Colombo, Sri Lanka – Sri Lanka announced on Tuesday, September 23, 2025, that it has immediate plans for no LNG imports from India due to lagging infrastructure, particularly the absence of storage facilities, with construction yet to begin and imports delayed by at least three years. Energy Minister Kumara Jayakody made the statement amid ongoing bilateral talks, highlighting how unresolved contracts and site evaluations are stalling the Sri Lanka no LNG imports timeline originally set for 2025.
This development underscores the fragility of energy cooperation in South Asia, where Sri Lanka’s heavy reliance on imported fuels exacerbates economic vulnerabilities post its 2022 crisis. With India positioned as a key supplier, delays in Sri Lanka’s LNG imports could strain bilateral ties, inflate power costs across the region, and hinder the shift to cleaner fuels amid rising demand. For island nations like Sri Lanka, securing affordable LNG from neighbours such as India is crucial to balancing energy security with fiscal recovery, potentially influencing similar pacts in the Maldives or Bangladesh.
Delays in Sri Lanka No LNG Imports from India Stem from Infrastructure Gaps
Sri Lanka’s pursuit of liquefied natural gas to fuel its power plants has hit a significant roadblock, primarily due to the lack of essential infrastructure. According to Energy Minister Kumara Jayakody, the country requires a dedicated storage facility before any LNG shipments can commence, but construction has not yet started. “We have to first build the storage facility. Construction has not commenced yet,” the minister stated, emphasising the foundational hurdles in Sri Lanka’s no LNG imports strategy.
Discussions on developing this storage infrastructure were initiated under the previous administration, yet no contracts have been finalised. The minister further noted that his team is “studying the earlier content, deciding the location, and evaluating the loan and pricing aspects.” This evaluation process, involving feasibility studies and financial assessments, is expected to extend the timeline considerably. Experts estimate that building the facility could take at least three years, pushing any potential LNG inflows from India beyond 2028.
Sri Lanka’s energy sector, managed by entities like the Ceylon Petroleum Corporation and Ceylon Electricity Board, has long eyed LNG as a cleaner alternative to heavy fuel oil and coal, which currently dominate its 4 GW generation capacity. The planned imports were intended to power combined-cycle plants, potentially reducing costs by up to 20 per cent and cutting emissions in line with the nation’s carbon neutrality goal by 2050. However, without the storage and regasification units, these benefits remain elusive, forcing continued dependence on costlier liquid fuels.
India’s Role in Sri Lanka’s Energy Transition
India has been a pivotal partner in Sri Lanka’s energy diversification efforts, with announcements dating back to late 2024 promising LNG supplies alongside broader connectivity projects. In December 2024, Indian Prime Minister Narendra Modi outlined plans to deliver LNG to Sri Lankan power plants while advancing a cross-border petroleum pipeline and power grid interconnection. This initiative aimed to foster energy security for Sri Lanka while bolstering India’s regional influence.
A key milestone was the agreement between India’s state-run Petronet LNG and Sri Lanka’s LTL Holdings, signed in 2024, to supply gas to power plants in Colombo for five years starting in 2025. Petronet had proposed initial container-based shipments via ships, followed by a floating storage regasification unit (FSRU) at Colombo port, with an estimated investment of INR 2,500 crore (approximately LKR 9 billion). The FSRU was slated for commissioning by 2028, pending government approval expected in 2025.
Yet, progress has stalled. Joint teams from both nations are now focused on prospective reports for a high-voltage transmission link from southern India to northern Sri Lanka, but the LNG component remains on hold. This delay in Sri Lanka’s LNG imports from India not only affects immediate power needs but also broader South Asian integration, as similar grid links could enable renewable energy sharing. For India, which imports over 50 per cent of its LNG needs, exporting to Sri Lanka represents an opportunity to utilise excess capacity from terminals like Kochi, but infrastructure bottlenecks in the recipient nation pose risks to these exports.
Broader Implications for Bilateral Energy Ties
The current impasse reflects deeper challenges in India-Sri Lanka relations, including past tender controversies. In 2022, Sri Lanka briefly awarded a related LNG terminal project at Kerawalapitiya to a Sino-Pakistani consortium, prompting objections from New Delhi before reverting to Petronet in 2023. Such shifts highlight geopolitical sensitivities, with China’s growing footprint in Sri Lankan ports like Hambantota complicating Western and Indian investments.
Data from the Ceylon Electricity Board indicates that LNG could add up to 2.6 million tonnes per annum to Sri Lanka’s capacity by 2030, displacing oil imports worth USD 500 million annually. However, without swift action on storage, the island risks higher electricity tariffs, already a burden at LKR 50-60 per unit, and potential blackouts during peak demand. Regional analysts note that this scenario could ripple into India, where domestic LNG demand is projected to rise 15 per cent by 2030, potentially redirecting supplies elsewhere in South Asia.
Background
Sri Lanka’s energy landscape has evolved amid economic turbulence. Following the 2022 crisis, which depleted foreign reserves and led to fuel shortages, the government prioritised diversification. India’s aid package, exceeding USD 4 billion, facilitated preliminary debt restructuring and energy talks. By early 2024, Petronet’s deal marked a concrete step, aligning with Sri Lanka’s long-term generation plan to expand capacity to 7 GW by 2025 through thermal and renewables. Yet, tender suspensions under prior regimes and financing hurdles have repeatedly delayed execution, underscoring the need for stable policies.
What’s Next for Sri Lanka LNG Imports
As Sri Lanka advances location and pricing evaluations, bilateral working groups with India are set to reconvene in the coming months to expedite feasibility reports. Successful completion of the storage facility could unlock LNG flows by late 2028, stabilising power costs and enhancing grid resilience. In the interim, Colombo may explore short-term oil imports or renewables to bridge gaps, while monitoring global LNG prices hovering at USD 12-14 per million British thermal units. Ultimately, resolving these delays will be key to realising the full potential of Sri Lanka with no LNG imports as a cornerstone of sustainable South Asian energy ties.
Published in SouthAsianDesk, September 23rd, 2025
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