Govt. and Opposition clash over oil drilling in Mannar
Saturday, 7 December 2013 00:00
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By Ashwin Hemmathagama - Our Lobby Correspondent
The Government has entered into an agreement with Cairn India, enabling it to retain 90% of anticipated profits from the ongoing oil explorations carried out on block no. SL2007-01-001 in the Mannar Basin in the north west of Sri Lanka, UNP MP Rosy Senanayake revealed yesterday in Parliament.
“Sri Lanka spent US$ 6 billion for annual crude oil imports. We spend almost 60% of the total imports bill for oil imports. But according to the agreement the Government has signed, Sri Lanka will receive only 10% of the profits if Cairn strikes oil and commercially developed the well,” she exposed.
In response, Minister of Water Supply and Drainage and Chief Government Whip Dinesh Gunawardena praised Cairn for coming forward to conduct oil explorations in Mannar basin when other explorers were not interested.
“The oil exploration investment cost is high. Oil exploratory companies are not willing to come to certain parts of the world, so Cairn is a victory for us. We consider this agreement as the last hope for Sri Lanka to reduce the high oil imports bill and the impact it has on the economy is considerable,” he said.
The Minister said oil wells are governed by the Petroleum Resources Agreement signed between the Government and CLPL. This agreement is a production sharing contract, a concept commonly used in the international oil industry. He said that as per the agreement, the ownership of the exploration block and resources will remain with the Government.
“Data acquired and the wells drilled for that purpose of exploration, appraisal and production are done at the sole expense of CLPL. In the event of commercial production, the oil or gas is shared between the Government and CLPL in proportions set out in the agreement,” added Gunawardena.
Cairn Lanka Ltd. (CLPL), a fully-owned subsidiary of Cairn India, is currently engaged in oil exploration on one block out of the nine blocks.
The Minister explained that CLPL drilled four exploration wells, of which two were successful with natural gas and condensed discoveries. CLPL will submit the appraisal program for the two discoveries by the end of this year.
“Based on this appraisal program, more wells will be drilled around these discoveries in 2014, followed by at least one more exploration well in the CLPL block SL 2007-01-001. In the meantime, the Government is also conducting technical and financial feasibility studies on the possibility of producing early gas from one of these discoveries, with a view to offsetting the cost of imported fuel for power generation,” he said.
