Oil majors expected here to evaluate Mannar Basin opportunities

• Petroleum Ministry to seek cabinet approval for third round of tenders for offshore blocks
• Much interest shown during CERAweek 2018 in Houston for Lankan offshore blocks

By Chandeepa Wettasinghe

A number of leading international petroleum companies will be visiting Sri Lanka in the coming months to evaluate the opportunities for oil and gas exploration in the Mannar Basin, while the Petroleum Resource Development Ministry seeks the cabinet approval for the third round of tenders to develop the offshore blocks next month.

“In the coming months, a number of leading global companies will be visiting Sri Lanka to discuss the opportunities,” Petroleum Resource Development Minister Arjuna Ranatunga told Mirror Business during a media briefing last week.

He said that at CERAweek 2018, held in Houston, Texas in the USA earlier this month, further interest was sparked among major international players on the offshore blocks, building on the linkages Sri Lanka created at last year’s edition of CERAweek.

In January 2018, the Petroleum Resource Development Secretariat (PRDS) said that it was planning to open the tenders for the third licensing round within the first quarter of 2018. However, Ranatunga said that the ministry would be seeking the cabinet approval for the tenders round in April.

“Papers have been drawn to submit the proposal to the cabinet next month,” he said.

The PRDS is expecting to open some of the 14 offshore blocks in the Mannar and Cauvery Basins in the North and West of Sri Lanka, which have already received international interest for licensing in the third round.

The PRDS has already called tenders to conduct airborne geophysical surveys on a multi-client basis over the Mannar and Cauvery Basins for the blocks up for offer.
Sri Lanka has so far discovered two natural gas deposits in the ‘M2’ block in the Mannar Basin, which was awarded in the first licensing round in 2007. There was limited interest in the second licensing round in 2013.

Based on the initial studies on the discovered wells and regional studies, the PRDS is estimating the Mannar Basin alone could have the potential to generate five billion barrels of oil and nine trillion cubic feet of natural gas, which would be sufficient for Sri Lanka’s energy needs for the next 60 years.

This is in addition to the more than two trillion cubic feet of natural gas and 10 million barrels of condensate discovered in the two wells in the M2 block.

The M2 block too would be opened up to bidding by the PRDS after India’s Cairn, which spent US $ 26 million in exploring the block, exited the project in 2015 during the global downturn in the oil market. The PRDS is projecting the full exploration of the M2 block to generate US $ 240 million for the state.

It is expecting the two wells in the M2 block to become commercial by 2021 if the upcoming bidding round is successful. Twelve parties have so far shown interest in the M2 block, having forwarded expressions of interest to the PRDS.

The investment for gas transport and storage infrastructure is expected to run up to US $ 1 billion, according to the PRDS.

The local market is expected to absorb the extracted gas since the government is attempting to shift Sri Lanka’s power plants towards natural gas in the future.