Cairn to decide on Sri Lanka oil viability by mid-2013

By Ranga Sirilal

Reuters: Cairn India will start a second round of drilling and surveys as part of its Sri Lankan oil exploration program in the first quarter of 2013, before deciding on its commercial viability by mid-year, a company official said on Friday.

The Indian firm has concluded its first oil exploration phase in the island nation’s offshore Mannar basin, discovering gas and condensate in two out of three wells drilled, CLPL-Dorado-91H/1z and CLPL-Barracuda-1G/1, although their commercial viability has yet to be determined.

The third well, CLPL-Dorado North 1-82K/1, was plugged and abandoned as a dry hole in December last year.

Sunil Bharati, Cairn India’s Head of Corporate Affairs and Communications, said the company would drill a fourth well in a second phase of exploration in the first quarter of 2013.

“That will play a very decisive role in the overall commercial study as well as evaluating whether the discoveries are commercial,” Bharati told Reuters in an interview.

“Both these discoveries we have made at Barracuda and Dorado, they are not commercial in the sense of on a stand-alone basis. But when you combine them with several discoveries, then this project becomes commercial.”

He said the company was in the process of assessing the volume of the hydrocarbon presence in the first two wells.

The first phase of the exploration program involved the purchase, processing and interpretation of 1,753 square kilometres of 3D seismic data and a three-well, deepwater drilling program.

In the second phase, Cairn will buy, process and interpret 3D seismic data for 600 square kilometres before it begins to drill the fourth well.

Cairn has rights to drill in one of eight blocks in the Mannar Basin. China and India have been offered one each, which they have yet to accept, while the remaining five are expected to be tendered after Cairn’s exploration campaign is completed.

“We have already expressed our interest to do more work within this block and in a new block. Whenever an appropriate opportunity comes, we will be happy to consider,” Bharati said.

Sri Lanka produces no oil and is dependent on imports, which cost it $ 4.6 billion in 2011. Since the end of a 25-year war with Tamil separatists three years ago, the Government has tried to reinvigorate oil and gas exploration.

Seismic work done earlier by Norway’s TGS Nopec Geophysical Co ASA showed some potential in the northern Cauvery Basin, which on the Indian side has producing wells, and in a basin off the island’s southern coast.

Sri Lanka’s Government has said the seismic data shows the potential for more than one billion barrels of oil under the sea in a 30,000 sq km area of the basin.

Russia’s natural gas monopoly Gazprom and Malaysian State oil company Petronas have held talks with Sri Lanka on potential exploration, and Vietnam and Sri Lanka signed a deal on oil and gas cooperation in October.