India and Japan will join hands to set up a USD 250 million LNG import terminal in Sri Lanka, the first collaboration between the two to counter China’s growing influence in the Island nation.

Petronet LNG Ltd, India’s biggest gas importer, last year proposed to set up an up to 2 million tonne (MT) liquefied natural gas (LNG) import facility on the coast of Sri Lanka to meet its energy needs.

Sri Lanka however wanted Japan also to have a role in it.

“An agreement has been reached between the governments of India, Sri Lanka and Japan to set up the LNG terminal as a 50:50 joint venture by Petronet and a Japanese company,” Petronet Managing Director and CEO Prabhat Singh said here.

Japan is yet to identify the company which will form an equal joint venture with Petronet for setting up the terminal.

Without giving details, Singh said the import facility will be set up at Kerawalapitiya on western coast.

Sri Lanka has plans to build a 300 MW gas-fired power plant in Kerawalapitiya adjoining an existing power plant. The existing plant which uses oil to generate power, would also be converted to LNG once the terminal is set up and gas imports start.

LNG has become significantly cheaper in the last year and many countries have begun switching their power plants to LNG.

Singh said the LNG terminal, which will import super— cooled natural gas in ships, will take two—and—half to three years to build.

The terminal in Sri Lanka is part of Petronet’s vision to own 30 MT per annum of LNG import and re—gasification capacity by 2020, he said.

Petronet already operates a 15 MTPA import facility at Dahej in Gujarat and has another 5 MT terminal at Kochi in Kerala.

It has signed preliminary agreement to build a 7.5 MT LNG terminal in Bangladesh and is also looking at setting up smaller facility in Mauritius.

Singh said Dahej is also being expanded to 17.5 MT over the next two years.

The India-Japan collaboration comes after a string of Chinese successes in Sri Lanka. China has managed to revive its flagship USD 1.4 billion Colombo Port City project and is also engaged in expansion of major infrastructure projects it built in the past.

These projects include expansion of the Hambantota port and the Mattala airport.