High Commissioner’s address at the inauguration of the 4th Asia Energy Security Summit organized by IPPAI

[February 26, 2014]

Hon’ble G. J. L. Neomal Perera, Deputy Minister of External Affairs,

Mr. Harry Dhaul, Director General, IPPAI, India,

Distinguished Panelists,

Ladies and Gentlemen,

At the outset, I would like to express my gratitude to the organizers for inviting me to address the inaugural session of the 4th Asia Energy Security Summit on fostering energy security partnership in Asia. I am delighted to be able to speak on energy cooperation between India and Sri Lanka. Our relationship dates back to time immemorial and the rich legacy of religious, cultural and linguistic interaction forms a strong underpinning for a modern forward-looking relationship that covers a wide gamut of activities.

2. The demand for energy is growing at an incremental pace all over the world. India is the fourth largest consumer of energy after China, USA and the Russian Federation. Sri Lanka is fast emerging as an important consumer of energy. In the post-conflict period, the Sri Lankan economy has expanded considerably. As the economy grows and the standards of living rise there is a corresponding growth in the demand for energy. Energy costs can be of crucial importance in energy-intensive industries such as chemicals, aluminum, cement, iron and steel, paper, glass and the petroleum sector, particularly where goods are traded internationally. As per the World Energy Outlook 2013, energy-intensive sectors worldwide account for around one fifth of the industrial value, one quarter of the industrial requirement and 70% of the industrial energy use.

3. The unabated demand for energy has resulted in sources of energy coming under increasing strain the world over. Planning for assured access to energy is a vital component of national policy and has also impacted the conduct of international relations and realisation of foreign policy objectives.

4. In the context of India-Sri Lanka relations, engagement across the board in the energy sector constitutes an important pillar of bilateral cooperation.

Power generation

5. Presently, conventional sources of energy continue to be the mainstay of the economy of India and Sri Lanka. In the power generation sector, a Joint Venture Agreement was signed between India’s National Thermal Power Corporation (NTPC) and Sri Lanka’s Ceylon Electricity Board (CEB) in September 2011 for implementing the 500 MW Sampur Coal Power Project in Eastern Trincomalee and a joint venture company, Trincomalee Power Company Ltd. (TPCL), was set up. All necessary agreements related to the Sampur Coal Power Project were signed in October 2013 by officials authorized by the Government of Sri Lanka and their counterparts from India. These agreements were signed in the presence of Shri Salman Khurshid, Hon’ble Minister for External Affairs of India and the Hon’ble Minister of Economic Development of Sri Lanka. The Hon’ble Ministers of Power and Energy, External Affairs and Investment Promotion of Sri Lanka also witnessed the signing of the agreements. 

6. India has also extended a line of credit amounting to USD 200 million towards various aspects of the project. TPCL would raise over USD 400 million through commercial loans for the project. A 240 km-long 220 KV transmission line would be laid from Sampur to the Grid sub-station at Veyangoda to connect the Power Plant to the National Grid.  TPCL would undertake the construction of the line from Sampur to Habarana, with the Habarana-Veyangoda segment being constructed with Japanese assistance. It has been estimated that the power plant would be linked to the National Grid in 2017. 

7. The linking of power generation to the National Grid would minimize the CEB’s dependence of purchasing power from private suppliers.  The Sampur Coal Power Project has the distinction of being one of the largest single Indian-assisted projects to be implemented in Sri Lanka.  Once this power plant is fully operational, it would add 500 MW to the National Grid. This is expected to reduce the cost of electricity and increase supply to cater to the rising electricity demand driven by rapid development. The completion of this project and its integration with the power grid would also result in an opportunity for Sri Lanka to export power to India

8. I would like to stress that NTPC, who is executing the project on the Indian side is a premier public sector unit which has achieved stellar success in setting up power projects in India and abroad.  NTPC has an installed capacity of 42,464 MW in India and under construction capacity of around 20,000 MW. NTPC’s expertise, backed and supported by its own fully-trained technical teams, would help develop an efficient, reliable and modern state-of-the-art power project which could be seen by others as a model.  The project has been backed by sound technical specifications facilitating high efficiency.  The project fully covers the environmental aspect. An environmental impact study has been conducted and the report in this regard will be submitted shortly. It may be mentioned that concern for the environment has been integral to NTPC’s growth strategies which are driven by its environment vision of ‘Going Higher on Generation – lowering GHG intensity’. 

9. There has been unwarranted and motivated criticism in some sections of the local media, including one scurrilous piece in a newspaper today about the Sampur Power Plant. It is surprising that there are some, who were responsible for the delay in the signing of the agreements and now continue to seek to undermine this project by labeling baseless allegations for reasons best known to them. This project will be a landmark of bilateral cooperation in the energy sector and will add substantially to Sri Lanka’s power generation capacity. Moreover, this project has been crafted in order to take into account best practices in the region and beyond and also learn from mistakes made in setting up similar power projects in Sri Lanka and the region. It will be ensured that state of the art machinery and equipment are installed in the plant through an open and transparent international tendering process. I am sanguine that once the power plant is completed it will be a model for other such plants in the country and will silence those that are making baseless allegations. As regards the re-settlement of people who have been displaced from the area allocated to the power plant we will provide proper housing under our flagship housing project being executed by the Government of India involving construction of 50,000 houses mainly in the Northern and Eastern provinces of Sri Lanka. We have been informed by Sri Lankan authorities that based on survey records only 7 families have been displaced from the area where the power plant will be built.

10. India’s consistent policy has been to share the benefits of its development process and its technical expertise with friendly countries, particularly in its neighbourhood. This project has the potential of not only addressing Sri Lanka’s energy needs but also contribute towards trade in power between our two countries. I propose to address this issue later in my speech.

Petroleum sector

11. In the petroleum sector, the partnership between India and Sri Lanka crystalised when an MoU was signed in June 2002 between Ceylon Petroleum Corporation (CPC) and Indian Oil Corporation Ltd. under the auspices of both the governments. The first major overseas commercial venture of Indian Oil Corporation commenced in August 2002, with the incorporation of Lanka IOC (Pvt.) Ltd. Lanka IOC has made phased investments to provide world-class quality petroleum products and services to the people of Sri Lanka. It is the only private oil company that operates retail petrol/diesel stations in Sri Lanka, apart from the government-owned Ceylon Petroleum Corporation. Lanka IOC is ranked number 1 among the listed energy companies in Sri Lanka.

12. Lanka IOC has contributed to development of infrastructure in this important sector. Its major facilities include an oil terminal at Trincomalee and an 18,000 tons per annum capacity lubricants blending plant and state-of-the-art fuels and lubricants testing plant at Trincomalee. The Trincomalee oil tank farms operated by Lanka IOC consist of 99 tanks, jetty, pipelines etc. The oil tank farm has a capacity of 12,000 kilolitres. Currently, only 15 of these tanks are operational. Lanka IOC has made a proposal to Government of Sri Lanka to develop the remaining tanks under a suitable joint venture arrangement.

Oil and Gas Exploration

13. In the field of oil and gas exploration, there have been regular discussions between ONGC Videsh (OVL), another premier Indian public sector unit and the Government of Sri Lanka. Cairn Lanka, a wholly-owned subsidiary of Cairn India Ltd., has struck gas in two wells in the Mannar basin in Sri Lanka during the first phase of the drilling programme. Cairn Lanka has announced that they would enter the second phase of their operation. Further drilling will be required to establish commercial viability.

14. In the second round of licensing for offshore oil blocks opened on March 7, 2013, Cairn India had bid for one of the blocks in the Mannar Basin (M 5) and has won the bid. I understand that an agreement for this block will be concluded shortly. We continue to evince interest in off shore exploration and in assisting Sri Lanka in augmenting its oil refining capacity.

New and Renewable Energy

15. India and Sri Lanka are actively discussing cooperation in the field of new and renewable energy. During the 8th Session of the India-Sri Lanka Joint Commission held at New Delhi in January 2013, both sides agreed to explore cooperation in the field of new and renewable forms of energy, including through greater cooperation between the public and private sector entities of the two countries. During the visit of Secretary Treasury of Sri Lanka to India in April 2013 discussions took place for cooperation in wind and solar energy between government agencies of the two sides. 

16. During the session of the India-Sri Lanka Joint Commission, it was also agreed to consider Indian proposals regarding renewable energy projects of aggregate capacity of 15 megawatts using biomass fuel, provided such projects conform to relevant Sri Lankan legislation. Sri Lanka possesses huge potential for hitherto untapped wind and solar energy. Indian companies in the wind, solar and biomass energy sectors like Suzlon and Ankur Scientific Energy Technologies are already present in Sri Lanka and there is scope for greater cooperation between public and private sector entities of the two countries in the fields of capacity building, technical and consultancy assistance and sourcing of equipment. We hope to enhance cooperation in this important sector, which is environment friendly and makes use of green technology.

Nuclear Energy:

17. India and Sri Lanka have an official dialogue on the issue of nuclear energy and both sides have reaffirmed the commitment to strengthen bilateral cooperation in the uses of civil nuclear technology for peaceful purposes for the mutual benefit of the people of the two countries.

Energy Trade: 

18. An area of great promise is the area of trade in energy between the two countries. Experts believe that countries can reduce the impact of higher prices by promoting more efficient, competitive and interconnected energy markets. Energy trade between India and some of its neighbours like Bhutan, Nepal and Bangladesh has become a reality. There are ongoing discussions with Pakistan for supply of electricity as well as gas and refined petroleum products. It has been analysed that cross-border power purchase will produce tangible benefits, including effective utilisation of natural resources, increase in reliability of power, benefits from seasonal differential demands and large-scale transformation in sectors contributing to economic growth.

19. India and Sri Lanka have been discussing the possibility of trading in energy, keeping in mind the present generating capacity as well as patterns of power consumption in Sri Lanka as well as India. There is agreement on both sides to move ahead with the interconnectivity of our electricity grids. The minutes of the 8th Meeting of the India-Sri Lanka Joint Commission Meeting held in Delhi in January 2013 refers to this possibility. Such an inter-grid connectivity will enhance the viability of power investments in Sri Lanka in addition to enhancing the overall stability of the Sri Lankan grid due to the much larger demand base. The prospects for trading of electricity between India and Sri Lanka are enhanced by the fact that the peak hours between the two countries are different. Export of power would also help address the trade deficit of Sri Lanka vis-à-vis India, while catering to the growing power requirement of Southern India, thereby creating a win-win situation for both countries. 

Conclusion

20. The uneven spatial distribution of natural resources in South Asia is an imperative for regional cooperation in the energy sector. This is vital for emerging economies to maintain sustainable growth. Lack of sustainable power sources or neglect of development of the same is a risk which neither India nor Sri Lanka can take. I am certain that policy-makers in both countries realize the existing potential and will ensure that cooperation in this vital field will be further enhanced. Energy diplomacy has become the new crucible in international relations and neighbours like India and Sri Lanka are poised to take full advantage of the opportunities that arise.

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