Financial Times

Energy firms show interest in offshore oil
Companies from India, Britain, Norway and Russia have shown interest in prospecting for oil and gas off Sri Lanka’s western and southern coasts, the economics of which are becoming increasing favourable given the soaring cost of crude on international markets.

Petroleum Resources Development Secretariat officials said the latest surveys had indicated good sub-surface structures capable of holding large quantities of crude or LNG (Liquid Natural Gas).

The findings of the seismic studies will be available for purchase by prospective bidders soon when offshore blocks will be auctioned. Petroleum Resources Development Secretariat officials said offshore drilling for oil and gas is becoming more and more feasible given the rising crude oil prices.

“Our base is $16 a barrel – that is the price at which Mannar Basin oil becomes commercially viable to exploit,” said an official. “High oil prices make it commercially viable. Areas which could not have been commercially viable when international oil prices were below $10 a barrel have become commercially viable today.”

Oil prices have soared mainly because of strong demand from China and refining capacity restrictions. British Gas executives have already met with Energy and Finance Ministry officials giving an indication of the interest from energy multinationals in drilling for oil and gas in the Mannar Basin and off Hambantota.

The Indian state oil giant ONGC (Oil and Natural Gas Corporation) is considered a leading contender in the exploration stakes as they are currently drilling in blocks that are only a hundred miles away on the Indian side of the Mannar Basin, Board of Investment officials said.

This will make it relatively easy for the company to shift its operations to the new blocks on offer in Sri Lankan waters in the Gulf of Mannar.
Open competitive bidding had been expected to be called this month but has been delayed slightly. The offer will be keep open for six months and close around the second quarter of 2006.

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