Gas hopes!

Sri Lanka plans to strike a sales agreement with Cairn India within this year and hopes to join the natural gas producing nations club by 2017-2018, according to the head of Sri Lanka’s state-run petroleum exploration unit.

“We would like to be able to finalize a heads of agreement [with Cairn India] within this year,” Petroleum Resources Development Secretariat (PRDS) Director General Saliya Wickramasuriya was quoted as saying by Platts, a leading provider of energy and metals information.

“If talks with Cairn succeed and a price of mutual agreement is reached, we are looking at production around 2017-2018,” Wickramasuriya had told Platts on the sidelines of the 19th Asia Oil Week upstream conference in Singapore.

Being the first to establish a working petroleum system in the Mannar basin Sri Lanka in block SL 2007-01-001, Cairn India’s fullyowned subsidiary Cairn Lanka has made two gas and condensate discoveries—Dorado and Barracuda—in the block so far.

“This is a sub-Tcf (trillion cubic feet) discovery ... It is marginal and the only way we can make it commercial is by matching the need to the capacity,” Wickramasuriya was quoted as saying, referring to the size of Cairn’s two discoveries.

He also had told Platts that the price will be project specific and he expected it to be “high” given that this is the first gas project off the shores of Sri Lanka.

“It will be a floating price agreed mutually between the government and Cairn on the basis of their cost of production and the cost benefit to us of import substitution,” he said, adding that it would be somewhere between Cairn’s “lift cost and our import cost.”

The gas is expected to be supplied to the Ceylon Electricity Board’s power plants, which currently run on imported fuel oil and gasoil.

Sri Lanka has already called for a second upstream licencing round offering 13 blocks in the Mannar and Cauvery basins. The deadline for bidding is scheduled to fall in end-November.

Sri Lanka held its first licencing round in 2007, in which three blocks were offered, but only one awarded -- block SL 2007-01-001 in the Mannar basin to Cairn India.

In addition, outside the bid round, the PRDS has expressed its interest in joint study agreements to explore hydro carbon potential in ultra-deep water acreage, in which little or no date is currently available.

In an earlier story, Mirror Business exclusively reported that the PRDS was negotiating a joint study programme with French oil-giant Total S.A., quoting Wickramasuriya.