Sri Lanka persuades new global companies to tap oil and gas resources
With the withdrawal of Cairn India from oil and gas exploration in Mannar Basin after the discovery of hydrocarbons in two offshore wells, Sri Lanka is persuading new global companies to tap these potential resources under the 3rd phase exploration programme, Petroleum Resources Development Secretariat (PRDS) Director General Saliya Wickramasuriya told the Business Times.
He confirmed that Cairn India has pulled out of its offshore fuel and natural gas explorations within the Mannar Basin terminating its agreement with Sri Lanka.
The Indian company is scaling down its overseas operations due to the continuous fall of fuel prices in the world market and this was the reason for the company’s decision not to re-new the agreement with Sri Lanka for the third phase of the programme, he added.
The government is now compelled to look for new entities to continue drilling these deposits and new bids will be called for this purpose shortly, Mr. Wickramasuriya disclosed.
“We are expecting a positive response from the global oil and gas companies for the new bidding,” he said.
According to the Petroleum Resources Agreement, Cairn India had to bear the cost for the work which they have done in the Mannar basin, he said, adding that it was the risk involved in the oil exploration activities.
Sri Lanka will not have to pay any compensation under the agreement.
According to the company’s financial statement, it has spent around 10 per cent of its total exploratory expenditure of US$214 million during the period 2008-2014.
Minister of Power and Energy Patali Champika Ranawaka said that Sri Lanka’s future economy depends on the success of oil and gas exploration and the government will select a suitable firm to continue the balance work as well as commercial operations in the field of fuel.
A state-owned strategic institution will be established soon to integrate the Ceylon Electricity Board, Petroleum Corporation and other related institutions including the PRDS to meet the future challenges in the power and energy sector, he disclosed. In October 2011, Cairn Lanka announced that they had discovered natural gas deposits in Dorado, an exploratory well in the Mannar basin.
This was followed by another discovery in November 2011 of gas deposits with hydrocarbon potential in the second exploratory well, Barracuda. A third well was also drilled and it has to be abandoned as a dry hole. Cairn India began exploration in Mannar after winning the block in Sri Lanka’s first licensing round, in 2007 competing with OVL and Niko Resources of Canada.