Sri Lanka carried out her second licencing round for 13 blocks in the Mannar and Cauvery basins and the deadline for bids ended November 29. Mirror Business met with Saliya Wickramasuriya, Director General of Petroleum Resources Development Secretariat (PRDS), the government agency which facilitated the bidding round, for a brief interview on the matter and a few other developments related to the country’s quest for hydro-carbon resources.
By Indika Sakalasooriya
Q: The deadline for bids ended on November 29. How was the response?
We received one bid each for three blocks. Cairn India made a bid for a block in the Mannar basin while we received two bids from Canada’s Bona Visa for two blocks in the Cauvery basin.
Q: When are you planning to award the blocks to winners for exploration purposes?
As soon as we finish evaluation and submit the same for the consideration of the Cabinet, the blocks will be awarded. It is important to capture as much of the prevailing weather window as possible.
Q: Despite high expectations, you have received only three bids. What were the reasons?
We did expect more bids but what we received made up in quality for what they lacked in quantity. Although detailed evaluation has not started yet, a preliminary review indicates very robust work commitments— the best Sri Lanka has received thus far.
Further, they spell out a significant amount of both 2D and 3D seismic and a number of commitment wells, which will go a long way towards gathering enough data to understand our assets better.
Q: Why did the big players who seemed really interested initially back out at the last moment?
All the major IOCs (International Oil Companies) who have been following Sri Lanka like Total, Shell, Exxon and ENI, confirmed to us that they would not be bidding in this round before the round was closed, so their absence was not a surprise.
What was unexpected was that the smaller independent companies looking at the Cauvery basin also did not bid at the last minute. The logic of the IOCs seems to be uniformly consistent—technical uncertainty. While Cairn has undoubtedly de-risked the northern Mannar basin with its 2011 discoveries, questions still remain in other parts.
These may well be addressed by more data, but unfortunately, despite our best intentions, we were not able to commence the data acquisition programmes we planned last year. This has led to investment in Sri Lanka, although possibly recommended at regional level, losing out to competitive opportunity during a global review. Our position on the priority list of global oil companies may well improve with additional data, the acquisition of which must remain a high priority.
Q:Any update with regard to deep water explorations? Any new players who have expressed interest except French oil giant Total?
The proposed Joint Study agreement with Total has been finalised and will go to the Cabinet for final approval very soon. This is another milestone we tried to reach well before the bid round closed, as it would have positively impacted industry sentiment, but it was not to be. As it is, we expect to sign the agreement with Total in January 2014. Several other IOCs have expressed interest in JS work, but at this point no enquiry is firm enough to warrant mentioning explicitly.
Q: It is said that lack of data about the blocks offered was a major hindrance?
Companies bid based on available information and in Sri Lanka’s case, this is relatively sparse. As mentioned before, lack of sufficient data was definitely a factor in the decision of some companies, as they were unable to de-risk the prospects beyond a certain point.
On the positive side, one thing we did do successfully was designing a competitive legal and fiscal regime for this bid round. Companies were universally of the opinion that the new MPRA (Model Petroleum Resources Agreement) was a significant improvement over the old one and from the commercial and operational point of view Sri Lanka was an attractive place to invest. In fact, according to one super-major, Sri Lanka is one of the best in the region.
Q: What is the current situation with regard to amending the Petroleum Resources Act?
It has now received comment from the Attorney General, and will be going back to the Legal Draftsman for final refinement prior to being placed before the Cabinet and then the Parliament.
Q:Any update on the price negotiations with Cairn with regard to the gas found in the Mannar basin?
A draft MoU (Memorandum of Understanding) covering key aspects of this project is being reviewed by the relevant government stakeholders as we speak and we are giving this a high priority not only due to its economic benefit, but also due to the positive impact it will have on Sri Lanka’s standing as an emerging oil province.