Sri Lanka to Make $2.25bn from Investments on Oil Blocks in Mannar Basin

16th March 2012, www.dailynews.lk, By Ramani Kangaraarachchi

Sri Lanka is expected to generate over US$ 2.25 billion through investments from shallow water oil blocks in the Mannar basin shortly. The investment will be towards off shore oil exploration,drilling and production and infrastructure in the next five years.

Speaking at a forum organized by the National Chamber of Commerce on 'new business opportunities arising out of oil exploration in Sri Lanka,' Wednesday, Director General, Petroleum Resources Development Saliya Wickramasuriya said an international licensing round for some of the remaining blocks, will be launched during the next three months. Only the shallow water blocks in the Mannar Basin, closest to the coast, will be auctioned initially and he hoped that there will be many companies coming forward to invest in Sri Lanka.

Wickramasuriya said there will be a large number of upcoming business opportunities in the areas such as aviation, environment, catering and transportation within Sri Lanka to the right partners. He said that a considerable amount has to be invested on market research and risk management is also a huge area that has to be carefully handled.

Cairn is in the process of conducting more seismic surveys in preparation to drill a few more wells to properly define the reservoir potential ahead of commercial production. Last year Cairn India, was awarded one block in the first licensing round and , found gas and condensate in the first two test wells.

Related Info :

• Cairn Lanka to Start 2nd Phase of Oil Exploration in Sri Lanka's Mannar Basin. Oil Wells to be Drilled in 2013

• One Billion Barrels of Oil in Sri Lanka Mannar Basin - Director General of Sri Lanka's Petroleum Resources

Cairn Lanka to Start 2nd Phase of Oil Exploration in Sri Lanka's Mannar Basin. Oil Wells to be Drilled in 2013

08th March 2012, www.island.lk

Cairn Lanka has commenced the second phase of oil exploration in the Mannar Basin and oil wells are likely to be drilled in 2013 after another round of seismic studies.

Cairn Lanka, the wholly owned subsidiary of Cairn India Limited successfully completed the first phase of the exploration campaign on Sri Lanka’s side of the Mannar Basin on Block SL-2007-01-001 and has delivered two back to back discoveries.

According to our sources here, the seismic study has already commenced in the Mannar block, and the seismic vessel Pacific Explorer has begun its seismic activity. The 3D seismic contract has been awarded to Petroleum Geo-Services (PGS). The seismic survey will be followed by a technical evaluation of the data, data interpretation and then with another drilling campaign. An international tender for this seismic programme was floated by the company last year during the first phase of drilling campaign.

Cairn Lanka had spent over US$ 150 million in the first phase of the drilling campaign that resulted in two gas discoveries. The initial estimate for the programme was around US$ 110 million.

The drilling campaign in the second phase will be undertaken during the fair weather window and it is learnt that Cairn Lanka has already initiated its legwork for this second phase with a plan for a deepwater drilling campaign. According to the scope of the international tender, the work programme will involve one firm well and have provisions for three optional wells too, in the Gulf of Mannar. It is likely to commence in 2013, post completion of data interpretation and other pre-drilling tests and studies.

Cairn Lanka has also floated an international tender inviting experienced services contractors to provide services for this deepwater drilling campaign.

The company has invited an international tender bid for the drilling operation. A series of stringent guidelines have been laid out for the contractors who need to comply with, and should have a successful track record to be considered. Special emphasis is also being laid on the contractor’s ability to adhere to the "stringent" health, safety and environmental management requirements.

According to industry sources, the company is looking for a Drillship or Semisubmersible Rig – that is capable of operating in water depths between 800 to 1700 metres. The rig should have a capability to drill a maximum depth of 5500 m.

The first phase of the exploration programme involved the acquisition, processing and interpretation of 1,753 sq km of 3D seismic data and a three well deep water drilling programme. The seismic programme exceeded the phase I commitment by 20% and the drilling programme exceeded the drilling depth commitment by 50%. The first phase of the programme resulted in two successive gas and condensate discoveries: the CLPL-Dorado-91H/1z well and, the CLPL-Barracuda-1G/1 well.

Related Info :
• One Billion Barrels of Oil in Sri Lanka Mannar Basin - Director General of Sri Lanka's Petroleum Resources

• Cairn India Calls for Oil Spill Response Proposals as It Drills First Well off Sri Lanka in August
 
• Sri Lanka's Commercial Production of Oil Could Start by 2017 - Professor Stuart Burley of Cairn India

Cairn India Calls for Oil Spill Response Proposals as It Drills First Well off Sri Lanka in August

11th July 2011, www.lankabusinessonline.com

Cairn India which is exploring for petroleum resources off Sri Lanka has called for proposals for oil spill response equipment and services as it prepares to drill its first well in August this year.

The company announcement said delivery of equipment could be either at Colombo or Chennai in south India indicating its support operation for offshore wells in the Gulf of Mannar might be based in India.

Sri Lankan companies interested in the oil industry business had been hoping to win support contracts for the exploration and subsequent production phase.

Cairn India (CIL) and its subsidiary Cairn Lanka (CLPL) are seeking Expressions of Interest from experienced offshore oil spill response equipment manufacturers and service providers to sell offshore oil spill response equipment to support exploratory offshore drilling.

"CIL and CLPL are exploring an option to buy offshore oil spill equipment which includes protective booms, containment booms, skimmers along with power packs, inflatable storage tanks and beach cleaning kits.

"CIL is looking for delivery of the equipment either at Colombo, Sri Lanka or Chennai, India and storing it in the company warehouse," the announcement said.

"However, CIL/CLPL reserves the right to decide the location of delivery."

The contractor would be required to provide support services to include maintenance and training on use of the equipment for Cairn's oil spill response crew.

Cairn is set to starting drilling three test wells off the island's north-west coast in August.

Related Info :

• Sri Lanka's Commercial Production of Oil Could Start by 2017 - Professor Stuart Burley of Cairn India

• Cairn to Start Drilling for Oil & Gas off Sri Lanka’s Northwestern Coast in July

• One Billion Barrels of Oil in Sri Lanka Mannar Basin - Director General of Sri Lanka's Petroleum Resources

Sri Lanka's Commercial Production of Oil Could Start by 2017 - Professor Stuart Burley of Cairn India

28th June 2011, www.news360.lk

Professor Stuart Burley, Head of Geo sciences of Cairn India says commercial production of oil in Sri Lanka will start by the year 2017.

He said this is taking into consideration that the country succeeds in finding oil in the Gulf of Mannar basin.

Burley who was speaking at a workshop held in Colombo this morning reiterated Cairn’s plans to start oil drilling work in the Gulf of Mannar during this August.

He said, 3 wells have been identified in the Mannar basin to start drilling activities and added that the explorers will drill one well at a time,

Burley says, drilling a well takes over 01 year while the Appraisal and the Development part will take another 4 years, leading up to starting of commercial production.

Cairn is planning to drill a well up to a depth of 3.5 kilometers.

“We believe there is oil and gas at that level” added Burley.

Already Cairn has hired “Chikyu deep-water drill-ship” from Japan to start drilling activities, which Burley says is a world class facility.

He says the cost for hiring a drill-ship per day runs up to US$ 500,000.

According to Burley finding of a “source rock” in Pesale, an area which was tested for possible existence of oil in the seventies is an indication of having oil and gas in the area.

Gulf of Mannar basin and Pesale is located in the same area.

Related Info :

• Cairn to Start Drilling for Oil & Gas off Sri Lanka’s Northwestern Coast in July

• Sri Lanka Oil Exploration in Mannar Basin on Schedule. Tenders for more Blocks by End January

• One Billion Barrels of Oil in Sri Lanka Mannar Basin - Director General of Sri Lanka's Petroleum Resources

Global Energy Secures First Private Refinery Deal in Sri Lanka. A Plant Twice the Size of State Run Sapugaskanda Refinery to be Built in Trincomalee

15th march 2011, www.thebottomline.lk, By Santhush Fernando

US-based Global Energy & Industrial Operations, Inc. has secured the first private oil refinery deal in Sri Lanka, under which a plant twice the size of the current state-run Sapugaskanda Refinery will be built in Trincomalee.

Although the project was earlier earmarked for Hambanthota and anticipated to process 150,000 bpd (barrels per day), it had been shifted to Trincomalee due to environmental concerns while production capacity had been brought down to 100,000 bpd.

The Bottom Line on March 13, 2011, exclusively reported that Global Energy & Industrial Operations, Inc. has signed a Memorandum of Understanding (MoU) to set up a 150,000 BPD (Barrels Per Day) refinery in the emerging port city of Hambantota.

The Bottom Line learns that the Company had requested a guarantee from the government that it (CPC) will purchase 50 percent of the output (which is the gap between Sri Lanka’s requirement and the production capacity of the out-dated Sapugaskanda plant run by Ceylon Petroleum Corporation) while the remaining half would be intended for export.

The project is to kick start end 2011, with the financial closure expected by December. Although the project developers were negotiating with the banks it is learnt that, the venture faces several financial constraints.

However it is learnt that the Petroleum Industries Ministry would request modifications to GE&IO’s original proposal that the government purchases refined products at Singapore plats plus a premium of US $ 2.1 per barrel.

Earlier the refinery estimated to cost between US $ 1.5 to 2bn (Rs. 166.5 to 222bn), was projected to be thrice the size of the CPC Refinery and was mainly intended to refine crude oil for the export market, with Hambantota being poised to become a mega global hub in energy, shipping and aviation.

“It is highly commendable that this project was finally given the green light by authorities, as Sri Lanka’s energy security was facing a grave threat with authorities turning a blind eye to modifying the outdated Sapugaskanda refinery,” an energy expert told The Bottom Line on grounds of anonymity.

However, he lamented that it was unfortunate that the line ministry was not kept informed that when GE&IO singed an MoU on a petroleum industry-related project.

“Even the Ministry Secretary Titus Jayawardene was not aware of these developments.
How can the ministry take a proper decision on whether to go ahead with the US $ 2.2bn Sapugaskanda Project if it is not aware that an MoU was signed with a private party? The Ministry or the CPC cannot gamble with funds because these are public moneys which the country must repay later on. If the private refinery is coming up, it is good because we may not have to find a staggering amount such as Rs. 244.2bn (US$ 2.2bn),” he added.

Numerous energy experts and think tanks have time and again emphasised that Sri Lanka needs to properly implement its energy policy in transparent and investor-friendly manner, if the country was to emerge as a global player in the energy industry.

Meanwhile, the Rs. 244bn Sapugaskanda Oil Refinery Expansion and Modernisation (SOREM) project has been in the limbo since 2007 as Iranian and Sri Lankan authorities failed to agree on an exact modus operandi to implement the project. “Rather than the CPC, already embroiled in a major financial crisis, bearing a staggering cost of US$ 2.2 to upgrade Sapugaskanda, it is more prudent and commendable that a private party was allowed to proceed with an alternative, at an estimated cost of nearly half of the former,” he added.

Related Info :

• Global Energy to Set up a 150,000 bpd Refinery in Hambantota Magampura Port City

• Sri Lanka May Get $1.5bn from Iran to Expand Refinery

One Billion Barrels of Oil in Sri Lanka Mannar Basin - Director General of Sri Lanka's Petroleum Resources

14th March 2011, www.dailymirror.lk

The Director General of Petroleum Resources, Dr. Neil De Silva has said that the Mannar Basin could hold over 1 billion barrels of oil equivalent (boe).

Cairn Lanka which is expected to commence oil drilling in the Mannar Basin by July this year, believes there is more work to be done in the frontier basin to assess the magnitude of resources.

“If Sri Lanka’s drilling program is successful, commercial oil production can be expected by 2014 with a billion barrels,” a recent report on Cairn India’s Oil drilling future quoted Dr. Neil De Silva as saying.

The report said that Cairn India has contracted a deepwater rig from Japan Drilling to embark on a three-well exploration drilling campaign in its frontier deepwater block in Sri Lanka’s Mannar basin (SL-2007-01-001) in June 2011. The exploration area is 3000 sq km with water depths ranging from 400 metres to 1900 metres.

Cairn Lanka, a subsidiary of Cairn India had signed the Petroleum Resource Agreement (PRA) with the Sri Lankan government in July 2008 to explore oil and natural gas in the Mannar Basin with an investment of US $110 million, spread over three years.

According to the Agreement, Cairn will start exploration activities in one of the 8 blocks in the Mannar Basin and the company will conducted a full Environmental Impact Assessment (EIA) as required by the Sri Lanka Central Environmental Authority and Marine Pollution Prevention Authority. Earlier in 2010, the company had also acquired 3D seismic data on 1,750 km2 area of the Mannar basin.

Mannar basin’s two oil blocks have been granted to China and India. Russia’s largest oil company, Gazprom also has indicated plans to join the exploration of offshore oil in Sri Lanka’s Mannar basin.

Related Info :

• Petroleum Resources Development Secretariat (PRDS) - Petroleum Potential Offshore Sri Lanka

• Petroleum Resources Development Secretariat (PRDS) - Exploration History

• Cairn to Start Drilling for Oil & Gas off Sri Lanka’s Northwestern Coast in July

• Sri Lanka Oil Exploration in Mannar Basin on Schedule. Tenders for more Blocks by End January

Cairn to Start Drilling for Oil & Gas off Sri Lanka’s Northwestern Coast in July

13th March 2011, www.island.lk

Cairn India, a unit of British exploration firm Cairn Energy plc, said Friday it plans to drill for oil and natural gas deposits off Sri Lanka’s northwestern coast in July.

In 2008, Cain invested $100 million, spread over three years, to conduct detailed seismic studies and drilling three wells off the coast of Mannar. "Frontier exploration drilling in Sri Lanka is planned to commence in July," a company statement said.

"Logistical preparations and detailed studies are ongoing ahead of drilling later this year." Sri Lanka, which imports all of its oil needs, offered three blocks to investors after surveys showed deposits along the Gulf of Mannar, close to neighbouring India.

Block two, an area that covers around 3,400 square kilometres (1,300 square miles) off Mannar, was offered to Cairn in June 2008.

Sri Lanka allocated the two other blocks to the governments of India and China.

The island spent $3.0 billion in 2010 importing oil, which was 40 percent more than 2009, according to central bank figures.

Decades ago, overseas companies explored areas off Sri Lanka’s northwest coast, but failed to find any oil and gas reserves worth exploiting commercially.

Related Info :

• Sri Lanka Oil Exploration in Mannar Basin on Schedule. Tenders for more Blocks by End January

• Sri Lanka's Mannar Basin Oil Drilling to Continue as Planned by Cairn

• Cairn India Drills 3 Oil Wells in Mannar Basin, Sri Lanka

Sri Lanka's Nawaloka Enters Lubricant Market with Total Oil, the French Multinational Oil Company Operating in over 130 Countries

10th March 2011,, www.dailynews.lk

Nawaloka ABC Petroleum, a member of Nawaloka Holdings, has entered the lubricant market with ‘Total’ Oil, the French multinational oil company presently operating in over 130 countries. ‘Total’, a Fortune 500 company with an annual revenue exceeding 150 billion Euros, engages in all aspects of the Petroleum Industry, such as oil and gas exploration, development and production, *LNG, refining, trading, as well as the shipping and transport of crude oil and petroleum products.

Nawaloka ABC Petroleum Chairman Jayantha Dharmadasa said as part of its diversification strategy, the Nawaloka Group had identified an opportunity in the local lubricant market for a superior range of lubricants, offering the consumer value for money; hence the partnership with ‘Total’.

“The total value of the local lubricant market is approximately Rs 11 billion and it is now a growing market though it was stagnant for a while”, Dharmadasa said.

‘Total’ is ranked as the fourth largest oil and gas company in the world with an oil and gas production capacity of 2.6 million.

‘Total’ is the No.1 refiner in Europe with a capacity of 2.7 million barrels per day, while the volume of refined products sold is 3.8 million barrels per day.

‘Total’ has a complete range of lubricants covering all segments of Automotive and Industrial applications and Nawaloka ABC Petroleum is confident that the local consumer will appreciate the benefits of a world class lubricant.

“‘Total’ products are manufactured to exceed the most stringent quality and environmental standards presently demanded by law in most western countries, as well as the environment conscious motorist”, Nawaloka ABC Petroleum General Manager Sanjay Benjamin said.

“Our target market is the quality conscious motorist with a sense of social responsibility who wishes to contribute towards protecting the environment” he said.

Nawaloka ABC Petroleum commenced operations in the local market in the Western Province and have now spread to the Central and Eastern provinces, as well as parts of the Sabaragamuwa province.

“It is our intention to cover the rest of the island shortly, providing the local consumer with the ‘right choice in lubricants’ that are both high performance and cost effective” Benjamin said.

Sri Lanka Oil Exploration in Mannar Basin on Schedule. Tenders for more Blocks by End January

24th January 2011, www.dailynews.lk, By Sanjeevi Jayasuriya

Oil exploration in the Mannar basin continues as per the work schedule. The tenders for more blocks in the Mannar basin will be finalized by January end.

“We are heading for the drilling process. The work will commence on July 1 after the completion of the ground work. We are in the process of carrying out the necessary studies,” Petroleum Resources Development Secretariat Director-General Dr Neil de Silva told Daily News Business.

The selection of a marketing consultant will be done once the bidding process is finalized where the marketing of more exploration blocks at the Mannar basin will be carried out.

“We are in search of a suitable candidate and the bids will be evaluated after the deadline which is also in end of January,” he said.

Cairns Lanka is securing necessary goods and services for drilling purposes. The work is progressing well.

The company which undertook drilling of three wells in the Mannar basin is finalizing the contracts for supply services to commence drilling.

Cairns Lanka called for sub contractors for services such as off-shore supply vessels, services related to drilling tools, well testing services, weather forecasting services, supply of fuel and water and ambulance service. There are 37 items listed for service contacts.

Related Info :
• Sri Lanka's Mannar Basin Oil Drilling to Continue as Planned by Cairn

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

• Petroleum Resources Development Secretariat (PRDS) - Sri Lanka

Sri Lanka's Mannar Basin Oil Drilling to Continue as Planned by Cairn

15th November 2010, www.dailynews.lk, By Sanjeevi Jayasuriya

The work related to oil exploration in the Mannar basin is progressing as per the terms of the agreement entered between Cairns Lanka Limited and the Government, Petroleum Resources Development Secretariat Director General Dr Neil de Silva told Daily News Business.

Cairns Lanka Limited is in the process of finding sub contractors to continue the necessary drillings. The Government called for tenders to offer more blocks and is in the process of searching for a consultant to market these exploration blocks with the Petroleum Resources Development Secretariat, he said.

Cairns Lanka undertook to drill three wells. The drilling process is scheduled to be completed before October 15, 2011. The company is at present looking for contractors to supply goods and services for drilling purposes.

The drilling process to explore oil in the Mannar basin commenced after the detailed study conducted by Cairns. The oil exploration is based on past studies and also fresh studies conducted by Cairns.

Cairns Lanka (Pvt) Limited entered into an agreement in September 2008 committing an initial investment of more than US $ 110 million towards the exploration of hydrocarbons.

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

Cairn India Drills 3 Oil Wells in Mannar Basin, Sri Lanka

Britain to Invest in Sri Lanka Oil Exploration and Infrastructure

15th October 2010, www.news360.lk, By Prasanna C Rodrigo

The United Kingdom says, Businesses in Britain is showing a great interest to invest here in Sri Lanka and is already bidding to obtain some of the big infrastructure development contracts.

The Deputy Head of UK Trade and Investment at the British High Commission in Colombo Nadeesha Epasinghe said apart from it, few UK companies are also looking at the possibility of engaging in oil exploration activities here in the country.

Speaking to www.news60.lk she said, UK Trade and Investment is following up with those companies to activate those plans.

Touching further Epasinghe also noted Britain which brought in the 2nd largest share of FDI’s to Sri Lanka in 2009 counting for a sum of US$ 300 million wants Sri Lanka and UK to be “Partners in Prosperity”.

Following is the full interview Nadeesha Epasinghe, who is the Deputy Head of UK Trade and Investment at the British High Commission in Colombo had with us.

Q1. How does UK see the trade and investment climate here in the country?

The UK has close and long-standing bilateral ties with Sri Lanka. The two countries have built on their historical links to develop a close partnership across a wide range of spheres, especially in trade, culture and education. In addition to these ties, the bilateral people-to-people links are also very strong. Many Sri Lankans have studied or worked in the UK and regard it as their second home and Sri Lanka is a top tourist destination for Britons. Statistics released by the Board of Investment (BOI) also support these links. In 2009, Foreign Direct Investment (FDI) by the UK totalled nearly US$300 million – the second largest share of FDI from a single country for 2009. Meanwhile, UK exports to Sri Lanka totalled US$186 million while imports from Sri Lanka to the UK totalled US $1 billion in 2009.

There are over 100 companies in Sri Lanka with a UK affiliation and some of these British investments are expanding their operations. I recently visited AB Mauri (a company owned by the Association of British Foods) which has a substantial investment in Sri Lanka and has recently expanded their operations with an Rs.50 million investment into a bakery school. In addition, some of the biggest British businesses operate in Sri Lanka, such as Marks and Spencer, Tesco, Triumph, GlaxoSmithKlein, Aviva, HSBC and Scott Wilson. Clearly, the UK and Sri Lanka already enjoy an extensive business partnership across many sectors. We at the British High Commission believe this partnership can be further strengthened and that the UK and Sri Lanka can be “Partners in Prosperity”. This is why we continue to engage with government officials, businesses, chambers of commerce and other key decision makers in Sri Lanka to further strengthen the bilateral trade relationship.

Q2. There have been many stories about UK investors showing an interest to invest in Sri Lanka after the end of the conflict. What is the level of progress in this regard?

We are receiving a lot of business interest from companies across different sectors in the UK in doing business with Sri Lanka. We are working with these potential investors, introducing them to the key players in the market and helping them assess the opportunities available.

Q3. What areas are they focusing on to invest in Sri Lanka?

The sectors that we see as having the greatest potential for UK companies in Sri Lanka are infrastructure, tourism, power, education and training and ICT. In addition, we feel that there are opportunities in the areas of agriculture, fisheries and garments (in which UK companies can build on the already existing links).

Q4. During an investor forum in Malaysia recently, you made a presentation about the opportunities Sri Lanka presents in regard with oil exploration. Are any of the British firms eyeing to bid for oil exploration activities in the country?

I attended the SubSea Asia Conference in Kula Lumpur in June and presented some of the opportunities available for oil exploration. There was some interest and we are following up with the relevant companies to take this forward. In addition we are supporting the British Company Cairn Energy who are about to embark on off-shore drilling off the coast of Mannar early next year; this is an investment of US$100 million.

Q5. Do you see any key players already in the pipeline, planning to enter Sri Lanka, maybe for projects like ports, airports, roads etc.?

There are already a number of UK companies involved in infrastructure development projects. The British company, Scott Wilson, is developing the Colombo Port and is also involved in the South Harbour Development to provide a robust and bankable business plan for the phased development.

We also have Mabey Bridge who constructed the flyovers and are engaged in a regional rural bridge development project. They have so far constructed 76 bridges and have another 60 to complete.

Moreover, there are other companies that are bidding for some big contracts in infrastructure developments. We will have to wait and see if they are successful!

Q6. Overall, how does the UK see Sri Lanka which is now a peaceful country?

The UK will continue to have strong friendly ties with Sri Lanka. We are at a historic point where our two countries can

build new partnerships and strengthen our commercial ties. The dawn of peace has created a unique opportunity for prosperity.

The UK welcomes this opportunity and wants to support Sri Lanka to capitalise on it. We believe that Sri Lanka is on the cusp

of achieving sustainable economic growth and investment. My team will support Sri Lanka’s economic development; both by

helping UK companies seeking to do business in Sri Lanka as well as helping Sri Lankan companies invest in the UK. We will

work towards Sri Lanka and the UK being partners in prosperity.

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)

Cairn India Drills 3 Oil Wells in Mannar Basin, Sri Lanka

26th May 2010, www.dailymirror.lk, By Sandun A. Jayasekera

Cairn (India) will drill three wells in block M2 in the Mannar Basin between January – March next year, while Sri Lanka will call international tenders for the rest five blocks within this year, Petroleum Minister Susil Premjayantha said.

“In the first bidding in the first part of 2007, Sri Lanka offered three blocks, C1, C2 and C3 in the Cauvery Basin and five M1,M2,M3,M4 and M5 in the Mannar Basin when it called international tenders after an international road show and Cairn (India) won a bid as only the Indian company was able to meet the conditions of the tender and was offered block M2 for oil exploration,” Minister Premjayantha said.

Cairn (India), the Indian arm of the British energy company, has already conducted Three Dimensional Seismic Tests in the last couple of years and on the results of data collected from these tests, is now in a position to drill oil wells in M2 block, he added.

Cairns (India) will use its know-how and machinery and manpower to drill test wells off Jaffna, he said.

Five blocks in the Mannar Basin, M1, M2, M3, M4 and M5 situated off North West coast have been lined up for this year’s international tenders, Minister Premjayantha added.

“The decision on conducting an international road show for these blocks will be taken at the next ‘Petroleum Resources Development Committee’ meeting scheduled to be held on June 3rd, he said.

Those who are bidding, would have to collaborate a minimum 10% of oil exploration with Sri Lanka National Oil Company, s fully government owned venture. In addition, all contractors are required to pay 35% income tax on petroleum profits and another 10% in divided remittance tax according to the provisions of the Inland Revenue Act.

Sri Lanka has identified and demarcated 12 blocks vis-à-vis 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 Hambantota) for oil exploration and will call international tenders for all blocks except M2.

Sri Lanka May Get $1.5bn from Iran to Expand Refinery

25th May 2010, www.bloomberg.com, By Anusha Ondaatjie

Sri Lanka, which imports all its oil, may get a $1.5 billion loan from Iran to fully fund a project to double capacity at the South Asian island’s only refinery, the petroleum minister said.

“The earlier understanding was for us to come up with 30 percent, but Iran may come in to completely finance the expansion,” Susil Premajayantha said in an interview in the capital Colombo.

Sri Lanka plans to start the two-year construction to increase state-run Ceylon Petroleum Corp. refinery’s processing capacity to 100,000 barrels a day by early 2011, Premajayantha said May 21. China Huanqiu Contracting and Engineering Corp. has submitted a proposal to set up a refinery in Sri Lanka’s southern Hambantota district that would export products, he said.

The end of Sri Lanka’s three-decade civil war last year is attracting overseas aid and investment, stoking an economic recovery. Cairn India Ltd., a unit of U.K. explorer Cairn Energy Plc, is investing $100 million to look for oil in a field off Sri Lanka’s northwestern coast that may hold 1 billion barrels of oil.

Preliminary seismic tests indicated “possible deposits of oil or gas” in Sri Lanka’s territorial waters within the Cauvery Basin in the Palk Straits and in the island’s southeastern waters, Premajayantha said.

Sri Lanka will offer four blocks in those areas after calling for tenders from overseas companies to explore six more blocks in the offshore Mannar basin, the minister said.

“If we strike oil, we could have the refineries already here,” Premajayantha said.

Sri Lanka currently imports as much as 60 percent of the island’s crude oil requirements from Iran and is holding discussions on purchases from Russian companies, Premajayantha said.

Local petroleum prices are likely to be “stable” in the coming weeks while following global market rates, he said.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net.

Sri Lanka Hemas and Dockyard with Singapore's Toll Bid for Oilfield Services of Cairn India

14th May 2010, www.lankabusinessonline.com

Sri Lanka's Hemas group and Colombo Dockyard have teamed up with Singapore's Toll Offshore Petroleum Services to bid for Cairn India's contract for offshore oil field support services, officials said.

"Hemas Holdings, Colombo Dockyard and Toll Offshore Petroleum Services have jointly placed a bid for the offshore supply base for Cairn," Irshad Mushin, director - maritime transportation of Hemas group told LBO.

"We have proposed viable sites in Sri Lanka."

Cairn Lanka, a unit of Cairn India, which is part of Britain's Cairn Energy, has called for expressions of interest and pre-qualification for provision of services to support its exploration effort.

Cairn has called for support for drilling, testing and completion of exploratory wells in a deep-water block in the Mannar Basin off north-west Sri Lanka.

Cairn plans to start drilling test wells by January 2011 to May 2011.

Colombo Dockyard managing director Mangala Yapa said offshore oil explorations in Sri Lankan waters gives good opportunities for both engineering and shipping companies.

"Colombo Dockyard is confident we can be involved in some of the engineering and other logistics requirements, especially because we have a fully-fledged engineering facility within Colombo port," he told LBO.

"Even at present we are repairing many offshore vessels from India's offshore industry."

The yard also builds offshore support vessels and is therefore aware of the requirements, Yapa said.

"Our role would be to provide all possible engineering and other logistical assistance for Cairn along with other partners."

Toll Offshore Petroleum Services is a subsidiary of Toll Asia, which is part of Toll Holdings, a big transport and logistics group headquartered in Australia.

It owns and operates offshore supply bases in Azerbaijan, Cambodia, China and Thailand.

Sri Lankan companies are keen to get Cairn's offshore support contract as it means new business in the new field of oil exploration.

It will also position them to offer similar services when exploration and drilling gets under way in other blocks in the Gulf of Mannar as well as in waters off the northern and southern coasts.

Sri Lankan firms would have to compete with firms in India which has an established offshore oil industry.

Oil explorations firms are expected to source some of their requirements from local industry in order to ensure the benefits of oil are shared in the domestic economy and also provide employment for locals.

Among the services requested by Cairn are anchor handling tugs, supply vessels and offshore supply barges.

Cairn Lanka has also called for rig positioning and site survey services, supply of fuel and water, provision of local logistic support such as cranes, port clearances, boat calls, and offshore supply base services.

Another service requested is air logistics which will provide opportunities for helicopter services offered by local aviation firms, officials said.

Cairn's exploration licence to explore for oil and natural gas in the Mannar Basin covers about 3,000 square kilometres in water depths of 200-1,800 metres.

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.

Russia’s Gas Giant Gazprom Plans Oil Exploration in Sri Lanka

08th February 2010, www.dailymirror.lk

Russia’s gas giant Gazprom plans to take part in exploration of offshore hydrocarbon fields in Sri Lanka. Gazprom CEO Alexei Miller and Sri Lankan President Mahinda Rajapaksa, who is visiting Moscow, discussed this issue at the talks on Monday.

“The parties discussed prospects for Russian-Sri Lankan cooperation in the oil and gas sector,” the gas giant’s information department said. “In particular, they focused on Gazprom’s possible participation in the development of offshore hydrocarbon deposits in Sri Lanka.”

According to the Sri Lankan government, the republic has eight oil and gas blocs in the Mannar basin, northwestern coast.

Sri Lanka Could Have Hydrocarbon Deposits off the Northern and Southern Coasts. Oil Exploration Activities Bring New Business to Colombo Dockyard

14th December 2009, www.island.lk, By Devan Daniel

Petroleum Minister A H M Fouzie said Sri Lanka could have hydrocarbon deposits off the Northern and Southern coasts. The Cabinet is yet to approve a paper allowing the Ministry of Petroleum and Petroleum Resources to call for bids from oil exploration companies, he said.

If all goes well, Sri Lanka’s waters could be teaming with oil exploration vessels.

The Island Financial Review spoke to Mangala P B Yapa, managing director and CEO of blue-chip ship repair and heavy engineering company, Colombo Dockyard PLC, about the potential of new business the oil exploration activities and possible off-shore oil excavations could bring the company.

"Colombo Dock Yard specialises in dry dock and offshore ship repairs and maintenance. We have also carried out repairs and maintenance to oil rigs and dredging vessels. We are focusing a lot on Dockyard General Engineering Services, which specialises in engineering, construction, maintenance and auxiliary services," Yapa said.

Yapa said oil exploration activities bring new business to other sectors as well.

"Logistics and crew transport is something we do not provide, but yes other companies in Sri Lanka could provide this service," he said.

Yapa, however, said the limiting factor would be space constraints in Colombo.

"We do not have the space in Colombo required to carry out repairs on rigs and dredging vessels. Because of the monsoons, these repairs must be carried out in calm waters. Rigs would have to be completely towed to calmer waters.

"Rigs on the Mannar Basin that need repairs cannot be towed to Trincomalee — a natural harbour — from the North so Colombo is the closest destination. Hambantota — when it is ready —would be too far as well," Yapa said.

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."

Sri Lanka to Offer More Blocks for Oil Exploration in the Island's North-East and South

11th December 2009, www.lankabusinessonline.com

Sri Lanka is ready to calls for bids for oil exploration in more blocks in the island's north-west as well as the south, Petroleum Resources Minister A H M Fowzie said.

He said he expects more interest this time now that the ethnic war is over and Cairn India has begun seismic surveys in preparation for drilling test wells in the Gulf of Mannar off the island's north-west.

The petroleum ministry has submitted a proposal to the Cabinet of ministers seeking approval to call for oil exploration bids in three more blocks, he told a news conference held to announce Cairn's launch of seismic surveys.

"Very soon we'll call for tenders for more blocks in the Mannar Basin," he said.

"The last time the war was on and the LTTE (Liberation Tigers of Tamil Eelam separatists) were operating in the area. So it was very risky. But now we expect more interest."

Sri Lanka's invitation for bids to explore for oil in the Mannar Basin last year drew only a limited response.

But government forces defeated the Tamil Tigers in May this year, ending a 30-year ethnic war, and raising expectations of a revival in foreign investment.

Cairn India which won exploration rights to one block in the Mannar Basin in the first bid round has said it plans to invest 100 million dollars in the effort.

Fowzie said oil and gas discoveries on the Indian side of the Mannar Basin meant there was a better chance of finding similar deposits on the Sri Lankan side.

Fowzie said he was disappointed that neither India nor China which had been offered a block each in the Gulf of Mannar free of charge had shown interest in exploration.

The Indian government was offered block number one and China block number eight in the Gulf of Mannar.

"India wanted block number two which was given on tender to Cairn which we refused. Now there's a possibility of Cairn India talking to the Indian government and starting exploration in block number one as well.

Fowzie also said his ministry has sought Cabinet approval to call for oil exploration bids in the island's south where he said studies had shown hydrocarbon potential.

"Studies done in the southern province have shown indications of deposits of hydro carbon. I have submitted a Cabinet paper for approval to call for bids."