Sri Lankan oil exploration becomes hot political issue

A meeting of all political party leaders is to be called by President Mahinda Rajapaksa to discuss the course of action to be taken with regards to oil exploration in the country in which American, Indian and British companies have expressed interest.

A.H.M. Fowzie, Minister of Petroleum and Petroleum Resources Development told The Sunday Times FT that he formally requested the President to chair a meeting with all political parties. The handling of the much talked about oil resources in the Mannar and Kovari Basins has been heavily debated by many political parties particularly since it’s in some areas where the LTTE is active.

Seismic surveys were however never conducted on the Kovari Basin due to the political instability and security concerns in the area voiced by Norway’s TGS NOPEC, industry sources said.

The Ministry of Petroleum and Petroleum Resources Development came under intense criticism for its handling of the seismic surveys which were conducted by TGS NOPEC.

The 2D seismic data from the Mannar Basin purchased from TGS NOPEC by the Sri Lankan government, paying $10.5 million has been ‘interpreted’ (analysed) by this company and by Dr. Neil De Silva, Director General of the Petroleum Resources Development Secretariat. De Silva told The Sunday Times FT that, “TGS NOPEC interpreted the data. I too interpreted the data. We have seen what we call direct hydrocarbon indicators in the data.” Fowzie also confirmed that the data shows oil deposits in the Mannar Basin. However, this newspaper learnt that no independent analysis or interpretation of the data has been conducted so far.

"We have to now make arrangements to do 3D seismic surveys or to call for bids and allow bidders to do it. It still has to be decided,” said Fowzie. "This is a very sensitive issue because the whole country depends on these resources. If you take the correct decision, something good happens. But if something bad happens, people will criticise me. By now, I would have called for tenders if I was allowed to do what I wanted but all the political parties got involved in this and are making their own observations and recommendations."

The minister expects the President to make a decision sometime the following week.

No offers have been made to buy the data and no arrangements have been made to sell it. Up to date, Indian (Oil and Gas Corporation – ONGC) and British companies are the two sole purchasers of the data. Kishu Gomes, Managing Director of Caltex Lubricants Lanka Ltd, local subsidiary of the US multinational oil firm, said his company is eagerly anticipating the tender process which the ministry has announced will occur in May 2007.

Sri Lanka has acquired the data from TGS NOPEC for $10.5 million with Treasury funds. Fowzie said a building on Flower Road (current Ministry office) is being allocated to house the data which is currently being stored in Australia. "We already have a building. We are converting rooms to accommodate the data. It will be a high security zone," the minister said. He added that even though data pertaining to the Mannar Basin has been studied and not other areas surrounding the island, the general understanding is that Sri Lanka is rich in oil. "Saudi Arabia is above us and Indonesia is below us and we are in the centre," he said, suggesting that the country is in a good position for oil exploration.