Cairn Opens Door in Sri Lanka's Exploration and Production Sector with Big Find in Mannar Basin

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Researched by Industrial Info Resources (Sugar Land, Texas)--Cairn India Limited (BSE:532792) (Gurgaon, Haryana) found success in Sri Lanka's Mannar Basin by striking a 25-meter hydrocarbon column in the CLPL Dorado - 91H/12 wildcat well, which is in Block SL2007-01-001, discovering primarily gas and other liquid hydrocarbons. Cairn has full operatorship of the block. In November 2011, the company announced success at another well, CLPL-Barracuda-1G/1, which was drilled on the western Coast of Sri Lanka. However, commercial discovery from the block will not begin until 2014.

In June 2008, Cairn Lanka (Private) Limited, which is a subsidiary of Cairn India, initiated drilling in block SL2007-01-001, at an initial cost of $110 million. The total area covered under the block was 3,000 square kilometers, with water depth ranging from 400 to 1,900 meters. Excited by the discoveries in the Mannar Basin, the government recently announced that it will initiate a fresh round of five exploration blocks in the northwestern area offshore Mannar Basin.

Cairn India's success in the previously unexplored territories of Sri Lanka has motivated many international players to participate in exploration activity in the country. According to TGs NOPEC and a 2005 survey conducted by Ceylon Petroleum Corporation, sustainable oil and gas deposits can be found in the Mannar and Cauvery basins on the northern coast.

The government is willing to award ONGC Videsh Limited (OVL) (New Delhi), the international subsidiary of India's Oil & Natural Gas Corporation Limited (BSE:500312) (ONGC) (New Delhi), three blocks in the northern offshore area. OVL plans to secure blocks C1, C2 and C3 on a nomination basis, and conduct seismic studies. Vietnamese state-run oil company PetroVietnam is also interested in seeking an exploration block in Sri Lanka, talks for which already have started. The Russian oil and gas company Gazprom, which has similar plans, is viewing the viability of oil and gas exploration in the Mannar Basin.

Oil exploration in Sri Lanka dates back to 1967, when General De Geophysique (CGG), on behalf of Ceylon Petroleum Corporation, acquired the offshore seismic reflection survey. But only few traces of oil were found. The country is completely dependent in oil imports, and for 2010 the oil import bill was $3 billion.

Since the decline of terrorism in 2009, the country launched a well-established exploration programme. In May 2007, it launched its Mannar Basin Bid Round, and divided the offshore basin into eight blocks. The 30,000-square-kilometer area has the potential for 1 billion barrels of oil, as indicated by seismic data.

The future for Sri Lanka's oil and gas exploration seems to be progressing well, and with the advent of international companies it will remain promising. These companies have the advantage of being first movers into the nearly unexplored territories of Sri Lanka, and will definitely utilize their global experience and technical capabilities for the nation's energy security.

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