Oil exploration to be extended to South

By L.S. Ananda KANNANGARA

Oil and gas exploration activities in Sri Lanka's offshore belt from Mullaitivu to Galle will be expanded next year.

As its meeting in January 2012 the Petroleum Resources Development Committee chaired by the Secretary to the President took a decision to offer upto 10 offshore blocks in the Cauvery and Manner basins in Sri Lanka's second international licensing by the end of this year, Petroleum Resources Development Secretariat (PRDS) Director General Saliya Wickramasuriya said in an interview with Sunday Observer. Wickramasuriya said that the basis for this decision was the substantial interest generated in the industry following the Cairn discoveries last year and that the results of subsequent analyses of these results augers well for the future.

Excerpts from the interview:

Q: Cairn Lanka which was awarded the oil exploration rights in block SL 2007-01-001 in the Mannar basin in July 2008 found gas and liquid hydrocarbons in two wells out of three drills last year. What progress have they made over the last few months?

A: Cairn is now engaged in the second phase of their exploration, having recently acquired a further 600 square kms of 3D seismic data in their current block. They are currently evaluating the results, which, in combination with the further interpretation of their existing 3D data, will form the basis for their 2013 drilling campaign.

Q: What plans does the PRDS have for the remaining offshore blocks?

A: Over the last few months the PRDS has extensively evaluated the geology of basins, and has re-defined the block boundaries on the basis of sedimentary cover. This has resulted in the Cauvery basin in the North, being divided into five blocks instead of the previous three and the Mannar basin to the West of Sri Lanka being divided into 10 instead of the previous eight. Exploration risk in both basins is now substantially mitigated, with Indian companies producing oil and gas for many years from their part of the Cauvery and Cairn conclusively proving the existence of a working hydrocarbon system in the previously unexplored Mannar basin last year. The size of this basin, its geological history, and depth of sediment have now become an attractive prospect for many companies, and the PRDS has recommended several steps to intensify exploration activities offshore Sri Lanka.

Q: Could you elaborate on these?

A: Our plan is to offer up to 10 offshore blocks for exploration under the upcoming Sri Lanka 2012 bid round. Prior to putting these blocks on the market, we are conducting a review of the prevailing fiscal regime, regulations and operational guidelines with a view of improving them to the benefit of both State and investor. For example, the basin geometry and bathymetry, and therefore the exploration risk, very significantly between the Mannar and Cauvery basins, so it may be unrealistic to apply the same economic model to both areas. Therefore, we are currently selecting an international oil and gas consulting company to study the competitiveness of Sri Lanka's current model in a global context and make recommendations accordingly.

We have also initiated a large-scale environmental baseline study in both basins as a pre-cursor to the Environmental Impact Assessments (BIA) required before exploration operations begin. This study has the collaboration and support of all Government institutions with jurisdiction or interest in the offshore areas and is being coordinated by the PRDS. The idea behind it is to understand and protect sensitive habitats, breeding grounds, migration paths, and populations, and group them into environmentally similar "zones" for the purpose of more efficient and focused EIAs. We hope to have this baseline study done, and possibly the EIAs started, by the time we award licences next year, saving up to a year in time to production.

On the marketing side, we have taken several initiatives designed to increase global awareness of Sri Lanka's opportunities before the formal bid round is launched - this way we do not have to depend entirely on the effectiveness of promotional road shows. We also plan to hold the largest promotional event, a symposium dedicated to our new upstream opportunities, actually here in Sri Lanka, in order to showcase, in addition to the business angle, the country itself.

We plan to highlight the ease of doing business , the relative speed of administration, our tremendous human resource potential, and the quality and diversity of life.

Finally, our members have attended and made presentations at several international industry conferences so far, in India, Europe and Singapore, resulting in more parties visiting our data room.

Q: What else will the international consultant do?

A: Apart from the legal and economic modeling and recommendations, they have been asked to study the integration of Sri Lankan businesses and professionals into the oil industry and make recommendations to accelerate this, as well as offer promotional and marketing services to attract the right kind of investor to Sri Lanka.

Q: What are the PRDS objectives in attracting investment in oil and gas to Sri Lanka and who sets them?

A: Any oil and gas found in Sri Lanka belongs to our citizens. Our mandate, as issued by the Minister in charge of the subject, President Mahinda Rajapaksa is to manage this industry transparently in a manner that a diversity of high quality operators are attracted to Sri Lanka on the basis of their experience, skills and commitment, and encouraged to invest in a sustainable manner such that oil is produced.

Q: Can you tell us what companies have visited the data room thus far?

A: Some of our partners have requested confidentiality and therefore we are unable to share the whole list, but we can say that ONGC, Gazprom, PVEP and Total have been among our visitors.