Exploring Opportunities in the oil and gas sector (Part 1)

In two blocks in the Eastern Province of Sri Lanka, the Mannar and Cauvery Basins, Sri Lanka has opened a global bid round to explore and generate oil and natural gas. The offers for the M1 block of the Mannar Basin and its northern neighbor, the C1 block of the Cauvery Basin, will be closed on July 15, 2019, according to the Petroleum Resources Development Secretariat.

The blocks of M1 and C1 cover 2,779 km2 and 2,246 km2 respectively. Based on information from seismic studies, the government estimates that in northern waters there are more than one million barrels of oil resources in a region of 30,000 square kilometers. An Australian subsidiary of the Norwegian company TGS-NOPEC performed the seismic surveys in 2003 and 2005.

Several blocks have been marked for offshore oil exploration in the Mannar Basin and Cauvery Basin by the Sri Lankan Petroleum Resources Development Secretariat (PRDS). Based on the initial studies conducted in the oil basin, the PRDS estimates that the Mannar basin alone could potentially generate five billion barrels of oil and nine trillion cubic feet of natural gas, which would be sufficient for the energy needs of Sri Lanka for the next 60 years.

The first Mannar Basin exploration permit was awarded in July 2008 to an Indian oil exploration company. The test wells generated natural gas, but in 2015, owing to low prices of crude oil and natural gas, the firm decided to leave oil and gas exploration operations in Sri Lanka.

Earlier this year, the Government of Sri Lanka signed an agreement with Eastern Echo DMCC, a subsidiary of a significant oilfield services business, Schlumberger, to collect, market and license "multi-client" oil information, allowing multiple data acquisition projects, including 2D and 3D seismic, to be carried out in chosen offshore fields around Sri Lanka at no expense to the government.

The primary goal of this contract is to obtain more petroleum information using contemporary acquisition and handling methods, thereby reducing the technical and financial risk of potential investors in profound water exploration in Sri Lanka and encouraging enhanced investor involvement in oil and gas exploration operations.

Currently, there is an urgent requirement to upgrade and expand the only oil refinery in Sri Lanka and the primary port-to-refinery pipeline. The state-owned Ceylon Petroleum Corporation (CPC), which operates the Sapugaskanda refinery, has indicated that it will invite offers to upgrade the current refinery and construct a new refinery.

Although numerous announcements have been made by the government to build a new refinery, a project has not yet been enacted. The CPC expects from the present 50,000 barrels per day to 100,000 barrels per day to raise the refining ability. The primary 5.8-kilometer oil pipeline in Sri Lanka also requires immediate replacement, and the CPC is assessing offers for a new oil pipeline including a U.S. business offer.

VBS/AT/10102019/Z_TB1