India's LNG Supply to Sri Lanka: A Strategic Partnership for Energy Growth

India is set to strengthen its energy ties with Sri Lanka through the supply of liquefied natural gas (LNG) by the end of 2025. Facilitated by India's largest LNG terminal operator, Petronet LNG, the collaboration involves tanker shipments to Colombo and the construction of an offshore regasification terminal at the Colombo port.

Petronet LNG aims to supply approximately 850 tonnes of LNG per day, totaling around 350,000 tonnes annually, to Sri Lanka over a five-year period. The company's Chief Executive Officer, Akshay Kumar Singh, revealed plans to commission a floating storage regasification unit (FSRU) during this timeframe. The FSRU, a regasification unit housed on a vessel, is a key component of the project.

The logistical intricacies of the venture include transporting 50 tankers, each approximately 17 metric tonnes, to Sri Lanka daily. This involves utilizing barges for transportation and regasification on-site using a vaporizer. Singh highlighted that the average frequency of supply would be once every two days, using ships capable of accommodating 100 such tankers.

Sri Lanka, in its pursuit of LNG for gas-based power plants and industrial applications, has entered into an agreement to procure supplies from Petronet LNG. The FSRU project, which has been under discussion for several years, is anticipated to materialize around 2028, pending formal approval from the Sri Lankan government.

Petronet LNG, equipped with long-term LNG purchase agreements from Qatar and Australia, will execute the LNG supply to Sri Lanka from its Kochi terminal. This initiative not only supports Sri Lanka's energy needs but also aids in increasing the capacity utilization levels of the Kochi terminal. While the Dahej terminal typically operates at high capacity utilization, the Kochi unit has faced challenges due to a lack of a requisite pipeline network for supplying regasified LNG to industrial customers.

Singh indicated that the company, along with its promoters—Indian Oil Corporation, GAIL, Bharat Petroleum Corporation, and Oil and Natural Gas Corporation—is actively exploring additional gas sourcing through long-term contracts. Petronet LNG's extended 7.5-mtpa long-term LNG contract with QatarEnergy underscores this commitment, extending the contract for another 20 years beyond 2028.

As part of its expansion plans, Petronet LNG is increasing the capacity of the Dahej terminal by 5 mtpa to reach 22.5 mtpa. The underutilized 4-mtpa capacity at the Kochi terminal is also expected to see higher capacity utilization by next year. Additionally, the company is developing a 4-mtpa FSRU at Gopalpur in Odisha.

The strategic collaboration between India and Sri Lanka not only addresses Sri Lanka's energy requirements but aligns with India's broader goal of increasing the share of natural gas in its primary energy mix to 15% by 2030. With a focus on long-term contracts and stable pricing, this initiative reflects the growing importance of LNG in meeting the energy demands of both nations.