Laugfs Hambantota port LPG venture faces roadblocks

• Company asked to halt construction of connecting pipeline of US $ 80mn LPG import-export terminal without any explanation
• “This has been done unofficially. We didn’t get any written document,”- Laugfs Gas Chairman
• H’tota port was given on 99-year lease to a Chinese firm for US $ 1.12bn and port operations were handed over to them last month

By Chandeepa Wettasinghe

Construction of the connecting pipeline of the US$ 80 million LPG import-export terminal of Laugfs Gas PLC in the Hambantota port has been unofficially halted without further explanation, according to the company’s head.

“We were asked to stop construction of the pipeline, and when we inquired from the official in-charge at Hambantota Port, he said that his superiors asked him to do this,” Laugfs Gas PLC Chairman H. K. Wegapitiya told Mirror Business yesterday.

A handful of news websites had reported that the entire terminal construction had been halted, which was inaccurate, according to him. 

However, he said that without the pipeline and access to load and offload LPG from the jetty, both of which are now unofficially restricted, the project would become unviable. “This has been done unofficially. We didn’t get any written document. But, we have all the rights for this project. We have brought this to the notice of the President, Minister Malik Samarwickrama and the Board of Investment,” Wegapitiya added.

He refused to speculate on who could have been responsible for creating pressure to halt the pipeline.

The Hambantota Port was given on a 99-year lease to the Chinese state-owned China Merchant Port Holdings (CMPort) in mid-2017 for US$ 1.12 billion and CMPort took over operations of the port last month, which is strategically-important to China’s One Belt One Road initiative.

CMPH effectively controls 70 percent of the port through two joint venture companies with the Sri Lankan state-owned Sri Lanka Ports Authority (SLPA), which controls the remaining stake in the port.

SLPA Chairman Dr. Parakrama Dissanayake and SLPA Managing Director H. D. A. S. Premachandra could not be reached despite numerous attempts to contact them to obtain a comment on the development. 

Ports and Shipping Ministry Secretary L. P. Jayampathy chose to stay out of the issue by stating that the Ministry—which owns SLPA—is only involved with policy making, and not operational aspects.

Laugfs is the only local company to set up major operations in the port, which is situated less than 20 kilometres north of the east-west sea lane, which connects the Far East with the Middle East and Europe, and along which over 200 vessels travel daily.

China built, and later invested in the port due to its importance in China’s future energy security and geopolitical interests.

Phase one of the storage facility, worth US$ 51.5 million, will be operational this April, since 80 percent of the construction is complete, according to Wegapitiya. 
The first phase adds a 30,000 metric tonne storage capacity. The second phase, worth US$ 28.5 million, will add another 15,000 metric tonnes of capacity.

“This will be able to contribute 6 percent towards the government’s US$ 50 billion export target for 2020. We will be exporting 80 percent of the gas to Africa, India, Bangladesh, Myanmmar, and other parts of the region,” Wegapitiya said.

The tank farm, coming under the Laugfs subsidiary Laugfs Terminals Ltd., is being financed through equity and corporate guarantees provided by Laugfs.