Cairn Lanka (Pvt.) Ltd, a subsidiary of Cairn India, has expressed its desire to withdraw from all hydrocarbon exploration and development work in the Mannar basin and the government is now looking for new partners from the local private sector to fill the void, a top official said.
“They are withdrawing to focus on their Rajasthan oil fields. They are withdrawing from all over the world, not just from Sri Lanka. It’s because of the global oil price drop,” Petroleum Resource Development Secretariat Director General Saliya Wickramasuriya said.
He also added that Cairn India had laid off its entire exploration force— some 400 out of its 1,800 total staff.
This was revealed at an energy forum organised by the Ceylon Chamber of Commerce yesterday.
Power and Energy Ministry Secretary Dr. Suren Batagoda said that Cairn Lanka will remain in operation until October this year, when the Petroleum Resource Agreement (PRA) signed between the two parties in 2008 is set to expire.
Cairn Lanka was the only bidder in the first round of bidding of three blocks in the Mannar basin in 2007. The company then explored four fields in its block in the ensuing period, of which two were found to have natural gas.
“Cairn spent US $ 215 million on exploration. The state didn’t spend anything,” Power and Energy Minister Champika Ranawaka said.
Further, under the PRA negotiated, the revenue is to be split between the state and the developer equally, the rights which Cairn will have to relinquish when exiting.
However, according to the ministry’s five-year master plan published last month, commercializing the first well and building support infrastructure such as pipelines and tanks is expected to cost US $ 1 billion.
Ranawaka and Dr. Batagoda both called for the private sector to partner with the state in exploring and commercializing the explored and potentially rewarding blocks.
“I know it’s a huge risk, but if you invest, you will be helping the country become self-sufficient in energy and drive towards a knowledge-based economy,” the minister expressed. The second round of bidding for 17 blocks had taken place in 2013, of which there was no information published till recently.
“Three proposals were submitted but nothing has been done since 2013. I will be drafting a Cabinet Paper in the coming weeks for the evaluation of the tenders,” Dr. Batagoda said.
He added that the government would begin requesting the private sector to forward proposals for all 20 blocks in the coming two months.
Private sector representatives called for better data before making such risky investments. Dr. Batagoda in reply said that six parties have forwarded proposals to survey the areas, which would be