Since my focus on the Cairn factor in Sri Lanka striving to strike oil in the BT on 24 October 2010, some confusing reports appeared in the print media both locally and abroad (not the Business or Sunday Times).
In a memorial lecture delivered by Chas Charles, CEO of Cairn Lanka Pvt Ltd (CLPL) local partner Hayleys Energy Services (Pvt) Ltd (HESPL), titled 'Oil and Gas Exploration in Sri Lanka' it was reported that CLPL will award the global tender to drill off shore in Mannar by next month.
The CEO was a Vice President of Halliburton who was in charge of the South and Far Eastern operations and was based in Singapore. Halliburton is a US drilling firm where Dick Cheney, the Secretary of State to President Bush had a major interest especially in Iraq after the invasion. The CEO of HESPL is promoting Halliburton to get involved in oil drilling here.
When the CEO of HESPL was questioned by the audience over the reasons for the delay in drilling, he responded "the project being the first ever off shore drilling exercise in the country." This statement is incorrect as the Russians and Americans drilled off shore in the Mannar basin in the 1970s and 1980s.
The figures quoted by the CEO HESPL on the expenditure of $25 million to date out of a total of $80 million set apart for "initial work" is erroneous as the signed Petroleum Resources Agreement (PRA) with CLPL gives a figure of $42 million. Further the CEO said that "we will enjoy the first barrel by 2016". However the former Minister of Petroleum Resources has gone on record saying the first barrel of oil will flow in 2010.
The CEO HESPL has also stated that "the whole drilling of one well will cost up to a handsome $400 million." This is in contrast to the PRA which gives the estimated cost of drilling three exploratory wells only as $70.5 million!!!
Adding to the above confusion as reported in the Business Line newspaper of the Hindu Group, Susil Premajayantha, Minister of Petroleum Resources addressed the ministerial session of the Petrotech2010 conference in New Delhi on November 1, 2010 and stated that Cairn India Private Ltd (CIPL) has "promised a $110 million well drilling programme" to commence in May 2011.
In the first instance it must be questioned as to the authority that the CEO HESPL has in making statements on behalf of CLPL and clarification is required whether HESPL has farmed in any equity up to 50 % of CLPL as offered in May 2010.However the CEO HESPL had also stated that "CLPL is a wholly owned subsidiary of CIPL" adding further to this confusion.
In conclusion, it appears that the Cairn factor continues to complicate the oil drilling process and the Government has a responsibility towards the public to issue a statement on the present status of the oil exploration and the relationship of CLPL to CIPL especially in the light of Vedanta's attempt to buy the controlling interest of 60 % in CIPL from Cairn Energy Pvt Ltd (CEPL), the Edinburgh based company.
It is also reported that ONGC will stall the Cairn Vedanta deal as the Government of India (GOI) is unwilling to let go an opportunity to improve ONGCs stock in the producing field at Rajasthan but CEPL is certain to counter ONGC's pre-emption right on the ground that the Vedanta deal is an ownership change of a corporate and not equity sale of an individual asset. It is also reported that in 2004, CEPL and ONGC which is a 30 % partner and licence in Barmer oil field in Rajasthan almost finalized a final sale for $2.4 billion and the GOI thought that the price was too high. However now Vedanta is offering nearly $10 billion and this shows the volatility of the Oil Exploration and Production (E&P) industry.
The Government of Sri Lanka should now intervene and see that the oil drilling in Mannar basin is nor kept in limbo in the light of uncertainty of Vedanta's deal to buy the controlling interest of CIPL. It must also be queried again where CLPL stands now.
(The author is a retired Economic Affairs Officer, United Nations ESCAP and can be contacted on fasttrack@eol.lk ) |
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