sri Lanka itself may be afraid that sanctions will be imposed on Russian companies and the project may stop because of this," the analyst explained.

Izvestia sent inquiries to Novatek and Gazprom about the possibility of participating in the creation of an LNG terminal in Sri Lanka.

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Asia is the largest consumer of gas in the world and a promising market for Russian exporters. By 2030, this macro-region will account for about 70% of global LNG exports, according to Morgan Stanley analysts. China is the most promising market. The largest importers are also Japan and South Korea.

In August, Russia was the third largest exporter of LNG to China — 976 thousand tons, according to the General Customs Administration of the People's Republic of China. In total, in the same month, the Russian Federation supplied 1,707 million tons to the largest Asian buyers (China, Japan, South Korea, Taiwan) with a total production volume of 2,141 million tons.

Photo: RIA Novosti/Sergey Guneev

India is also a promising importer of liquefied natural gas, said Alexander Frolov, Deputy Director General of the Institute of National Energy and editor-in-chief of InfoTEK. Despite the fact that European countries remain one of the main buyers of LNG, demand for liquefied natural gas will increase in Asia, the analyst notes.

— Over the past 10 years, Europe has not become the most attractive market. For understanding: China consumes more gas than the EU and the UK combined. Gas consumption is expected to increase by about 1.6% this year. Considering that its consumption exceeds 4 trillion cubic meters. Globally, 1.6% is about 60 billion cubic meters. Next year, an increase is expected by 1.8%, " he told Izvestia.

Earlier, Russia announced its readiness to supply LNG to Thailand, Malaysia, and the Philippines. Earlier, Foreign Minister Sergei Lavrov said that Moscow and Jakarta were actively negotiating the participation of Russian enterprises in Indonesia's economic life, including in LNG supplies. In addition, analysts emphasize that other ASEAN countries such as Brunei, Vietnam, Cambodia, Laos, Myanmar, and Singapore will also be the most promising market for Russian liquefied natural gas in the long term.