While the US is a relative outsider in the Sri Lankan energy sector compared to India, China and Japan, in 2021, the United States Agency for International Development (USAID) introduced a Sri Lanka energy programme, which is both a strategy and a funding mechanism. It is ‘seeking to transform its power sector into a market-based, secure, reliable, and sustainable system by mobilizing investment to deploy advanced technologies, increase flexibility, and enhance competitiveness’.9 The aim is thus to make energy a market-based commodity.
In the same year, the US energy company New Fortress Energy (NFE) signed an agreement with the Government of Sri Lanka to build an LNG terminal off the coast of Colombo. It also enabled NFE to purchase the Sri Lankan Treasury’s 40% stake in a 310 MW power plant, which is a significant contributor to the national electricity grid. This agreement was signed without the knowledge of key political actors, including parliament. There was a massive local protest over the agreement but to no avail.
In the words of a trade union activist who joined the protest against the agreements:
The sheer audacity to sign an agreement regarding a matter of national importance at midnight without even informing the parliament underscores the nature of geopolitics and geopolitical actors’ power on local issues. The government gave in to the U.S. request while talking about patriotism locally. Sri Lankan energy sector is being dissected by influential external actors where it has become murky water.
In the wake of the economic crisis, Sri Lanka has also explored nuclear energy. By early 2023, India, the US and a few European countries had offered to build nuclear power plants in Sri Lanka. In June 2023, the country reached a deal with the Russian nuclear giant Rosatom to build a nuclear power plant that may run two reactors and generate 300 MW. Although Russia is a newcomer in Sri Lanka’s energy landscape, it is currently building Bangladesh’s first nuclear power plant – the Rooppur Nuclear Power Plant, in which India is also a stakeholder, is the first Indo-Russian nuclear project outside India. India’s role in the proposed Sri Lankan nuclear power plant is unknown.
Amid the geopolitical fray, Japan – a long-standing partner in the Sri Lankan energy sector through projects developed with bilateral financial and technical assistance as well as the Japan International Cooperation Agency (JICA) – has been sidelined. Nevertheless, Japan is continuing its 20-year partnership with Sri Lanka on energy policy but has increasingly joined with India in trilateral cooperation in this area.
Although there has been an expansion of renewable energy, this has not been at the expense of the continued development of, and investment in, fossil fuels. In January 2021, the Sri Lankan government approved two coal power plants and two LNG plants, each of which would have a capacity of 300MW, for a total of 1200MW. In September 2021, the President of Sri Lanka stated that the country would prioritise obtaining 70% of its electricity from renewable sources by 2030, yet the current version of Sri Lanka’s Long Term Generation Expansion Plan (LTGEP), which covers the 2020–2039 period, anticipates the addition of 55% more coal and oil capacity.
Sri Lanka’s energy crisis, triggered by the economic crisis, has renewed the ambitions of the coal lobby, promoting it as a cheap option and encouraging coal imports. External actors continue to be interested in new coal plants, presenting them as ‘eco-friendly’ and ‘clean coal’.
Sri Lanka has also explored LNG projects. In 2017, Sri Lanka and India signed a Memorandum of Understanding (MoU) in which an Indian company was to build a 500MW LNG plant. The MoU referred to a joint venture involving entities from Sri Lanka, India and Japan – but the project never took off, and Sri Lanka delayed the project despite Indian pressure. In August 2022, the government awarded a LNG contract to the Sino-Pakistan Engro Consortium following a competitive international bidding process. In August 2023, the Sri Lankan Sunday Times reported10 that the government had revoked the Engro project and planned to offer it to an Indian company, Petronet LNG Ltd. LNG is a highly competitive geopolitical space with many actors involved, aware of the untapped gas potential in the Mannar Basin on the western coast of Sri Lanka. In January 2023, the Minister of Power and Energy requested companies from Japan, India, and NFE to develop a joint proposal to supply, build and run an LNG terminal.
Table 1 gives an overview of the geopolitical entanglements in the Sri Lankan energy sector, especially in the last decade.