Billionaire’s exit prompts Sri Lanka to seek new oil explorer

Wednesday, 14 October 2015 00:04 - - {{hitsCtrl.values.hits}}

Bloomberg: Sri Lanka will issue a fresh international tender for offshore oil and gas blocks after billionaire Anil Agarwal’s Cairn India Ltd. relinquished its exploration rights in the South Asian island.

Cairn will be “departing in a couple of weeks” after coming to an agreement with the Sri Lankan government, petroleum minister Chandima Weerakkody said in an interview on Monday. The island nation will keep Cairn’s seismic study worth about $300 million and won’t charge any penalty for pulling out, he said.

“We are at an advantage because we have all the data collected by them,” Weerakkody said. “Therefore we will go forward with the next step. We are going to expedite the international tender process.” Sri Lanka, which doesn’t produce any oil or gas and imports all its needs from nations including Saudi Arabia, will hold an international road show this year to promote blocks on Sri Lanka’s western coast of Mannar. The island nation, where a three-decade civil war ended in 2009, is looking for technology to unlock the potential of the area neighboring India, where companies including Reliance Industries Ltd. and BP Plc are present.

Impairment Charge

Cairn India’s exit followed a one-time, non-cash impairment charge on acquisition goodwill for the SL 2007-01-001 block, which covers approximately 3,000 square kilometers (1,158 square miles), in the quarter ended March. The charge was triggered by the fall in crude oil prices, which declined 43 per cent in the past year making the discoveries unviable. The company increased focus on producing more from fields in Rajasthan state in north India, while cutting overall capital expenditure.

Shares of the company, India’s biggest onshore oil driller, fell 1.4 per cent to 165 rupees at the close in Mumbai. The company was the second-worst performer on the S&P BSE India Oil & Gas Index, which declined 0.6 per cent.

Sri Lanka’s cabinet in July approved inviting new international bids for commercial development of natural gas deposits found in the Mannar basin block.

“All the top oil companies believe that Sri Lanka is blessed with gas and oil,” Weerakkody said, adding that the government hadn’t considered offering incentives for exploration. Total SA, Europe’s third-largest explorer, is seeking a joint study in two blocks on Sri Lanka’s eastern front, Weerakkody said. Two other companies are also interested in conducting seismic studies in the island’s northern belt, he said without naming them.