In Search of a Liquefied Natural Gas Trading Hub in Asia: Sri Lanka’s Potential to Become a Candidate

Abstract

Asian regions natural gas demand is growing fast but a lack of competitive national and regional markets creates high prices, and the region largely imports Liquefied Natural Gas (LNG). The LNG is one of the energy sources that diversifies Asias energy mix while adding another source for energy security. Asias economic powers like, China, India, Japan, and South Korea as well as many smaller countries like Sri Lanka largely depend on imported energy resources risking human security. As a matter of fact, this dependency is being controlled through diversification of energy sources. India has become fourth largest LNG importer in the world for electricity generation and for domestic cooking. The LNG prices in the region are higher than in any part of the world due to lack of distribution pipelines, regasification infrastructure, storage facilities and a trading hub. The International Energy Agency (IEA) identifies Singapore as the major LNG trading hub for South East Asian Region. In South Asia, by 2030, the Indias growth in per capita income will enlarge the middle class society and its purchasing power, demanding higher standards of living, which will open new markets for LNG and renewable energy supplies. Singapore has a legacy for being the oil trade hub for long years and understands the market. But, when there is a lower demand for LNG, surplus tankers are idling in Singapore shores due to a lack of regasification and storage facilities, and incurring shipping cost to companies of which average cost $ 60,000 per day. In addition, proposed gas pipelines in South Asia: Turkmenistan-Afghanistan-Pakistan-India Gas Pipeline (TAPI), Iran-Pakistan-India Gas pipeline (IPI), and Myanmar-Bangladesh-India Gas pipelines largely depend on contemporary security challenges of involving countries. These challenges push Gas pipeline constructions beyond reality, in which increases dependence on sea commons to supply gas. Therefore, alternative LNG regasification and storage hubs should be in place to support export companies as well as to establish uninterrupted supply to the region. Being located in a major Sea Line of Communication (SLOC) and close proximity to Indian sub-continent increase Sri Lankas potential to become another candidate in providing LNG regasification and storage facilities to the region. Kalpitiya, Mannar, Hambantota, and Trincomalee areas can be developed to have a LNG storage and terminal facility. This paper discusses Sri Lankas potential to become an alternative LNG storage and regasification transit hub for Jurong Island LNG terminal, Singapore or an independent facility for the region, based on secondary sources.