Sunday Times 2
Time to revive Mannar Basin oil and gas projects
View(s):By Sumith Thennakoon
Sri Lanka’s offshore Mannar oil and gas (MOG) basin is located around 30 kilometres off the Puttalam-Mannar coast. After several decades of ambitious programmes and development activities, Sri Lanka reported its first-ever successful oil and natural gas discovery in the Mannar Basin in 2011. Two exploratory wells—Dorado and Baracuda—drilled in the Mannar basin reported significant oil and gas volumes sufficient for several decades of consumption.
Post-discovery exploration programmes and basin development activities were continued by successive governments with the support of internationally recognised oil and gas exploration companies and agencies. In 2021, the Power and Energy Ministry and the Petroleum Development Authority (PDA) formally published projections regarding the Mannar Basin. These estimations indicate the presence of between 5 to 9 trillion cubic feet (Tcf) of natural gas and 2 billion barrels of crude oil, with a total estimated value of about $267 billion. It is learnt that this valuation could have been based on average Asian market prices, which are assumed to be $10 per million British thermal units (MMBtu) for natural gas and $80 per barrel for crude oil.
Based on the 2021 information, it is evident that the MOG basin prospects hold significant wealth sufficient to meet the country’s needs for decades.
However, this represents only the Upstream Phase, and the other two phases (Mid and Downstream) lack complete value chain studies that represent an end-to-end business model. A complete MOG value chain study will help clearly define a suitable country-specific use case because the country’s economy heavily depends on annual oil and gas imports costing about $4 to $5 billion, representing the largest outflow of foreign currency.
At present, the country’s economy is gradually improving from the past dire economic situations, and the newly elected president has ensured zero tolerance for corruption with the highest transparent and unbiased political leadership for development activities. There is a great opportunity for the government to revisit MOG prospects at a time when an investment-friendly environment is being created.
This article advocates a new approach to developing effective implementation strategies to navigate the existing obstacles and ultimately utilise Mannar oil and gas prospects with a long-term perspective benefiting the nation’s economy. To achieve this, it is necessary to overcome numerous factors and implement a well-designed programme with a detailed value engineering process supported by proper transparency and integrity to develop a domestic business model that can meet the country’s power and energy demand.
(The writer is a Tokyo-based Chartered Mechanical Engineer with B.Sc and M.Sc in Eng. A former CPC refinery engineer, he is now involved in refinery, LNG, and power projects globally.)