Dr Sarath Obeysekera

Green Hydrogen: Will Sri Lanka Become a Producer or Just Another Importer?

BOI in Sri Lanka has invited global companies for RFi to forward proposals to generate green hydrogen to bunker to ships Most suitable locations for such bunkering will in  be Trincomalee 

Glad to note that government is shifting attention to generate FDI under blue economy 

Based on current global trends, importing ammonia produced in China and then cracking it into hydrogen may, in some cases, be cheaper than producing green hydrogen locally from seawater, especially in countries where renewable electricity is expensive or insufficient.

However, the answer depends on the entire value chain.

Option 1: Import Chinese Green Ammonia and Extract Hydrogen

China has rapidly expanded solar and wind capacity and is developing large-scale green ammonia projects in regions with very low renewable electricity costs. Because electricity accounts for 60–80% of the cost of green hydrogen, Chinese producers can achieve significant economies of scale.

Advantages:

• Lower capital investment in Sri Lanka.
• No need for massive electrolyser installations.
• Hydrogen can be transported as ammonia using existing shipping technology.
• Potentially lower delivered cost if Chinese production remains subsidized.

Disadvantages:

• Energy losses when converting hydrogen to ammonia in China and then cracking ammonia back into hydrogen in Sri Lanka.
• Dependence on imports.
• Exposure to shipping costs and geopolitical risks.
• Ammonia cracking plants are expensive and energy intensive.

Option 2: Produce Hydrogen Locally from Seawater

Strictly speaking, electrolysers do not usually use raw seawater. They require desalinated water first.

Process:

1. Seawater intake.
2. Desalination.
3. Electrolysis.
4. Hydrogen production.

The cost of desalination is surprisingly small. About 9 litres of water are needed for 1 kg of hydrogen, and the water cost is usually less than 2–3% of total hydrogen production cost.

The real issue is electricity.

Sri Lanka’s challenge is not water availability but:

• High electricity costs.
• Limited large-scale renewable energy capacity.
• Grid constraints.
• Need for substantial investment.

What Makes Sense for Sri Lanka?

Sri Lanka may have a competitive advantage if it develops:

• Offshore wind resources around Mannar.
• Large solar parks in dry zones.
• Green hydrogen production close to ports such as Trincomalee Port and Port of Colombo.

For export-oriented projects, producing ammonia locally could be more attractive than importing ammonia and extracting hydrogen.

Strategic Question for Sri Lanka

The key question is:

Should Sri Lanka become a producer of green hydrogen and ammonia, or merely an importer and consumer?

If Chinese green ammonia lands in Sri Lanka at a lower cost than locally produced hydrogen, investors may prefer import-based projects. However, that would create fewer local jobs and less industrial development.

For a country seeking energy security and industrial growth, the long-term objective should probably be to exploit Sri Lanka’s own renewable resources rather than depend entirely on imported ammonia.

A concern for Sri Lankan policymakers is that, just as European producers are worried about cheaper imports, Sri Lanka could end up importing green molecules” rather than building a domestic green-hydrogen industry. The economic benefits of local production—employment, technology transfer, and renewable-energy investment—may outweigh a small difference in fuel cost.

For the BOI’s green hydrogen and ammonia initiatives, a detailed comparison should include:

• Chinese ammonia landed cost at Colombo or Trincomalee.
• Ammonia cracking cost.
• Local solar and wind electricity costs.
• Electrolyser CAPEX and OPEX.
• Carbon pricing and export market requirements.

The result may show that importing ammonia is cheaper in the short term, while local production offers greater strategic value in the long term.

Regards

Dr Sarath Obeysekera