Gas gusto!

In a development that is likely to fuel interest in the global energy industry, Sri Lanka yesterday disclosed the discovery of natural gas with liquid potential in the frontier Mannar basin, the commerciality of which however requires further drilling.

The revelation of the breakthrough was originally puzzling, but was later confirmed by the driller itself, briefly ending the confusion. The announcement was first made by President Mahinda Rajapaksa yesterday in Kandy, prompting the explorer Cairn to subsequently issue a confirmation whilst it had in parallel disclosed same via a formal filing to Indian stock exchanges on which it is quoted.

“Explorers have informed me that they have found a gas deposit in the seabed,” President Mahinda Rajapaksa was quoted as saying by his Spokesman W. Herath to an audience in Kandy on Sunday.

A few hours after this disclosure, Cairn India released a statement confirming the discovery of gas.

Issuing a Discovery Notification, Cairn Lanka (Pvt) Ltd., a wholly-owned subsidiary of Cairn India Ltd., said that it has notified the appropriate authorities in the Government of Sri Lanka of a gas discovery in the CLPL-Dorado-91H/1z well, drilled in a water depth of 1354m, located in block SL 2007-01-001, Mannar Basin, Sri Lanka.

Cairn Lanka is the operator and has a 100% participating interest in the block.

“A gross 25m hydrocarbon column in sandstone between the depths of 3043.8-3068.7m MD has been interpreted from log and MDT data to be predominantly gas bearing with some additional liquid hydrocarbon potential.

“Further drilling will be required to establish the commerciality of the discovery,” Cairn’s statement added. The CLPL-Dorado-91H/1z well is the first well to be drilled in Sri Lanka in 30 years and the first well to discover hydrocarbons in the country, it added. It will continue to drill to targetted depth before proceeding to the second well.

       

Gas ...

Even before the statements by President Rajapaksa and Cairn yesterday, there had been talk of discovery of gas. Since there was no official confirmation, such talk was dismissed as speculation. By virtue of being quoted on both the Bombay and National stock exchanges of India, Cairn India is required to make a disclosure for the benefit of its shareholders.

It couldn’t be confirmed whether Cairn’s discovery of gas was over the weekend, when the Indian bourses are closed. Now that an official Discovery Notification is out, the company is most likely to makes its filing today.

Cairn Energy PLC currently holds a 52.1% shareholding in Cairn India Limited. Cairn India is headquartered in Gurgaon in the National Capital Region, with operational offices in Tamil Nadu, Gujarat, Andhra Pradesh, Rajasthan and Sri Lanka.

Cairn India is primarily engaged in the business of oil and gas exploration, production and transportation. Average daily gross operated production was 149,103 boe in FY2011. The company sells its oil to major refineries in India and its gas to both PSU and private buyers.

The company has a world-class resource base, with interest in nine blocks in India and one in Sri Lanka. Cairn India’s resource base is located in three strategically-focused areas, namely one block in Rajasthan, three on the west coast of India and six on the east coast of India, including one in Sri Lanka.

The blocks are located in the Barmer Basin, Krishna-Godavari Basin, the Palar-Pennar Basin, the Kerala-Konkan Basin, the Cambay Basin, the Mumbai Offshore Basin and the frontier Mannar Basin. Cairn Lanka holds a 100% participating interest in the Mannar block in Sri Lanka.

Cairn India’s focus on India has resulted in a significant number of oil and gas discoveries. Cairn made a major oil discovery (Mangala) in Rajasthan in the north west of India at the beginning of 2004.

To date, 25 discoveries have been made in the Rajasthan block RJ-ON-90/1. In Rajasthan, Cairn India operates Block RJ-ON-90/1 under a PSC signed on 15 May 1995. The main Development Area (1,859 km2), which includes Mangala, Aishwariya, Raageshwari and Saraswati, is shared between Cairn India and ONGC, with Cairn India holding 70% and ONGC having exercised their back in right for 30%. The Operating Committee for Block RJ-ON-90/1 consists of Cairn India and ONGC.

Further development areas (430 km2), including the Bhagyam and Shakti fields and (822 km2) comprising of the Kaameshwari West Development Area, is also shared between Cairn India and ONGC in the same proportion.

The Mangala, Bhagyam and Aishwariya (MBA) fields have gross recoverable oil reserves and resources of over one billion barrels, which includes proved plus probable (2P) gross reserves and resources of 656 mmboe with a further 300 mmboe or more of EOR resource potential.

The MBA fields will contribute more than 20% of India’s domestic crude production when they reach the currently approved plateau rate of 175,000 bopd. The total resource base supports a vision to produce 240,000 bopd, (equivalent to a contribution of approximately 30% of India’s current domestic crude production), subject to further investments and regulatory approvals.

In Andhra Pradesh and Gujarat, Cairn India on behalf of its JV partners operates two processing plants, 11 platforms and more than 200 km of sub-sea pipelines with a production of approximately 45,000 bopd.

India currently imports more than 2.4 million bopd of crude oil. The domestic crude oil production is approximately 0.7 million bopd of which approximately 170,000 bopd comes from the Cairn India operated assets (Ravva, CB/OS-2 and the RJ-ON-90/1).