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Indian officials here for gas talks
View(s):A team from Cairn India, the company which discovered natural gas in the Mannar basin, will arrive in Sri Lanka this week for discussions on future action, industry sources said. While Cairn India’s quarterly report released in January says it will start “3D seismic reprocessing” to further investigate the potential, the company also admits that finding a market for the gas remains a challenge.
“Commercialisation of the gas discoveries made on the block continues to present challenges,” the report said. Power and Energy Minister Champika Ranawaka said the company had completed two steps in the process, including the seismic survey. Natural gas was found in two out of four wells that the company drilled.
“The next stage is for the company to construct infrastructure and start production,” the minister said. “It is in this phase that the environmental concerns have to be addressed and the impact on the marine environment assessed. Local and foreign organisations with the relevant capacities have to be found.”
The nature of the financial contract would also have to be determined, he said. Under the circumstances, the only market that Cairn could sell gas to is Sri Lanka, industry sources said. However, this will require a shift in local policies so that the country moves towards a gas-driven economy.These issues will have to be taken up once again, following the change in government, an authoritative source said. This week, there were reports that Cairn was selling much of its equipment and exiting Sri Lanka. A senior company official in India, when contacted, said this was not the case.
“We are reducing some of our inventory,” the official said. “But the current position is as the company’s last quarterly report says.”
It states: “The Company is refining the technical evaluation of the remaining exploration prospects on the block that could ultimately add to the discovered resource base.”
Minister Ranawaka said the company had been divesting itself of some equipment that it had stored in the Orugodawatte yard of its subcontractor, a blue chip company.
Cairn has been in Sri Lanka for six-and-a-half years out of its eight-year contract. “When they come to the eighth year, they have to decide whether or not to develop the wells,” said Saliya Wickramasuriya, Director General of the Petroleum Resources Development Secretariat (PRDS). “The challenge is to find a market for this gas, to commercially sell it at a price acceptable to the company.”
He also said that Sri Lanka was Cairn’s only market for the gas. Discussions will take place in future in this regard.