Maritime boundary agreements, off shore oil exploration

In breach of provisions of the Petroleum Resources Act No. 26 of 2003, two off shore blocks (1 and 8) in the Mannar Basin have been awarded to Indian and Chinese state oil companies on a preferential nomination basis for oil exploration. More specifically, sections 4 (2), 7, 8 and 9 of the Act have been violated where there are clear guidelines on the issuance of licence for government blocks. Furthermore, recent press reports have indicated that the government of Sri Lanka has finalized arrangements calling for international offers for oil exploration in three off shore blocks in the Mannar Basin.

Block 2, 1338 sq kms Lat 8 deg. 10' and 8 deg 30' north Sri Lanka maritime boundary to 4 kms from low water mark Block 3, 3572.08 sq kms Lat 7 deg 50' and 8deg 10' north – Indian Sri Lanka maritime boundary to 4 kms from low water mark Block 4, 4126.51 sq kms Lat 7 deg 30 'and 7 deg 50' north – Indian Sri Lanka maritime boundary to 4 kms from low water mark Blocks 5, 6 and 7 are presumed to be offered during the second licensing round after road shows. This is a replication of efforts and expenses as all blocks could have been offered at the same time. It is also interesting to know whether the government is meeting the expenses for such promotional activities as an offer for US$1 million by the Asian Development Bank (ADB) was rejected. It is also relevant to find out what the total contract value is with Furgo Geoteam a Norwegian company appointed as consultants to the Petroleum Resources Development Secretariat (PRDS).

The PRDS website is being maintained by Fugro Data Solutions, an affiliated company of Fugro Geoteam that was associated with TGS NOPEC, another Norwegian company, on Phase II of the 2D seismic survey on a cost sharing basis. The website further states that oil exploration will start in 2008. The site gives a background on the functions of the Ministry of Petroleum, new opportunities in the Cauvery and Mannar Basins and the advantages of investing in Sri Lanka. It also gives a countdown for the upstream development.

The Director General of the PRDS, Dr. Neil De Silva, addressed the European Association of Geologists and Engineers (EAGE) in London in a Poster Talk on June 13 to 14, 2007. Three road shows are scheduled to be held in London, Houston Texas and Kuala Lumpur during August and September 2007 as well as a presentation to the American Association of Petroleum Geologists (AAPG) in November 2007.

The website does not contain the Petroleum Resources Act No. 26 of 2003 or the regulations under the Act if they have been legislated. It also does not give a model Production Sharing Contract (PRC) and the relevant Taxation Regime. These deficiencies will undoubtedly prevent reputed upstream oil exploration companies from sending any serious bids.

I shall make an attempt to elaborate on the relevant Maritime Boundaries between India and Sri Lanka. The Maritime Zones Law No 22 of 1976 and the Presidential Proclamation of January 1977 implementing the Law defines a Territorial Sea of 12 nautical miles (nm) historic claims between Palk Strait and Gulf of Mannar, a Contiguous Zone of 24 (nm) as well as an Exclusive Economic Zone of 200 (nm). The delimitation of the continental shelf is now in progress in accordance to Annex 11 of the Final Act of the United Nations Convention on the Law of the Sea. This delimitation is in respect of the southern part of the Bay of Bengal where India too has a claim.

I now refer to the oil exploration blocks. The demarcation of the three blocks has taken the southwestern maritime boundary in the Gulf of Manner with India as the western limit. The boundary in this area consists of 12 turning points defined by Latitude North and Longitude East and varies from 9 deg 6' to 5 deg 53.9' latitude north and 79 deg 32' to 77 deg 50.7 ' longitude east.

The maritime boundary from the 13m turning points to the tri-junction point (T) between the maritime boundary of India, the Maldives and Sri Lanka (4 deg 47' 04" latitude north and 77 deg 01' 40" longitude east) according to my knowledge has not been established. The Point T was established through an agreement between India, the Maldives and Sri Lanka on 31 July 1976.

I also draw your attention to the blocks that have been offered by Sri Lanka located in the Gulf of Mannar as well as the Mannar Basin. Block 1, offered to India is adjoining the Indian Block CY-DWN-2001/1 in the deep water off shore Cauvery Basin, Gulf of Mannar. This Block was offered to the Oil and Natural Gas Corporation (ONGC) under the New Exploration Licensing Policy (NELP). The Production Sharing Contract (PSC) was signed by ONGC and OIL (Oil India) on 4 February 2003 on an equity split of 80: 20 respectively.

This is the time that TGS NOPEC sold Sri Lankan seismic data and earned US$2 million. It is reliably learnt that a western oil company has now joined this consortium on undisclosed terms. It will be interesting to know what progress has been made on this block that is on the Indian side and whether any exploratory drill holes were done.

I would also like to point out that there are a number of oil producing wells north of the boundary between India and Sri Lanka in the Bay of Bengal. The Block CY-OS- 90/1 (PY3) Field operated by Hindustan Oil Exploration Company (HOEC) produced 6269 BOPD (Barrels of Oil Per Day) in 2004 to 2005 and all the crude oil was sold to Chennai Petroleum Corporation Ltd.

I would now draw the attention of the government of Sri Lanka to the Maritime Boundary Agreements signed with India for the Gulf of Mannar and the Bay of Bengal and the ratifications exchanged on 10 May 1976.

Special attention is drawn to Article VI of the Agreement that states as follows:"If any geological petroleum or natural gas structure or field, or any single geological structure or field of any mineral deposit, including sand or gravel extends across the boundary referred to in Articles I and II and the part of such structure or field which is situated on one side of the boundary is exploited, in whole or in part, from the other side of the boundary, the two countries shall seek to reach agreement as to the manner in which the structure or field shall be most effectively exploited and the manner in which the proceeds deriving there from shall be apportioned."

I wish to draw the attention of the experts on the relevance of the above Article to the Gulf of Mannar and also the Bay of Bengal where India is carrying out a vigorous offshore oil exploration programs. Particularly in the Bay of Bengal, there are already productive oil wells and there is also the likelihood of such oil fields in the deep water of the Gulf of Mannar. These fields will straddle the maritime boundaries. What action will the government take in relation to the treaties already in force with India?
I would also draw the attention of the experts on the Law of the Sea relating to the declaration of the Exclusive Economic Zone (EEZ) by India and Sri Lanka. The declaration of the 200 nautical mile EEZ, especially in the Gulf of Mannar and part of the Mannar Basin by both countries will overlap as the Gulf of Mannar, lying between the southern tip of India and west coast of Sri Lanka is on the average 160 and 200 kms (86 –160 nautical miles) wide. Will the maritime boundary delimitation in these areas supersede the declaration of EEZ's or have the two countries to agree on a median line for the EEZ's in the areas concerned through bilateral consultations? Another alternative is to work on a Joint Development Zone as provided by the Law of the Sea Convention. This arrangement will be advantageous to Sri Lanka.

It is also suggested that the three blocks offered should be clearly demarcated with established coordinates with respect to the turning points of the maritime boundary between India and Sri Lanka in the Gulf of Mannar and the Mannar Basin as to avoid future complications.

(The author is a Retired Economic Affairs who was in charge of the Marine Affairs Programme at United Nations ESCAP from 1990 to 2003. He can be contacted at - fasttrack@eol.lk )