Sri Lanka is central to the regional energy architecture of South Asia and the Indian Ocean. Sri Lanka is a central node in the Indian Ocean. Sri Lanka’s ports connect distant lands and stitch them together into a coherent whole.
Sri Lanka has a long history of maritime trade. The country has been part of the maritime Silk Road. Sri Lanka has traded goods with the Arabian peninsula, South Asia and India, and the Indonesian archipelago. Since ancient times, Sri Lanka has been an important part of the Indo-Pacific region. The Maritime Silk Road is a return to a historical norm. These trade networks were first established when the Greeks and Romans expanded in the Mediterranean. Spices, luxury goods were traded in antiquity, today energy commodities traverse the deep blue seas.
Sri Lanka plays an important role on the new Silk Road and has a brand new port infrastructure that enables trade across the Indian Ocean. This new infrastructure can be seen at the port of Colombo in Sri Lanka. China plays an important role in this and facilitates trade in this vast maritime space.
Relations with India are of enormous importance to develop Sri Lanka’s energy sector. Sri Lanka is the gateway to the Indian market. Sri Lanka thus benefits from two markets: On the one hand, the wider Indian Ocean, the new maritime Silk Road and Indo-Pacific trade. On the other hand, there is the Indian market and Sri Lanka’s direct connection with India.
1. SRI LANKA IS AN ENERGY HUB IN THE MIDDLE OF THE INDIAN OCEAN.
Sri Lanka is important for energy trade because of its geostrategic location in the Indian Ocean. Sri Lanka has easy access to regions as diverse as East Africa, the Arabian Peninsula, India, Southeast Asia, and the Indonesian archipelago. The very fact that Sri Lanka is an island separate from mainland India makes it particularly attractive for investment.
Sri Lanka has become an important part of the new Silk Road and continues to attract investment from China. This has contributed to the development of the Sri Lankan economy and the energy sector in particular. Thanks to the development of port infrastructure, Sri Lanka is now in a position to become a hub for major shipments of energy commodities from the Indian Ocean. Infrastructure investment is an essential component of energy industry development in Sri Lanka. The question is whether Sri Lanka’s port infrastructure can compete with the multitude of other port developments along the Indian Ocean. Recently, there has been significant competition.
In Pakistan, we have seen the development of the Gwadar port, which could channel energy commodities through Pakistan. Energy commodities would pass from the Gulf states through Pakistan, to western China. This would take some of the trade away from Sri Lanka. What works in Sri Lanka’s favor is that it is in a unique location in the heart of the Indian Ocean and there are no port alternatives for a considerable distance, except perhaps for Indian ports on the Indian mainland.
2. PORT INFRASTRUCTURE IN SRI LANKA CAN REDUCE THE COST OF TRADING ENERGY COMMODITIES.
The overall impact of Sri Lanka’s port infrastructure could be that it will reduce the cost of trading energy commodities in the Indian Ocean and Indo-Pacific regions. Colombo expands the extensive port network in the Indian Ocean and provides alternative storage facilities for oil and gas volumes.
Volume or tonnage plays a crucial role in reducing the cost per ton. In the energy world, every kilometer counts and generates additional costs. There is a reason why large supertankers cross the oceans. These supertankers travel at low speeds because it is more economical. The energy raw materials are delivered in large quantities. Developing port infrastructure for such supertankers is a major undertaking and a huge investment in infrastructure. Such projects can lead to new companies locating closer to the port area to take advantage of the trade networks. The Port of Colombo and Sri Lanka are ideally suited for this.
We see that the future of Sri Lanka is linked to the sea and the development of maritime trade. In a sense, this is a continuation of the past. The price of not integrating into these Indo-Pacific trade networks would be significant, as Sri Lanka can benefit from economies of scale.
3. SRI LANKA CAN BENEFIT FROM A DECENTRALIZED ENERGY SYSTEM.
Sri Lanka is in a good position to harness solar energy year-round due to its relative proximity to the equator. One of the criteria for the economic viability of solar panels is their ability to convert the sun’s rays into energy storage that can be easily used to meet our energy needs. Oil is and has been an ideal medium for energy storage and a great source of energy. Solar energy is only useful in locations that benefit from strong solar radiation. Latitude plays a big role when it comes to solar energy.
The use of biomass can continue to play an important role in Sri Lanka’s energy sector. Biomass can help local communities and will facilitate the provision of energy for cooking and heating. We should keep in mind that in the case of Sri Lanka, the use of biomass is likely to conflict with the use of agricultural land. Sri Lanka is an island which means that land is limited.
There are limits to the utilization of biomass and biogas im Sri Lanka. These challenges can be overcome. The question arises why Sri Lanka does not invest more in LNG supplies to diversify its energy supply. The newly constructed port infrastructure could be helpful in this regard.
Sri Lanka is far away from major trading centers such as Singapore, Gwadar, Dubai and Djibouti. Sri Lanka can develop and grow its own port infrastructure and establish itself as a center of global energy trade.
Sri Lanka’s potential for renewable energy is considerable, especially in the area of solar energy. The use of biomass will continue to play an important role in advancing the nation’s energy infrastructure.
There is potential for LNG in Sri Lanka, which can be part of a more diversified energy mix. However, this would require the construction of a national gas grid. This may come at the cost of other interesting opportunities in the energy sector in Sri Lanka.