Sri Lanka to ink oil exploration deal with France's Total
By Devan Daniels
Feb 09, 2016 18:42 PM GMT+0530 | 1 Comment(s)
ECONOMYNEXT - Total S.A., of France, one of six 'super major' oil and gas firms, will sign an agreement next week with the Sri Lankan Government to explore for offshore oil and gas, an official said.
Cabinet approval was granted to the Petroleum Resources Development Secretariat to ink the deal early February which could see Total commence off shore exploration activity off the eastern coast in April or May this year.
"They will start by investing about 10 million dollars to acquire seismic data off the East Coast of Sri Lanka,” Petroleum Resources Development Secretariat Director General Saliya Wickramasuriya said.
Oil companies are cutting costs and jobs as they bleed red ink all over their financial reports with oil down 70 percent from 2014 highs.
Total’s earnings for the first nine months of 2015 fell 40 percent from a year earlier.
British Petroleum has lost 4.5 billion sterling (6.5 billion dollars) and US-based Exxon Mobil announced plans to slash spending by 25 percent this year.
But Wickramasuriya says Total will make use of the slump to invest in new assets.
"With the global oil industry in a slump Total will be able to make use of lower prices for services and equipment to get a lot more done," he said.
Halliburton, a company that provides oilfield services, lost 666 million dollars in 2015, and plans to cut 4,000 jobs.
Sri Lanka will sign a 'joint-study agreement' with Total, where the firm will get three years of exclusivity for the data it acquires after which it can be viewed by other oil companies.
The government will own the data from the point of acquisition.
If it finds a commercially viable oil or gas reserve Total has the right to negotiate a production sharing agreement.
If the discussions are unsuccessful within a stipulated period, the Government may open the reserve to other bidders and here again Total has the right to match the highest bidder for a specified period.
All residual rights will lapse after 51 months.
After signing the agreement with Total, Sri Lanka is planning to launch a marketing campaign for the gas reserves that Cairn India had discovered and abandoned.
It found gas in two wells sunk in the Mannar basin but the firm was trying to sell the gas to Sri Lanka's domestic market and could not finalize a price.
"The opportunity we are offering is not just in exploration but in the linkages that follow from the emergence of an entire natural gas industry in Sri Lanka, which decouples risk with the rest of the world," Wickramasuriya said.
Japan and Korea have expressed interest in Sri Lanka’s potential for developing a domestic gas industry.
Cairn India had invested 240 million dollar on exploration activities with around 10 percent of this spent on Sri Lankan companies for support services.
A national gas policy is being drafted to feed the domestic energy and transport sectors.