SL plans major licensing round for oil and gas blocks

- „National policy on natural gas in the making

- „Marketing campaign by end of this year

„- Plan to produce natural gas before 2025

Sri Lanka’s Petroleum Resources Development Secretariat (PRDS) is planning to call bids for the first major licensing round early next year since 2013, for exploration and development work in the remaining blocks in Mannar and Cauvery basins after legislating the National Policy on Natural Gas (NPNG) this year with an aim to drill natural gas before 2025. “Sri Lanka will become a country which produces natural gas during 2024- 2025, and it will transform our energy mix,” Secretary to the Ministry of Highways & Road Development and Petroleum Resources Development, Sunil Hettiarachchi said. He was delivering the welcoming remarks yesterday at the public consultation on NPNG jointly organised by Ministry of Highways & Road Development and Pet roleum Resources Development and PUCSL at the BMICH in Colombo. PRDS, Director Eng. Preeni Withanage revealed that the agency will commence a campaign to market the remaining blocks in Mannar and Cauvery basin towards the end of this year and subsequently, PRDS will call for international bids. Sri Lanka has discovered around 1.350 trillion cubic feet (TCF) of NG in Dorado and Barracuda discoveries in Mannar Basin up to 5 TCF upside potential and over 10 million barrels of oil. PRDS called international tenders for M2 block where the two oil and discoveries had been found. The undiscovered hydrocarbon potential in 42,000 square kilometres in the Mannar basin is estimated to exceed 9 TCF natural gas and over 2 billion barrels of oil. According to Withanage, the nature of offtake commitment of the government to investors (for in-house use or export options) and gas sales contractual terms will play a crucial role in attracting gas and oil firms to invest in Sri Lanka and commence production of NG.

Sharing his experiences as the former Director General of Petroleum Resources Development Secretariat, Saliya Wickramasuriya pointed out that 2013 bid rounds for the blocks in Mannar Basin failed mainly due to the absence of a recognised government policy document on the natural gas industry. Commenting on the draft policy document, he said that the policy document can only be considered 75-80 percent complete as it lacks pieces of specific information such as pricing and domestic NG requirements, which are crucial for long-term investments.  

“How much gas does Sri Lanka need? How much are you prepare to pay for it? If you need x amount, how much are you going to allow them to export to cover their investments? Where can we export and how can we export? These questions need to be answered.” 
The policy document will have to satisfy oil and gas companies as well as suppliers of LNG, initially to get them invest in the process to make it a reality, otherwise it will remain a piece of paper,” he elaborated. 

Wickramasuriya also urged the authorities to expedite the legislation process of the proposed Petroleum Resources Act, which has been standing idle at the Attorney General’s Office since 2013. 

He affirmed that unless these requirements are fulfilled, the foreign investors are unlikely to make long-term investment commitments in Sri Lanka. 
The draft document also addressed a wide range of aspects in setting up a natural gas in Sri Lanka. However, several private sector and government representatives emphasised that the private sector could play a bigger role in future NG industry and its ancillary industries, if the government set-up the correct policy framework. 
LTL Holdings, COO, D. A. J. Nanayakkara asserted that the importation of LNG should be liberalised, for the private sector to play a larger role in the natural gas industry in future rather than monopolising it to CPC.

He noted that CPC has already proven its incompetency by failing to maintain petroleum infrastructure such as pipelines in the country. 
The NPNG proposed to set-up a national gas company to operate Private Public Partnership (PPP) ventures and to provide technical and institutional assistance for the implementation of NPNG.

The industry experts opined that a similar PPP should be set up for sourcing LNG where CPC could become a minority equity partner.  

In addition, the NPNG also proposed to formulate a Utilization Master Plan (GUMP) for the industry, which will be reviewed periodically addressing all sectors (power, transport, household and commerce, Industry).

PRDS expects that the share of natural gas will reach at least one third of the mix of total fossil fuel consumption by 2030, while reducing the dependency on imported fossil fuels to at least half of the present level in terms of physical quantity by 2030.

Without specifying sectors, PRDS expects a progressive penetration of natural gas in all sectors, maintaining a minimum 30 percent of the total energy mix.