Cairn Lanka Launches 3D Seismic Data Collection in Block Two of Mannar Basin. Discovery of Oil or Gas Expected by the end of 2010

11th December 2009,www.dailymirror.lk, By Nizla Naizer

Sri Lanka's quest for oil is one step closer to reality with the launch of 3D seismic data collection yesterday by Cairn Lanka, the fully owned subsidiary of Cairn India.

The vessel Viking II will scour 1450 sq km in the 3000 sq km Block Two of the Mannar basin for the next two months and Cairn Lanka officials were optimistic about the discovery of oil or gas by the end of 2010.

The data collecting vessel was launched ceremoniously by President Mahinda Rajapakse, Petroleum Minister A.H.M. Fowzie, Petroleum Resources Minister D. Dissanayake and Cairn officials yesterday.

At a media briefing held later in the evening, Fowzie said that very soon, there will be oil discovered in Sri Lanka and lauded Cairn Lanka for their efforts.

"When we called for bids in the Mannar basin, the war was still on but Cairn India took up the challenge. We now hope to call for tenders for the remaining seven blocks and we hope there will be a competition to see who discovers oil first."

The 50 crew strong vessel will collect data on the geophysical structure of the block which Cairn India's team of internationally trained scientists will examine for the rest of the year. Cairn Lanka had previously purchased regional 2D data from the government at a cost of US$ 1 million. In the meantime, officials explained that they will call for tenders to drill the oil rigs in the deep sea basin.

"We hope to have the first oil rig in place in the next fair weather window which is from December 2010 to April 2011," Cairn India Strategy Director Elango P explained, "The seismic activity and exploration phase is expected to cost US$ 100 million but it all depends on the cost of services required to drill and explore."

Meanwhile, Petroleum Resourced Development Committee Director General Neil de Silva said that the production sharing agreement between the government of Sri Lanka and Cairn Lanka will include not only a 10% royalty on the oil discovered, but a petroleum profit sharing amount that would increase with the revenue earned by Cairn Lanka. "After the royalty is deducted Cairn Lanka can deduct an amount for their cost recovery," he explained, "but as the years progress, this cost recovery amount will reduce. The portion of petroleum then earned by the Government will increase as the ratio is measured as total revenue by total investment."

Cairn India Corporate Affairs Director Sundeep Bhandari said across the world, the profit petroleum revenue earned by the governments was as much as 80% of the total oil in the long term. He added that in the current contract with the Sri Lankan government, the profit petroleum ratio could range from 15% to 85%. He added that while the agreement was a win-win situation, it was up to God and science to deliver the oil. "The world average denotes a 10% success of hitting oil, but all the data we have so far is encouraging."