Despite the government banking high on the gas found in one of the off-shore exploration wells in the Mannar Basin, it appears that the whole process of taking out the discovered gas and putting it to commercial use is getting delayed due to various unexplained reasons.
First of all, the recently released financial reports of Cairn India, the 100 percent owner of Cairn Lanka, the company that is carrying out oil explorations in the Mannar Basin, did not say anything about gas in the next couple of years. Besides, while giving very detailed updates about their other local and foreign exploration projects, Cairn India’s update on its exploration work in the Mannar Basin (Block SL 2007-01- 001) remained very vague.
“In 2013 we concluded appraisal and commercial studies to determine the next steps for the gas discoveries made on the block. We continue discussions with the Sri Lankan Government regarding commercial terms necessary to monetize the discovered gas resources on the block, urging the policy makers to take a holistic view to maximise the benefits from the maiden natural gas discoveries in the Mannar Basin.”
Due to sustainable and innovative technologies that are being used in the oil and natural gas exploration industry worldwide, the price of natural gas is forecasted to significantly come down in the foreseeable future. When this happens, according to experts it would be cheaper for Sri Lanka to import natural gas than to produce it. Are we waiting for that to happen
The company was saying the same thing last year and there is no clear explanation as to what exactly is happening. At the same time, the state-run Petroleum Resources Development Secretariat (PRDS) has also been quiet about the matter. Despite the latest Central Bank report having about a couple of pages dedicated for oil exploration in Sri Lanka, it does not give a clear picture of what is happening either.
Due to sustainable and innovative technologies that are being used in the oil and natural gas exploration industry worldwide, the price of natural gas is forecasted to significantly come down in the foreseeable future. When this happens, according to experts it would be cheaper for Sri Lanka to import natural gas than to produce it. Are we waiting for that to happen? To become what is discovered to be commercially useless to Sri Lanka but viable for someone else?
Another mystery surrounding Sri Lanka’s oil exploration process was the much hyped second licensing round carried out last year, which ultimately received a very poor response. Only two companies placed bids and Cairn India was one of them.
“We also participated in Sri Lanka’s off shore bidding round for M-5 south of our current block in the Mannar Basin in November 2013,” Cairn said.
However during the build up to the second licensing round, according to PRDS the interest of international oil companies in Sri Lanka’s hydrocarbon prospects was immense. The roadshows carried out by the PRDS in the USA, UK and Singapore were crowd pullers. Soon after that Sri Lanka held its first international oil symposium which was very well attended.
Despite all the enthusiasm and positive feedback, Sri Lanka was able to lure only two bidders and one of them was Cairn. The timelines set for awarding of contracts to the bidders have also lapsed.
Is some invisible hand meddling with Sri Lanka’s hydrocarbon prospects?