- Seismic surveys to be conducted off East coast, Mannar Basin
- Agreement to be entered into on May 30
- Schlumberger subsidiary to bear full cost
By Nishel Fernando
Sri Lanka will sign an agreement with the Eastern Echo Holdings Plc, a fully-owned subsidiary of the world’s largest US-based oilfield services company, Schlumberger, on May 30, to conduct seismic surveys off the country’s East coast and Mannar Basin to evaluate hydrocarbon prospects.
“We will provide them (Eastern Echo Holdings Plc) with access to conduct seismic surveys on multi-client basis in the Lanka Basin (JS-5 and JS-6 blocks) as well as Mannar Basin,” Petroleum Resources Development Secretariat (PRDS) Director General Vajira Dassanayake told Mirror Business.
The Eastern Echo Holdings Plc is expected to finance the cost of the seismic surveys through pre-funding agreements and selling the findings to operators such as Shell or Total as the Sri Lankan government will not bear the cost.
The agreement will allow the Eastern Echo Holdings Plc to market and sell data within a particular period.
According to PRDS, the French multinational integrated oil and gas company, Total has already given their pre-commitment to acquire data in JS5 and JS6 blocks.
“The Eastern Echo Holdings has to provide a copy of data to us also, so that our database will be enhanced and we will gain more knowledge on our offshore petroleum potential,” Dassanayake said. He noted that the cost of seismic surveys to encrypt seismic data in unexplored areas of Sri Lanka is estimated above US$50 million.
“After completing the seismic survey in the east, they have the option of conducting seismic surveys in the Mannar Basin (M1 to M8 blocks).They will commence the survey by this July and it’s expected to conclude at the end of the year, if they are going to include the West coast as well,” he said.
PRDS stressed that the agreement will also benefit the local scientific community and universities as they will get an opportunity to get involved in moderating data and acquisition of data as the local technical evaluation is expected to be carried out in collaboration with local universities.
Meanwhile, Dassanayake also revealed that the government will sign a tripartite agreement with Total and with another operator renewing the existing agreement with Total, which was signed in 2016.
“We are planning to enhance the agreement with Total next month with an additional operator, so there will be more resources for the exploration” he said.
Noting that the new agreement is likely to be signed next month, he said PRDS is currently waiting for the confirmation of the new operator to sign the enhanced agreement.
Total had signed a two-year agreement with PRDS to survey around 50,000 sq km off the East coast from air with an estimated cost of US$25 million to acquire data on unexplored areas.
Dassanayake stated that the interested operators will have to conduct more sophisticated seismic surveys such as 3D seismic and drilling programmes based on acquired data from Schlumberger’s seismic survey prior to extracting any hydrocarbons.
Calling of tenders for M2 block in Mannar Basin next month
Sri Lanka is to call international tenders next month for a 2,924 square kilometre offshore M2 block in the Mannar Basin to develop the two gas discoveries and for further explorations, Petroleum Resources Development Secretariat (PRDS), Director General (DG), Vajira Dassanayake told Mirror Business.
Following the approval of the Cabinet-appointed Procurement Committee, PRDS is set to call for tenders.
Dassanayake noted that the investment required for natural gas extraction will be between US$ 700 million to US$ 1.5 billion.
According to available data, there are about 850 billion cubic feet of gas reserves in the M2 block.
The exploration programme led by India’s Cairn in 2011 made two natural gas discoveries named “Dorado” and “Barracuda” in the M2 block.
Dassanaake also acknowledged that PRDS has received several unsolicited proposals from potential operators. However, he said the government wants the operators to come through the bidding process.
He, however, noted that finding credible investors remains a challenge.
“It’s very challenging to find investors as the discoveries are in deep water, which drives up the cost of extraction. Moreover, we are also competing with the Middle East that has on-shore reserves, and the current market conditions also have made investors hesitant.”
Dassanayake estimated that if the bidding process is successful, the first natural gas extraction could be witnessed between the 2020-2023 periods. PRDS also expects to power proposed LNG plants with locally-produced natural gas by 2023.
Meanwhile, Dassanayake revealed that the government is also currently evaluating the proposals received by a new operator on two blocks in the Mannar Basin and Cauvery Basin.
However, he noted that new seismic studies and a drilling programme have to be carried out as the available data is outdated to determine the hydrocarbon prospects in these blocks.
In addition, Singapore-based Bona Vista Energy, that won the bid for two blocks in the Cauvery Basin, which is in offshore shallow water, is currently looking for a new financial partner after the existing financial partner in the consortium had pulled out.
Dassanayake said that once the Bona Vista Energy finds a new partner, they will put forward a new proposal which will be evaluated by the government.