Cabinet approval sought to develop oil and natural gas discoveries in Mannar Basin’s M2 block

Sri Lanka’s Petroleum Resources Development Secretariat (PRDS) is expected to soon seek Cabinet approval to award bids to commence development of oil and natural gas discoveries in M2 block of Mannar Basin, eyeing first commercial production within 3-4 years.

PRDS earlier this year called for international tenders to develop the Mannar Basin’s M2 block, which includes Dorado and Barracuda discoveries. Three international bidders successfully submitted their applications for the mini-licensing round that was closed on June 7 this year.

The three bidders included a consortium based in UK, another consortium based in the South East Asian region and a leading firm based in Dubai.

PRDS Director General Vajira Dassanayake told Mirror Business that the project committee has already completed the bid evaluation process and the relevant report has been sent to the Petroleum Resources Development Ministry.

The ministry is supposed to hand over the report to the Cabinet-Appointed Negotiation Committee (CANC) for its observation and ratification before submitting it for Cabinet of 
Ministers’ approval. 

However, the CANC is currently not functioning as the majority of Secretaries in the committee have been given various other responsibilities following the change of government.

“The CANC has to be reconstituted, as most of the secretaries functioning in the committee are no longer in the system. Once the committee is formed, we can table it for them. Once CANC ratifies the report, we can send it for final approval of the Cabinet with their observations,” Dassanayake said.

After securing Cabinet approval, PRDS will enter into a petroleum resources agreement, which is commonly known as a production-sharing contract, with the 
chosen bidder.

“The full investment will be borne by the investor. In general terms, the required investment for a 10-year period would come closer to US$1 billion. We are expecting the government’s stake to be around 50 percent,” Dassanayake noted.

He was confident that Sri Lanka would be able move into commercial production of hydrocarbons within next 3-4 years.

Sri Lanka has discovered around 1.350 trillion cubic feet (TCF) of natural gas in Dorado. Barracuda discovery of M2 block of Mannar Basin is said to have up to 5 TCF upside potential for natural gas and over 10 million barrels of oil.

Meanwhile, PRDS is also preparing to call bids for the first major international licensing round mid next year after 2013 for the exploration and development work in the remaining blocks in the Mannar and Cauvery Basins.

“We acquired some crucial data on Mannar Basin in late 2018 through a survey and the processing mechanism of the data only concluded two weeks back. After interpreting those data, we will evaluate the good blocks that we can market off, and accordingly we will plan the licensing round thereafter. We might include blocks of Cauvery basin as well,” Dassanayake revealed.

He noted that PRDS will have more clarity on the blocks to be included in the international licensing round in three months after evaluating and interpreting of the processed data.
The undiscovered hydrocarbon potential in 42,000 square kilometres in the Mannar Basin is estimated to exceed 9 TCF of natural gas and over 2 billion barrels of oil.

Further, PRDS in August entered into a joint study agreement with French oil and gas multinational Total with the inclusion of Norwegian oil and gas company Equinor to explore the hydrocarbon potential in the JS-5 and JS-6 blocks of the Lanka Basin.

Dassanayake noted that Total completed the 2D seismic study of JS-5 and JS-6 blocks while data processing and initial interpretation were also completed.

“They have presented their findings and they are planning out future steps, which will include 2D seismic infill line, because there is a twenty kilometre gap between grids of those lines. Further, seabed coring operations are also planned for next year,” he stressed. (NF)