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

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

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.