Discovery of offshore oil and gas augurs well for Sri Lanka - Minister Premajayantha

By L.S. Ananda WEDAARACHCHCI

Signing the Oil and Gas Exploration Agreement with CAIRN India Ltd

The discovery of offshore natural gas deposits in the Mannar basin augurs well for the future of Sri Lanka, said Petroleum Industries Minister Susil Premajayantha.

He said he was confident of the success of gas and oil exploration activities carried out by Cairn Lanka Ltd.

President Mahinda Rajapaksa made a special announcement last Sunday in Kandy that he had been informed by oil and gas explorers that they had discovered a gas deposit in the Mannar basin seabed.

Minister Premajayantha said that Cairn India informed him immediately after the discovery of natural gas in the Mannar seabed in terms of its agreement with the Sri Lanka government.

”It will be a long scientific and technological process to confirm the commercial viability of the natural gas deposits being harnessed.”

”High Calibre bidders could be attracted for the remaining blocks in the Mannar basin. The discovery of gas in the first block drilling is a positive sign for future bidders, he said.

the Minister said that Russian Petroleum and Gas giant GasProm Chairman, came to Sri Lanka recently and held a series of discussions with the Sri Lanka Government on investment opportunities in Sri Lanka. GasProm may participate in oil and gas exploration activities in Sri Lankan seas and negotiations to this effect are being held, the Minister said.

India makes use of natural gas largely for domestic purposes such as vehicle running, generating electricity and fertilizer production, he said.

Cairn Lanka initiated drilling operations last August after a series of seismic studies conducted during the last two years.

Minister Premajayantha said that the Government is optimistic that the project will be commercially successful.

The Minister said that the global energy demand is increasing apace and the discovery of natural gas will position Sri Lanka as an attractive investment destination.

The energy focus is from nuclear energy to natural gas, the Minister said.

He said that there are two more wells for drilling and it will commence in the near future.

Cairn India Ltd. a UK subsidiary listed as Cairn Energy Plc said that the natural gas found last week is Sri Lanka’s first confirmed hydro carbon discovery. Further operation will eventually justify whether it is commercially viable.

Cairn India had been awarded the right to drill three oil wells in Block 2 in the Mannar basin out of eight blocks in June, 2008. Sri Lanka allocated M1 and M8 blocks to the governments of India and China. Cairn India’s subsidiary.

Cairn Lanka had entered into an agreement with the Sri Lanka government in July 2008 to explore oil and gas in the Block No.2 in the Mannar Basin in an investment worth over 110 million dollars.

After the discovery of the gas deposit, Cairn India said.

”It struck a 25 metre hydrocarbon column showing primarily gas with other liquid hydrocarbon potential in the CLPL Dorado – 91H/12 wildcat well drilled at a water depth of 1354 metres” (4442 feet).

Since, Sri Lanka produces no oil it depends on imports which cost 3 billion in 2010 alone. Which was 40 percent more than in 2009, according to Central Bank figures. Since the end of terrorism, the government has launched offshore oil and gas exploration.

Although American and Russian companies explored the Canvery Basin, off the Northern shore for oil in the 1960’s to 1980’s, only traces were found. However, terrorist violence prevented exploration activities.

There are nearly 30 operating wells on the Indian side of the Cauvery Basin in the Northern coast.

The Calgary based Bengal Energy Ltd has exploration rights for 1362 Sq. km there. Sri Lanka is however optimistic about the prospects of her own oil potential.

In 2001, the CPC and TGSNOPEC signed an agreement to collect 1100 km of 2D seismic data in the Mannar Basin.

The data was acquired in June – July 2001 and a detailed interpretation report was produced by New South Global in 2002 under contract to TGSNOPEC. The report highlighted the petroleum potential of the Mannar Basin and encouraged TGSNOPEC to collect additional 4600 km of seismic data in the basin in 2005. These two TGSNOPEC data acquisitions caused exploration companies to show interest in oil exploration here.