NASDAQ-listed New Fortress Energy has signed a definitive agreement with the Sri Lanka government to develop a liquefied natural gas facility off the coast of Colombo, the commercial and judicial capital.
New Fortress and the government confirmed on Tuesday they had executed a definitive agreement for New Fortress’ investment in West Coast Power, which owns the 310-megawatt Yugadanavi power plant in Colombo, plus the rights to develop a new LNG receiving and regasification facility.
As part of the deal, New Fortress will have gas supply rights to the Kerawalapitiya Power Complex, where 310MW of power is currently operational and an additional 700MW scheduled to be constructed, of which 350MW is expected to be operational by 2023.
New Fortress will acquire a 40% ownership stake in West Coast Power and plans to build a floating storage and regasification unit-based LNG import facility offshore Colombo.
The LNG terminal is now expected to begin operations in 2023, a slight delay to the second half of 2022 that New Fortress had touted less than two months ago.
Sri Lanka has long sought to join the ranks of global LNG importers after limited success in its domestic exploration and production arena although no such scheme has yet left the drawing board.
South Korea’s SK E&S earlier submitted an unsolicited proposal to supply a converted FSRU to Sri Lanka, which prompted the government to launch a so-called Swiss challenge — a form of procurement that requires a public authority to invite third parties to match or better an unsolicited bid.
This tender was repeatedly delayed, and the Sri Lankan government subsequently approached the market for a newbuild unit with peak capacity of 2 million tonnes per annum of LNG.
Then, earlier this year, the Ceylon Electricity Board invited bids for a leased FSRU to be deployed at Kerawalapitiya.
CEB’s tender stipulated an FRSU on a build-own-operate basis, while the associated mooring system — mooring, flowline and umbilical to the pipeline end manifold (PLEM) control system — was being sought on a build-own-operate-transfer basis.
This request for proposal called for a vessel with regasification capacity of 380 million cubic feet per day of gas and minimum storage capacity of 156,000 cubic metres.
The 310MW Yugadanavi power plant has a long-term power purchase agreement to provide electricity to the national grid that extends through to the end of 2035.
The power plant, which is equipped with General Electric turbines, is configured to run on natural gas in combined cycle.
“This is a significant milestone for Sri Lanka’s transition to cleaner fuels and more reliable, affordable power,” said New Fortress chairman Wes Edens.
“We are pleased to partner with Sri Lanka by investing in modern energy infrastructure that will support sustainable economic development and environmental gains.”
The Kerawalapitya power complex is the foundation of the baseload power that serves the country’s population of 22 million people, said New Fortress, which added that delivering cleaner and cheaper fuels to Sri Lanka will support the country’s growth for years to come.