The Sri Lankan Government has decided to award the Kerawalapitiya Liquefied Natural Gas (LNG) project to China Harbour Engineering Company (CHEC), effectively moving forward without India’s Petronet LNG Ltd. Officials stated that CHEC had submitted its proposal through a proper tender process, while Petronet’s bid was unsolicited and submitted under a government-to-government arrangement, which had only received Cabinet approval under the previous administration.
CHEC’s original project partner, Pakistan’s Engro Corporation, has withdrawn from the joint venture. According to the Secretary to the Ministry of Energy, Prof. K.T.M. Udayanga Hemapala, CHEC has already informed the Government that it will replace Engro with another company to fulfil the same role in the project.
“We are currently awaiting the signing of the agreement, which has already been negotiated and submitted to the Attorney General for clearance,” Prof. Hemapala said. “Once we receive clearance, we can sign the agreement, and then they will begin constructing the Floating Storage Regasification Unit (FSRU) and the pipeline at Kerawalapitiya.”
He added that several attempts had been made by previous Governments to launch the project. “Initially, tenders were called. The American company New Fortress and India’s Petronet showed interest, but for various reasons, those projects were not completed.”
“When we came into power, we evaluated all the proposals and found that the most feasible option—aligned with our Government’s commitment to transparent procurement was the one that had gone through the formal tender process. That was CHEC’s proposal. We proceeded accordingly, and the project has now been awarded to CHEC,” he said.
Prof. Hemapala also clarified that the Petronet proposal has not been formally cancelled. “To cancel a project, we must follow the proper procedures, including consultations with the respective Government and other necessary steps. We will do that in due course. There was a committee report which recommended against proceeding with Petronet’s proposal. It was unsolicited and not part of the formal tender process,” he explained.
He noted that an expert committee had reviewed both proposals and found that Petronet’s solution was a short-term one, while CHEC’s offered a long-term strategy. Based on this, the committee recommended moving forward with CHEC.
Regarding future engagement with Petronet, the Secretary said, “We are still open to discussion. Initially, when they applied, the FSRU was to be handled by another party—not solely by CHEC. Now that we are proceeding with CHEC, we have asked them who will be supplying the FSRU. They simply need to inform us of the replacement company, since Engro has withdrawn.”
The tender for the project was officially issued by the Ceylon Electricity Board (CEB) on 18 February 2021. It was finalised with Cabinet Appointed Negotiating Committee (CANC) approval received on 5 August 2022 for the FSRU, and on 13 September 2022 for the pipeline. The new Cabinet granted approval to proceed with the project on 19 December 2024.
CHEC had initially formed a consortium with Engro Corporation. However, following Engro’s withdrawal, CHEC has identified another supplier to take over its role. Prof. Hemapala noted that such changes are common in large-scale procurement processes.
“As a procurement entity, the Ministry of Energy reviewed the changes and found no negative impact on the Government. On the contrary, these were positive developments, and therefore we approved them,” he said.