Petronas considering oil well exploration in Sri Lanka

Tuesday, 9 October 2012 02:30 -     - {{hitsCtrl.values.hits}}

Petroliam Nasional Bhd (Petronas) is considering oil well explorations off the shores of Sri Lanka, possibly near the Palk Straits and the Mannar Basin bordering India and the island state.

It is learnt that the Government of Sri Lanka has invited Petronas, through the Malaysian Government, to study and review the possibly of working together in exploiting oil and gas (O&G) resources in the straits and the Mannar Basin.

In August, Sri Lanka’s Petroleum Resources Development Secretariat released an expression of interest document, seeking proposals to explore O&G reserves via an airborne gravity gradiometry and seep detection survey.

An industry source said Petronas was responding to the open invitation to survey and explore the Cauvery Basin, northern Sri Lanka and the Mannar Basin, western Sri Lanka. It is learnt that Petronas senior executives are preparing to hold preliminary talks with Lankan officials.

Although speculated to contain oil for some time, news of Sri Lanka potentially holding oil reserves resurfaced news in March when traces of petroleum were discovered in its seawaters. However, it is not clear how much oil reserves Sri Lanka could potentially unlock with the exploration of the oil fields.

Late last year, Sri Lanka also discovered natural gas wells in the Mannar Basin. A few of the gas wells were sunk by Cairn Lanka Pte Ltd., a wholly-owned subsidiary of Cairn India Ltd., listed on the Indian stock exchange. Cairn UK Holdings Ltd has about 10% stake in Cairn India, following the disposal of an 8% stake in September.

India and UK have been active in oil and gas activities in Sri Lanka.

Cairn India has been given prospecting rights in one block of oil well in Sri Lanka, out of a reported 15 blocks available. In September, Cairn India reported that it would begin its second phase of Sri Lanka oil exploration by first quarter next year.

The Sri Lankan Government, eager to jumpstart its economic boom, after the end of the civil war in 2009, is seeking experienced international partners to help in its oil exploration activities. An international bidding is likely follow to explore its oil wells.

Apart from Malaysia and India, other countries which may be keen to explore oil fields in post-civil war Sri Lanka include Russia’s Gazprom, France’s Total and Vietnam’s PetroVietnam Exploration and Production Corp. China is also said to be eyeing O&G opportunities in Sri Lanka.

In recent times, Petronas has gone international. In June, Petronas agreed to buy Canada’s Progress Energy Resources Corp for C$ 5.5 billion (RM 17.16 billion). The deal would allow Petronas to enter shale gas exploration, and liquefied natural gas market in North America. The Malaysian national oil corporation is currently present in 19 countries with O&G exploration activities, including Australia, Turkemenistan, Sudan, Venezuela and Iraq.

Petronas is also embarking on a mammoth petrochemical project in Pengerang, South Johor covering over 6,400 acres in a project known as the Refinery and Petrochemical Integrated Development. The project is estimated to cost about RM 60 billion, perhaps the biggest O&G infrastructure project in the region.