COLOMBO (EconomyNext) – Sri Lanka’s oil exploration office which came directly under the President during the ousted Rajapaksa regime has been allocated to the energy ministry by the new administration.
The Petroleum Resources Development Secretariat (PRDS) being under former president Mahinda Rajapaksa was regarded as yet another display of excessive use of presidential powers in Sri Lanka.
Several Sri Lankan Presidents had also kept finance and a number of other portfolios under them, thereby undermining the ‘class monitor’ role played by presidents and premiers in freer countries.
New energy minister Patali Champika Ranawaka will on Friday take over the PRDS.
The secretariat is responsible for felicitating the country’s search for offshore gas and oil and issued the country’s first exploration license in 2008 to Cairn India, a unit of London-based Vedanta Resources.
Talks on pricing a two trillion cubic feet gas reserve discovered in the Mannar Basin off Sri Lanka’s western coast are ongoing, bogged down by delays in finalizing a national gas policy and regulatory legislation. This is one of two successful finds by Cairn India with the other being a 300 billion cubic feet well.
According to the PRDS, the natural gas discovered by Cairn India could be easily absorbed to the national electricity generation mix via combine-cycle power plants operated by the state.
In keeping with a local content policy of the PRDS, Cairn India has spent around 10% of its total exploratory expenditure of US$ 214 million during the period 2008-14.
A second bidding round for 13 blocks located in the Mannar Basin and Cauvery Basin off Sri Lanka’s northern shore end 2013 was unsuccessful with Cairn India submitting one bid and Singapore-based Bonavista Energy bid for two blocks in the north. These bids have not been opened. Their investment commitments are a little over US$ 200 million.
Cabinet approval was granted in 2013 for the PRDS to enter into a joint study programme with French oil major Total to acquire seismic data off the eastern and southern coasts, but the agreement has not been finalized to-date.
Sri Lanka could expect revenue amounting to US$ 200 billion by 2040 from offshore oil and gas, according to a study conducted by the Sri Lanka Carbon Fund.
Offshore petroleum exploration is more expensive than onshore explorations, with Sri Lanka having the added disadvantage of a narrow continental shelf and deep waters ranging from 200 to 1,800 meters.
Several oil majors including BP, Chevron, ExxonMobil and Shell have shown interest in Sri Lanka’s offshore potential with teams visiting the data room of the PRDS in Colombo over the last few years.
The interest is in part due to the island’s geographic location nearly 200 million years ago, in the heart of super continent Gondwanaland. Countries that had occupied the same fault line as Sri Lanka back then, have proven oil and gas reserves with India making discoveries in the recent past, and Mozambique making the biggest gas find of the century with around 100 trillion cubic feet.
PRDS has over the past few years developed curricula with University Grants Commission in areas such as geophysics.