Cairn to Drill Sri Lanka's 1st Oil Wells in Mannar Basin in January. International Oil Exploration Tenders to be Called on more Blocks

30th July 2010, www.dailymirror.lk, By Sandun A. Jayasekera

Cairn Sri Lanka (Pvt) Ltd a subsidiary of Cairn India (Pvt. Ltd) will begin drilling the first three oil wells in the Mannar Basin in January, the Petroleum Ministry said today.

Petroleum Resources Minister Susil Premajayantha said Cairn Sri Lanka was calling for bidders globally to undertake sub contracts for the eight-year three-stage oil exploration project, which is estimated to cost of US$172 million or Rs.18 billion.

The Minister said Cairn (India) had conducted three-dimensional seismic surveys and based on the results were now able to begin the drilling in the Mannar Basin. Cairn Sri Lanka will use its parent company know how, machinery and manpower for the excavation of test wells off Jaffna.

Minister Premajayantha said the Petroleum Resources Development Committee (PRDC) on behalf of Sri Lanka had signed six contractual agreements with Cairn Sri Lanka. The Indian company had paid a signature bonus of US$ One million for each contract which deals with current movements, seismic survey, data processing and structural evolution.

“The government has been successful in its tender procedure whereas the Indian company has consented to go for oil exploration in block SL 2007-01-001 in the Mannar Basin on very generous terms. Under the tender agreement Cairn Sri Lanka will pay US$50 million when the oil production resumes at the end of successful oil exploration. The royalty payable by the Indian company to Sri Lanka on the total production is 15 per cent in addition to the local taxes on their income. The Indians must also purchase 15 per cent of the shares of the National Oil Company that will be formed after the last phase of the project.

The agreement that runs for eight years has been planned in such a way that Sri Lanka will gradually enhance its royalty until the full ownership of the oil production is reached,” Minister Premajayantha said.

“In the first part of the bidding in 2007, Sri Lanka offered three blocks -- M2, M3 and M4 in the Mannar Basin when it called for international tenders after an international road show. Cairns (India) won a bid as the only Indian company able to meet the conditions of the tender and asked for block M2,” the minister said.

He said five blocks in the Mannar Basin -- M1, M2, M3, M4 and M5 situated off the North West coast have been lined up for this year’s international tenders.

“The decision on conducting an international road show will be taken at the next ‘Petroleum Resources Development Committee’ meeting.

Sri Lanka has identified and demarcated 12 blocks -- three in the Cauvery Basin (off North East coasts of Sri Lanka), eight in the Mannar Basin (off Western and North Western Coasts) and one in the Southern Basin (off Hambanthota) for oil exploration and will call for international tenders for all blocks except M2.

Related Info:
Petroleum Resources Development Secretariat (PRDS) - Sri Lanka

The Current Status of Oil Exploration of Sri Lanka and Future Opportunities (PRDS - July 2008)

Sri Lanka Offers More Blocks for Offshore Oil Exploration in North and South

06th April 2010, www.news.lk

Sri Lanka is to broaden its search for offshore oil and offer more exploration blocks in the Cauvery Basin in the island's north as well as the south, the Central Bank said.

These will be in addition to blocks in the Mannar Basin off the north-west coast where Cairn India is searching for oil. The Ministry of Petroleum and Petroleum Resources Development plans to conduct the second licensing round for oil exploration in the near future, the Central Bank said in its annual report.

"A few blocks from the Mannar Basin as well as some blocks from the more prospective Cauvery Basin and the southern offshore basin, would be available for competitive bidding."

Prospects for finding oil and gas deposits are considered good because India has found oil on her side of the Mannar and Cauvery basins.

Cairn India has completed three dimensional seismic surveys of its block in the Mannar Basin and is interpreting the data to find the best sites for test wells.

Cairn India was awarded the contract for oil exploration in block No.2 of the Mannar Basin and has signed a petroleum resources agreement with the government of Sri Lanka.

The company's Sri Lankan subsidiary Cairn Lanka has also called for bids to hire drilling rigs and logistic services to start exploratory drilling in early 2011.