Business Times

Oil drilling in Sri Lanka amidst imminent sale of Cairn India

Cairn Sri Lanka (Pvt) Ltd (CSLL), a subsidiary of Cairn India which is owned by UK-based Cairn Energy Plc is going ahead with the drilling of the first test well in Mannar basin next year amidst reports on the sale of a majority stake in Cairn India to Vedanta Resources, a senior official said.

Even if the deal comes through Cairn India will continue to exist as an independent company and operate the oil fields and only its corporate ownership is changing, he said. “Cairn Sri Lanka (Pvt) Ltd’s oil exploration in Sri Lanka will not be affected,” said Neil de Silva, head of Sri Lanka's Petroleum Resources Development Secretariat overseeing exploration efforts.

He revealed that the 3D seismic survey started in December has been completed. The gathering of meteorological data and monitoring ocean currents are now underway ahead of a test drilling programme, he said.

Dulip Jayawardane, a retired UN Economic Affairs Officer who has closely following the oil exploration process, expressed his doubt about the continuation of the oil exploration by CSLL a subsidiary of Cairn India as its parent company Cairn Energy Plc plans to dispose of its shares to a company called Vedanta Resources from Mumbai which has a bad reputation of environmental management and human rights abuses in Orissa. If Vedanta takes control of Cairn India as a majority shareholder then it will leave Cairn Sri Lanka out of the picture.

But Mr de Silva said that the Indian government has not endorsed the deal and therefore the Sri Lankan oil exploration activities will not be affected, adding that even with the changing of the ownership of the parent company, the activities of its subsidiaries will continue without any hindrance. Meanwhile The Economic Times reported this week that state-owned Oil and Natural Gas Corp (ONGC) has over a month to decide if it chooses to exercise its pre-emption or right of first refusal to a block sale of a majority stake in Cairn India to Vedanta Resources. Vedanta is paying $8.48 billion to buy Edinburgh-based Cairn Energy's 40 to 51 % stake in Cairn India, which has 10 oil assets in the country including the giant Rajasthan oilfield.

Cairn Sri Lanka is to drill three test wells before October 1, 2011 according to the schedule. The firm has completed three-dimensional (3D) seismic surveys of its exploration block in the Gulf of Mannar and is now processing the data to identify drilling locations. The company is exploring for oil in a 3,000 sq km block in deep water ranging from 400 metres in the east to about 1,900m towards the west. The total estimated cost of the oil exploration project would be the region of Rs. 18 billion.

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