|
INTERNATIONAL FRAME
&
Tamil Struggle for Freedom: The Oil Dimension [see also Tamil Eelam
Struggle for Freedom
- Some Aspects of the International Dimension ]
|
India & China get Exploration Blocks in Mannar
Basin
ahead of launch of Licensing Round 20 September
2007
" Recently, Sri Lanka
allocated an exploration block in the Mannar Basin to China for
petroleum exploration. This allocation would connote a Chinese presence
just a few miles from India's southern tip, thus causing strategic
discomfort. In economic terms, it could also mean the end of the
monopoly held by Indian oil companies in this realm, putting them into
direct and stiff competition from Chinese oil companies....It is Sri
Lanka's strategic location that has prompted Beijing to aim for a
strategic relationship with Colombo..."
Boosting Maritime Capabilities in the Indian Ocean,
Dipanjan Roy Chaudhury, New Delhi, India, 23 August 2007
"China's oil quest is set to reach the Mannar area
of Sri Lanka adjoining the likely oil/gas bearing Cauvery basin of
South India. A Chinese energy foothold in this key area has been
facilitated by the Government of President Mahinda Rajapakse to
balance an Indian presence in this area. "
China's Oil Quest Across India's Cauvery Basin - B. Raman
26 March 2007
"... According to the
reports by the Sri Lanka Government, seismic data shows more than 1.0
billion barrels of oil lie under the sea off Sri Lanka's northwest
coast, though no reserves have yet been proven. If proven, the reserves
would be a major boost for the country, which produces no oil and
imported $2.1 billion worth in 2006. ..
more than 20 countries including
India and
China who already own
two blocks at the Mannar Basin have agreed to participate in the bid
round..."
Rigzone, 14 September 2007 |
Sri Lanka
Minister Amunugama claims that Britain based Petroleum companies said
"Sri Lanka is the most stable country out of all places where untapped
petroleum deposits are known to exist" - Walter Jayawardhana, 14
September 2007
[see also comment at
To The Center.com "Given the proximity of the Tamil Tigers,
describing Sri Lanka as stable is like living on Vesuvius and commenting
on it being safer than living on the slopes of St Helens."]
Sri
Lanka launches Mannar Basin License Round - OilOnline, 11 September 2007
Oil
exploration; the battle begins - Natasha Gunaratne, Sri Lanka
Sunday Times, 9 September 2007
Sri Lanka�s Mannar basin has significant petroleum accumulations -
Walter Jayawardhana, 6 September 2007
Sri
Lanka chases after fresh oil reserves, Lanka Business Online , 5
September 2007
Offshore oil and production sharing contracts - Dulip Jayawardena in the
Sri Lanka Sunday Times, 2 September 2007
Maritime boundary agreements, off shore oil exploration - Dulip
Jayawardena in the Sri Lanka Sunday Times, 26 August 2007
"In breach of provisions of the
Petroleum Resources Act No. 26 of 2003, two off shore blocks (1 and 8)
in the Mannar Basin have been awarded to Indian and Chinese state oil
companies on a preferential nomination basis for oil exploration..."
Boosting Maritime Capabilities in the Indian Ocean, Dipanjan Roy
Chaudhury, New Delhi, India, 23 August 2007
Sri Lanka to allow India, China to explore oil along its coast,
Associated Press, 7 July 2007
China's Oil Quest Across India's Cauvery Basin - B. Raman 26 March
2007
Sri Lanka Will Seek Bids for Oil Exploration Licenses - Anusha
Ondaatjie, Bloomberg News, 5 April 2007
US grants Sri Lanka $474,000 to develop upstream licensing rules -
Platts, Singapore, 23 March 2007
Offshore back on agenda after Mannar basin rethink - Dr. Ray Shaw, Asian
Oil & Gas, 26 April 2002
Sri Lanka Minister
Amunugama claims that Britain based Petroleum companies said "Sri
Lanka is the most stable country out of all places where untapped petroleum
deposits are known to exist"
-
Walter Jayawardhana, 14 September 2007 Sri Lanka Says
Response to Government�s Road Show in London to Distribute Oil Exploring Data
Was Good
Sri Lanka�s Minister of Enterprise Development and Investment Promotion Dr.
Sarath Amunugama said that his country has received good positive responses from
Britain based Petroleum exploring companies to drill for the Indian Ocean
island�s untapped Mannar Basin petroleum deposits.
�They said Sri Lanka is the most stable country out of all
places where untapped petroleum deposits are known to exist ,� Amunugama
told a BBC Sinhala language interviewer in London where he and the country�s
Petroleum Minister A.H.M.Fowzie are holding a road show to present data on
three blocks of the basin which are offered to prospective explorers.
[see also comment at
To The Center.com "Given the proximity of the Tamil Tigers, describing
Sri Lanka as stable is like living on Vesuvius and commenting on it being
safer than living on the slopes of St Helens."]
Amunugama said Sri Lanka�s Mannar Basin seismic data has
indicated that the basin has significant potential for hydrocarbon deposits.
Earlier announcements by the Ceylon petroleum Corporation said about one billion
barrels of crude lie under the sea off Sri Lanka�s North West Coast, which is
known as the Mannar Basin.
After London two more road shows are scheduled to be held in
Houston and Kula Lumpur.
Amunugama said the government expected to call tenders by
January and actually start exploring after another six months.
The Minister said the prospective explorers whom they met in
London have expressed their satisfaction about the government�s method of
offering these Mannar basin blocks for oil prospecting .They appreciated the
efficient and transparent tender process, he said. Amunugama said
, all over the world , where untapped petroleum deposits have been found , the
countries have been found torn with various political conflicts and out of all
places Sri Lanka is the most stable place. He said that fact should be an added
reason to lure investors.
In the 1960�s under the premiership of Prime Minister Sirimavo
Bandaranaike the Russians were invited to drill test wells at Pesalai, Mannar .
Although, the equipment then were unable to indicate accurately , experts say,
the oil prospecting technology is far more advanced today.
Ceylon Petroleum Corporation said, �however, recent seismic data
have indicated that the basin has significant potential for hydrocarbon
accumulations. According to the reports by the Government, seismic data shows
more than 1.0 billion barrels of oil lie under the sea off Sri Lanka's northwest
coast, though no reserves have yet been proven. If proven, the reserves would be
a major boost for the country, which produces no oil and imported $2.1 billion
worth in 2006.� (EOM)
Oil Exploration Website says Sri Lanka�s Mannar Basin has Significant Petroleum
Accumulations - Walter Jayawardhana A leading Oil
Exploration industry website Rigzone.com said that Sri Lanka�s Mannar Basin
seismic data have indicated that the basin has significant potential for
petroleum accumulations.
�Seismic data shows one billion barrels lie under the sea off
Sri Lanka�s North West Coast,� said the website announcing the island nation�s
road shows to be held in London, Houston and Kula Lumpur to present data on
three blocks of the basin in the month of September which will be offered for
exploration after receiving tenders. �The Mannar Basin has seen
relatively minor exploration activity in the past;� said the website, �however,
recent seismic data have indicated that the basin has significant potential for
hydrocarbon accumulations. According to the reports by the Government, seismic
data shows more than 1.0 billion barrels of oil lie under the sea off Sri
Lanka's northwest coast, though no reserves have yet been proven. If proven, the
reserves would be a major boost for the country, which produces no oil and
imported $2.1 billion worth in 2006.�
The Rigzone.com said, Sri Lanka's Ministry of Petroleum and
Petroleum Resources Development will be calling for tenders beginning next month
for oil exploration in the Mannar Basin. According to the Minister of Petroleum
and Petroleum Resources Development A.H.M Fawzie, three road shows will be
launched in September to present data on three blocks in the offshore Mannar
basin. The road shows will be held at London, Houston and Kuala Lumpur.
Quoting Minister Fawzie the website added that more than 20 countries including
India and China who already own two blocks at the Mannar Basin have agreed to
participate in the bid round. The Minister further stated that the Government is
committed to conduct a transparent and efficient tender process with exploration
licenses being awarded in early 2008. However, report said that
the applicants will have to pay signature bonds and production bonds to the Sri
Lankan government. Also they will have to pay a 10% loyalty fee to Sri Lanka
during the exploration period. The permits will be for a period
of eight years and will consist of three phases. The permit will be broken up as
follows: three years for the first phase, two years for the second phase and
three years for the third phase. If additional exploration is needed, a two year
extension could be granted.
Sri Lanka chases after fresh oil reserves,
Lanka Business
Online , 5 September 2007 Sept 05, 2007 (LBO) � Sri Lanka
will shortly tender for two-dimensional seismic surveys off the southern tip of
the island to look for new oil deposits, officials said. Three out of eight
off-shore oil exploration blocks in the Northwestern Mannar basin which have
already been surveyed by Norway's TGS NORPEC would be offered to foreign
petroleum firms next month.
But the government believes there is more oil and natural gas off the southern
tip of the island. "We want to survey the Southern seas and would be calling for
tenders shortly," Petroleum Minister A H M Fowzie said. "Sri Lanka is straddling
oil bearing formations in the Middle East on one side and Indonesia on the
other."
Though Sri Lanka is yet to conduct more expensive three-dimensional seismic
surveys officials estimate that the Mannar basin to hold about one billion
barrels of oil.
Surveys were done in 2003 and 2005. The TGS-NORPEC data was bought by Sri Lanka
for about 10 million US dollars.
"We want to conduct surveys in the South, South West and South East of the
island," the head of Sri Lanka's petroleum resources development secretariat
Neil de Silva told LBO. "The tenders will be for two-dimensional surveys."
Sri Lanka is holding three road shows this month in London on September 10,
Houston on September 17 and Kuala Lumpur on September 24. Bids for the blocks
are expected to close in January.
Sri Lanka says companies would be given an 8-year license, and a 10 percent
royalty would be charged on extracted oil, and profits would be subjected to 35
percent corporate tax. They would also have to pay a signature bonus on
winning the tender and a production bonus after hitting oil which could be as
early as 2010.
Two blocks have been assigned to
India and
China on
government-to-government deals. The remaining three blocks are expected to be
sold after oil is found in any of the first round blocks. "Then we can get
better terms for the remaining blocks," Fowzie said.
Sri Lanka
launches Mannar Basin License Round -
OilOnline, 11 September
2007 The government of Sri Lanka today launched the Mannar Basin
License Round 2007 in London. The Honourable Mr Fowzie , The Minister of
Petroleum and Petroleum Resources Development, together with Dr Amunugama,
Minister of Enterprise Development and Investment Promotion, accompanied by Dr
Neil de Silva, the Director General of Petroleum Resources Development
Secretariat, took part in the first of a series of presentations scheduled over
the coming weeks.
Following in excess of 50,000 website visitors, 31 International Oil and Gas
companies are pre-registered or represented for this event. Companies ranging
from major multinational to independents will be represented at these
presentations, which will be followed by data rooms enabling companies to review
the technical data available for this unexplored basin. The
strongest interest is being clearly seen from the Asian presentation scheduled
for Kuala Lumpur where it has been necessary to extend the data rooms to
accommodate the increased level of interest being shown in this opportunity.
The Houston presentation will be held on the 17th September with
the Kuala Lumpur presentation following a week later on the 24th September 2007.
Interest in this licensing round is matching the Sri Lankan government
expectations.
With the recent discovery announcements of the finds in the East
Coast of India and particularly the probable extension of plays from the Cauvery
Basin to the Mannar Basin, along with the potential for large discoveries as
indicated on the pre-existing seismic, this is viewed as an area of interest.
Further details are available at
www.prds-srilanka.com
Offshore oil and production sharing contracts - Dulip Jayawardena (The
author is a retired Economic Affairs Officer of United Nations ESCAP who was in
charge of the Marine Affairs Programme from 1990 to 2003) in the
Sri Lanka Sunday Times, 2 September 2007
Oil exploration in Sri Lanka has a history which dates between 1966 and 1984,
when the Soviet and Western entities concentrated on land and shallow offshore
areas of the Cauvery Basin in the Gulf of Mannar.
During this period 18,000 kms of seismic data and seven exploratory wells were
drilled. All the wells were dry, except the three wells drilled in Mannar Island
by the Soviets, which encountered wet gas at several depths.
However, interest was again shown by US and Canadian companies after a flow of
1488 barrels/day were recorded from a test hole drilled in cretaceous sands on
the Indian side 30 kms from one of the holes drilled on the Sri Lankan side.
In 2001, a license was awarded by the Ceylon Petroleum Corporation (CPC) to
carry out off shore 2D seismic surveys in the Mannar Basin to TGS NOPEC. Between
June- July 2001, 1100 kms of seismic data was recorded and processed by Western
Geco.
Further analysis of the data by Dr Ray Shaw, team leader from
the University of New South Wales (UNSW), which was awarded a contract by the
ADB, concluded that the Gulf of Mannar Basin represents a new deep-water
frontier region, which had promising indications of having significant oil and
gas accumulations.
Further, the findings were presented by CPC at the South Asian Petroleum Society
(SEPEX) Conference in December 2001 and with the confirmation of the findings of
UNSW, TGS NOPEC carried out a further 7000 �8000 kms of seismic lines in the
Gulf of Mannar Basin purchased by the government for US $ 8 million in 2006.
However it is not clear as to the details of the data and the areas covered and
whether TGS NOPEC is still holding to some of the data even after the agreement
signed by CPC was annulled.
In 2003 the Petroleum Resources Act No. 26 of 2003 was legislated and the
Petroleum Resources Development Committee (PRDC) and the Petroleum Resources
Development Secretariat (PRDS) established that the PRDC had representation from
relevant ministries and other agencies and chaired by the Secretary to the
Ministry of Petroleum Resources.
The Director General heads the PRDS. It has been reported that eight off shore
blocks have been demarcated and Block 1 in the north and Block 8 in the south
have been awarded to India and China. Blocks 2, 3, and 4 will be subject to
International Bidding.
It is also reported that the government has finalized a
Production Sharing Contract (PSC) and a Taxation Regime for the award of the
Blocks and it is not clear what the arrangements are for the Indian and Chinese
Blocks.
Production Sharing Contracts (PSC) A PSC is an arrangement
between a contractor and the government whereby the contractor bears all the
exploration costs, risks, development and production costs in return for an
agreed share of production.
Such a contractual framework has three major areas that are paramount namely the
constitution (ownership vested in the State Part 1 of the Act) tax law and
petroleum legislation.
There is also Joint Operating Agreements (JOA) where the government agrees to
share costs with a number of contractors.
Petroleum legislation in many countries is known to be too archaic and a
comparison of the Petroleum Acts especially from developing countries will help
to make appropriate amendments.
I shall very briefly give an overview of the relevant components of a PSC. It
must be kept in mind the off shore areas of the Gulf of Mannar are in deep water
with depths varying from 1000 to 3000 meters (3200 to 10000 feet) with no
records of near shore prospects. Accordingly when PSCs are negotiated the risk
factor has to be taken to serious consideration.
In a PSC, an Outline of the Scope that will include the parties and Definitions
such as production date, commercial discovery etc has to be included as in a
normal contract.
The Purchase of Data will define the data package (TGS NOPEC) the government
purchased. Such costs could vary from US $ 10,000 to 100,000 depending on the
quality.
The Duration, Relinquishment and Surrender will include the contract period and
the percentage of area to be relinquished after a specific period. In Timor
Leste it is 25 percent after 3 years and another 25 per cent after 6 years. And
exploration is 6 years with a 4-year extension.
Work Programmes and Expenditures are important. The contractor is bound to carry
out an agreed work programme with minimum expenditure levels. It is important
that there should be a specific time period to start exploration that is usually
under 12 months.For example in Timor during the one year an expenditure of US $
1 �4 million has to be spent which would include 3 D Seismic survey. During the
2-year costing US $ 0.5 to 8 million has to be for drilling. And in the third
year 1-3 wells with a cost of US $ 20 million and the fourth year 1-4 wells
costing US $ 6 � 30 million should be completed. Some of these holes may strike
productive oil reservoirs.
Once a discovery is made the productive limits of the oil field have to be
mapped and identified. This is important as the cost recovery of exploration and
development are subject to �Ring Fencing� where such costs are confined to only
one area and cannot be extended to another area within the same block or another
license area where exploration was not successful. However development costs of
more than one field may not be subject to �Ring Fencing�
Signature bonus is very unpopular with the oil industry but could be a part of
competitive bidding.
Production bonus will stipulate a period and an amount of 10,000 barrels of oil
per day (BOPD) if exceeded the government is entitled to US $ 2 million. However
it will vary depending on the production and reserves together with the
depletion rate.
The rights and obligations of the government (PRDC) have to be clearly spelled
out and include access to data, monitor contractor�s work programme, right to
appoint representatives to the management team if it is a JV, right to remove
contractor�s employees and in certain instances use of equipment.
The rights and obligations of the contractor are also included such as
fulfillment of all technical requirements, funds for the work programme, rights
to sell or transfer its rights and interests to third parties, payment of taxes,
submit weekly or monthly reports to PRDC, give preference to goods and services
in host countries, provide access to operating areas to representatives of PRDC.
The other components that should be included in a PSC are valuation of petroleum
exported by contractor for Production Sharing on an agreed split after recouping
expenditure, payments in foreign currency, and net sales proceeds allocation. In
this case some countries allow 100 per cent cost recovery for production but
some allow anything between 80 �40 per cent depending on the prospectivity of
the area. Exploration costs invariably are recovered in full.
Employment and training of local personnel are given in most PSCs. Another issue
is that some PSCs stipulate that all equipment brought by the contractor become
the property of the state oil company after the expiry of the contract
Common clauses such as �force majure� are also included. The most important
clause in a PSC is arbitration on dispute settlement and includes non-judicial
dispute resolution mechanisms such as ICSID (International Centre for Settlement
of Investment Disputes) ICC (International Chamber of Commerce) UNCITRAL (United
Nations Committee on International Trade Law) and AAA (American Arbitration
Association). The government should be a party to such agreements.
The other components of a PSC are insurance, termination; provision for contract
modification and abandonment. It is customary for the host government to bear
the cost of removal and disposal of off shore oil platforms and structures.
However UN ESCAP had initiated a removal regime for East and South East Asia
where the contractor and the host government share the costs and includes legal,
technical and financial guidelines. The cost of removal of a small oil platform
will exceed US $ 3 million.
The normal exhibits of a PSC will include Description of Contract Area, Map of
Contract Area, Accounting Procedure and Management Procedure.
It must be stated that PSCs will vary from country to country and also from
known oil and gas bearing areas to unknown territories such as the Mannar Basin.
It is up to the PRDC with the advice of its consultants to evolve a model PSC
that would adequately address the challenges posed such as unknown territory,
deep water and the absence of adequate data specially 3 D seismics. It must also
be stated that only a few countries such as Norway have the technology to
explore and operate oil and gas fields in deep water.
Finally I would also draw the attention of the government, that the PSC that is
supposed to have been finalized and not in the public domain should be
compatible with the Petroleum Resources Act No. 26 of 2003 specially Part V that
spells out the Fiscal Provisions. I am not aware whether Regulations under this
Act have been legislated and if so most of the fiscal and other arrangements in
the PSC could have been included.
Maritime boundary agreements, off shore oil exploration - Dulip
Jayawardena (The author is a Retired Economic Affairs who was in charge
of the Marine Affairs Programme at United Nations ESCAP from 1990 to 2003) in
the
Sri Lanka Sunday Times, 26 August 2007
In breach of provisions of the Petroleum Resources Act No. 26 of 2003, two
off shore blocks (1 and 8) in the Mannar Basin have been awarded to Indian and
Chinese state oil companies on a preferential nomination basis for oil
exploration.
More specifically, sections 4 (2), 7, 8 and 9 of the Act have
been violated where there are clear guidelines on the issuance of licence for
government blocks. Furthermore, recent press reports have indicated that the
government of Sri Lanka has finalized arrangements calling for international
offers for oil exploration in three off shore blocks in the Mannar Basin.
Three blocks on offer are:
Block 2, 1338 sq kms Lat 8 deg. 10' and 8 deg 30' north Sri Lanka maritime
boundary to 4 kms from low water mark Block 3, 3572.08 sq kms Lat 7 deg 50' and
8deg 10' north � Indian Sri Lanka maritime boundary to 4 kms from low water mark
Block 4, 4126.51 sq kms Lat 7 deg 30 'and 7 deg 50' north � Indian Sri Lanka
maritime boundary to 4 kms from low water mark Blocks 5, 6 and 7 are presumed to
be offered during the second licensing round after road shows. This is a
replication of efforts and expenses as all blocks could have been offered at the
same time.
It is also interesting to know whether the government is meeting
the expenses for such promotional activities as an offer for US$1 million by the
Asian Development Bank (ADB) was rejected. It is also relevant to find out what
the total contract value is with Furgo Geoteam a Norwegian company appointed as
consultants to the
Petroleum Resources Development Secretariat (PRDS).
The PRDS website is being maintained by Fugro Data Solutions, an affiliated
company of Fugro Geoteam that was associated with TGS NOPEC, another Norwegian
company, on Phase II of the 2D seismic survey on a cost sharing basis. The
website further states that oil exploration will start in 2008. The site gives a
background on the functions of the Ministry of Petroleum, new opportunities in
the Cauvery and Mannar Basins and the advantages of investing in Sri Lanka. It
also gives a countdown for the upstream development.
The Director General of the PRDS, Dr. Neil De Silva, addressed the European
Association of Geologists and Engineers (EAGE) in London in a Poster Talk on
June 13 to 14, 2007. Three road shows are scheduled to be held in London,
Houston Texas and Kuala Lumpur during August and September 2007 as well as a
presentation to the American Association of Petroleum Geologists (AAPG) in
November 2007.
The website does not contain the Petroleum Resources Act No. 26 of 2003 or the
regulations under the Act if they have been legislated. It also does not give a
model Production Sharing Contract (PRC) and the relevant Taxation Regime. These
deficiencies will undoubtedly prevent reputed upstream oil exploration companies
from sending any serious bids.
Maritime boundaries
I shall make an attempt to elaborate on the relevant Maritime Boundaries between
India and Sri Lanka. The Maritime Zones Law No 22 of 1976 and the Presidential
Proclamation of January 1977 implementing the Law defines a Territorial Sea of
12 nautical miles (nm) historic claims between Palk Strait and Gulf of Mannar, a
Contiguous Zone of 24 (nm) as well as an Exclusive Economic Zone of 200 (nm).
The delimitation of the continental shelf is now in progress in accordance to
Annex 11 of the Final Act of the United Nations Convention on the Law of the
Sea. This delimitation is in respect of the southern part of the Bay of Bengal
where India too has a claim.
I now refer to the oil exploration blocks. The demarcation of the three blocks
has taken the southwestern maritime boundary in the Gulf of Manner with India as
the western limit. The boundary in this area consists of 12 turning points
defined by Latitude North and Longitude East and varies from 9 deg 6' to 5 deg
53.9' latitude north and 79 deg 32' to 77 deg 50.7 ' longitude east.
The maritime boundary from the 13m turning points to the tri-junction point (T)
between the maritime boundary of India, the Maldives and Sri Lanka (4 deg 47'
04" latitude north and 77 deg 01' 40" longitude east) according to my knowledge
has not been established. The Point T was established through an agreement
between India, the Maldives and Sri Lanka on 31 July 1976.
I also draw your attention to the blocks that have been offered by Sri Lanka
located in the Gulf of Mannar as well as the Mannar Basin. Block 1, offered to
India is adjoining the Indian Block CY-DWN-2001/1 in the deep water off shore
Cauvery Basin, Gulf of Mannar. This Block was offered to the Oil and Natural Gas
Corporation (ONGC) under the New Exploration Licensing Policy (NELP). The
Production Sharing Contract (PSC) was signed by ONGC and OIL (Oil India) on 4
February 2003 on an equity split of 80: 20 respectively.
This is the time that TGS NOPEC sold Sri Lankan seismic data and earned US$2
million. It is reliably learnt that a western oil company has now joined this
consortium on undisclosed terms. It will be interesting to know what progress
has been made on this block that is on the Indian side and whether any
exploratory drill holes were done.
I would also like to point out that there are a number of oil producing wells
north of the boundary between India and Sri Lanka in the Bay of Bengal. The
Block CY-OS- 90/1 (PY3) Field operated by Hindustan Oil Exploration Company
(HOEC) produced 6269 BOPD (Barrels of Oil Per Day) in 2004 to 2005 and all the
crude oil was sold to Chennai Petroleum Corporation Ltd.
I would now draw the attention of the government of Sri Lanka to the Maritime
Boundary Agreements signed with India for the Gulf of Mannar and the Bay of
Bengal and the ratifications exchanged on 10 May 1976.
Special attention is drawn to Article VI of the Agreement that states as
follows:"If any geological petroleum or natural gas structure or field, or any
single geological structure or field of any mineral deposit, including sand or
gravel extends across the boundary referred to in Articles I and II and the part
of such structure or field which is situated on one side of the boundary is
exploited, in whole or in part, from the other side of the boundary, the two
countries shall seek to reach agreement as to the manner in which the structure
or field shall be most effectively exploited and the manner in which the
proceeds deriving there from shall be apportioned."
I wish to draw the attention of the experts on the relevance of the above
Article to the Gulf of Mannar and also the Bay of Bengal where India is carrying
out a vigorous offshore oil exploration programs. Particularly in the Bay of
Bengal, there are already productive oil wells and there is also the likelihood
of such oil fields in the deep water of the Gulf of Mannar. These fields will
straddle the maritime boundaries. What action will the government take in
relation to the treaties already in force with India? I would
also draw the attention of the experts on the Law of the Sea relating to the
declaration of the Exclusive Economic Zone (EEZ) by India and Sri Lanka. The
declaration of the 200 nautical mile EEZ, especially in the Gulf of Mannar and
part of the Mannar Basin by both countries will overlap as the Gulf of Mannar,
lying between the southern tip of India and west coast of Sri Lanka is on the
average 160 and 200 kms (86 �160 nautical miles) wide.
Will the maritime boundary delimitation in these areas supersede
the declaration of EEZ's or have the two countries to agree on a median line for
the EEZ's in the areas concerned through bilateral consultations? Another
alternative is to work on a Joint Development Zone as provided by the Law of the
Sea Convention. This arrangement will be advantageous to Sri Lanka.
It is also suggested that the three blocks offered should be clearly demarcated
with established coordinates with respect to the turning points of the maritime
boundary between India and Sri Lanka in the Gulf of Mannar and the Mannar Basin
as to avoid future complications.
Boosting Maritime Capabilities in the Indian Ocean,
Dipanjan Roy
Chaudhury, New Delhi, India, 23 August 2007 [see also
Tamil Eelam Struggle for
Freedom - Some Aspects of the International Dimension ]
Maritime power represents military, political, and economic power, exerted
through an ability to use the sea or deny its use to others. It has
traditionally been employed to control "use-of-the-sea" activities undertaken by
nations for their general economic welfare and, often, even for their very
survival. Maritime power and naval power are not synonymous, the latter being a
sub-set of the former. Traditional land powers are more and more focusing on
developing their maritime capabilities to safeguard their economic interests and
extend their sphere of influence.
Historically, China has been a land power. However, over the past two decades,
it has found itself increasingly dependent on resources and markets accessible
only via maritime routes. This has left Beijing with the dilemma of how to
safeguard its trade routes and flow of resources in a world in which the United
States is the dominant naval power, and both India and Japan � China's neighbors
and strategic rivals � are stepping up their own naval capabilities.
Ensuring a continuous supply of energy has come to be the most important
prerequisite for China in building an advanced, industrialized state. Despite
being the world's sixth largest oil producer, China has been a net importer of
oil since 1994. It imported 40 million metric tons in 1999 and is projected to
import 100 million tons by 2010. China's dependence on seafood has increased in
recent years. China will therefore have to ensure security of its sea lanes and
shipping industry to ensure its continued development As of today, 85 percent of
China's trade is sea-based. Also, with its 26 shipyards, China has emerged as
the world's fourth largest shipbuilder. Thus for both reasons, China needs
assured access and control over its adjacent oceans.
China and Indian Ocean Nations
China's perceptions regarding other major powers, especially
Moscow and Washington, have been the most important external factor molding its
Indian Ocean vision and policy initiatives. While initially it was American
containment that explained all their activities in the Indian Ocean, the
Sino-Soviet split in the early 1960's made China suspicious of Moscow's
initiatives and intentions in this region.
In the recent years, a new great game has begun between India and China to bring
the Maldives and Sri Lanka under their respective sphere of influence in the
Indian Ocean Region (I.O.R.).
After Myanmar and Bangladesh, to complete the "arc of influence"
in South Asia, China is determined to enhance military and economic cooperation
with the Maldives and Sri Lanka. China's ambition to build a naval base at Marao
in the Maldives, its recent entry into the oil exploration business in Sri
Lanka, the development of port and bunker facilities at Hambantota, the
strengthening military cooperation and boosting bilateral trade with Colombo,
are all against Indian interests and ambitions in the region.
Although China claims that its bases are only for securing energy supplies to
feed its growing economy, the Chinese base in the Maldives is motivated by
Beijing's determination to contain and encircle India and thereby limit the
growing influence of the Indian Navy in the region. The Marao base deal was
finalized after two years of negotiations, when Chinese Prime minister Zhu
Rongzi visited Male' in May 2001. Once Marao comes up as the new Chinese
"pearl," Beijing's power projection in the Indian Ocean would be augmented.
Recently, Sri Lanka allocated an exploration block in the Mannar Basin to China
for petroleum exploration. This allocation would connote a Chinese presence just
a few miles from India's southern tip, thus causing strategic discomfort. In
economic terms, it could also mean the end of the monopoly held by Indian oil
companies in this realm, putting them into direct and stiff competition from
Chinese oil companies.
At Hambantota, on the southern coast of Sri Lanka where Beijing
is building bunkering facilities and an oil tank farm. This infrastructure will
help service hundreds of ships that traverse the sea lanes of commerce off Sri
Lanka. The Chinese presence in Hambantota would be another vital element in its
strategic circle already enhanced through its projects in Pakistan, Myanmar and
Bangladesh.
It is Sri Lanka's strategic location that has prompted Beijing to aim for a
strategic relationship with Colombo. Beijing is concerned about the growing
United States presence in the region as well as about increasing Indo-U.S. naval
cooperation in the Indian Ocean. China looks at using the partnership with Sri
Lanka to enhance its influence over strategic sea lanes of communication from
Europe to East Asia and oil tanker routes from the Middle East to the Malacca
Straits. China has been consolidating its access to the Indian Ocean through the
Karakoram Highway and Karachi, through the China-Burma road to Burmese ports and
through the Malacca Straits, especially once they have established their
supremacy over the South China Sea.
China's Indian Ocean policy has been clearly influenced by its ties with the
other major powers. Its interest in the Indian Ocean started partly as a
reaction to its perception that increasing United States presence there was
aimed at encircling China. The policy has also been directly linked to its
problems with New Delhi. China feels India is facilitating the American presence
in the Indian Ocean region as a means of countering Beijing.
The United States Navy maintains a substantial permanent presence in the I.O.R.
from its Fifth Fleet base in the Gulf, its substantial naval and air assets at
Diego Garcia as well as by rotational deployments of Seventh Fleet units from
the Pacific, centered on one or two nuclear-powered, nuclear-armed aircraft
carriers. It was last deployed in major hostilities against Iraq, was briefly
involved in Somalia and was on call to resist the Australian preemptive
intervention in East Timor.
Chinese Naval Power and the Indian Ocean Region The Indian Ocean,
along with other sea lines of communication, have attracted the attention of
Chinese naval planners. The takeover of the Panama Canal by a private Chinese
firm after the United States withdrawal in 1999, reported Chinese threats to
intervene in the Straits of Malacca and the active Chinese role in the West
Asian region indicate unfolding Chinese interest this region. Beginning from the
early 1980's, Chinese naval modernization underwent a sea change, partly with
the modified perceptions about the value of the oceans.
China has launched an ambitious futuristic weapons development program,
including high energy microwave beam-weapons, ship-based laser cannon and
space-based weaponry to destroy communication and reconnaissance satellites. The
country is the greatest source of proliferation of weapons of mass destruction
and missile technology. History has shown that China is not averse to using
force in order to achieve its aims, and its attitude towards its neighbors is a
constant source of concern.
Gwadar in Pakistan, Hambantota in Sri Lanka and Sitwe (Akyab) in Myanmar have
functioned essentially as fishing harbors. The growing Chinese interest in these
places and China's generous offer of assistance to these countries for
converting their fishing harbours into maritime ports of international standards
has aroused doubts about Beijing's motive in increasing its naval presence in
the region.
Beijing is trying to give its Navy a greater visibility, operability and rapid
action capability in the Indian Ocean region than it enjoys now. Gwadar,
Hambantota and Sitwe form important components of its maritime security
strategy. China is also interested in the island nation of Seychelles. It is
important to monitor the growing Chinese interest there as part of any study of
China's maritime strategic moves.
Beijing has given signal to the world of its aspirations to assume a role beyond
its natural geographic and historical maritime boundaries. Any Chinese threat to
India's maritime interests in the near future is economic and political as well
as military. China is setting up a series of military bases as part of an
endeavor to project its power.
In Bangladesh, Beijing is seeking extensive naval and commercial
access. Dhaka already shares close defense ties with Beijing. In Myanmar, China
is also building naval bases and electronic intelligence gathering facilities at
Grand Coco Island in the Bay of Bengal. However, the military junta, wary of
excessive dependence on China, has turned to New Delhi for military supplies.
In Cambodia, Beijing is helping to build a railway line from
South China to the sea. In Thailand, China is funding the construction of a $20
billion canal across the Kra Isthmus. This would allow ships to bypass the
Strait of Malacca. China has also set up electronic posts near the Persian Gulf
to monitor ship traffic through the Strait of Hormuz.
New Delhi's Role in the Indian Ocean Region India has been
apprehensive about China's growing naval expansion in the Indian Ocean, which
New Delhi views as encirclement. As China's naval diplomacy take roots in the
region, India cannot remain a mute spectator and, much like China, has increased
its military engagement in the region. India now regularly conducts naval and
military exercises with the United States, Japan, and China, as well as with its
South Asian and South-East Asian neighbors. New Delhi has signed a defense
agreement with Singapore and has cooperative arrangements with many nations
stretching from the Seychelles to Vietnam. It has participated in mechanisms to
protect maritime traffic passing through the strategic Malacca Straits.
In recent years India has intensified its pace of cooperation with countries in
the Indian Ocean littoral. After the success of its tsunami diplomacy, New Delhi
is looking forward to evolve new channels of naval diplomacy with these
countries. During the past year, the just-retired Indian Navy chief, Admiral
Arun Prakash, visited many South East Asian and South Asian capitals. The
primary goal of these visits was to enhance bilateral cooperation and strengthen
naval ties.
Two Indian warships recently made friendly port calls in Bangladesh and Myanmar.
The navies of India and Bangladesh have also discussed possibilities of
connecting the Vishakapatnam and Chittagong ports. An access agreement with
Dhaka would allow more extensive patrolling, both sea borne and from the air in
these sensitive waters. The Indian navy is also keen to maintain vessels at the
Bangladeshi ports, to compete with Beijing's strategic gains in that sector.
China has signed a training and equipment agreement with Dhaka.
India's geographical location at the natural junction of the busy international
shipping lanes that crisscross the Indian Ocean has had a major impact upon the
formulation of New Delhi's maritime strategy. The sea area around India is among
the busiest in the world, with over 100,000 ships transiting the shipping lanes
every year.
The Straits of Malacca alone account for some 60,000 ships
annually. India itself has a 4,670-mile long (7,516 km) coastline and several
far-flung island territories. The 13 major and 185 minor ports that mark India's
coastline constitute the landward ends of the country's sea lines of
communication. The development of additional ports is a high-priority activity
and is taking place all along the western and eastern seaboards of the country.
India, today, has a modest, but rapidly-growing
merchant-shipping fleet, presently comprising 756 ships and totaling 8.6 million
"Gross Registered Tonnes," with an average age of around 17 years, as compared
to the global average of 20 years. The Indian Navy and the Indian Coast Guard
are major stabilizing forces in the movement of energy across the Indian Ocean,
not just for India, but for the world at large.
The region of India's maritime interests, which on primary geographic
considerations might suggest itself only as the north Indian Ocean and the
Arabian Sea, in fact has to take maritime factors into account and developments
in distant areas such as the western Pacific, South China Sea, the eastern
Mediterranean, the central and southern Indian Ocean.
Also under review are islands such as Diego Garcia, Madagascar,
Mauritius, Reunion and the Seychelles, in addition to South Africa and Australia
as they dominate the southern approaches to the Indian Ocean. This is because of
the flexibility and mobility of naval forces and the rapidity with which they
can traverse large distances, concentrate, deploy, withdraw or disperse.
India's maritime diplomacy, like its broader diplomatic effort, radiates out in
expanding circles of engagement, starting with the country's immediate maritime
neighborhood. As a mature and responsible maritime power, New Delhi is
contributing actively to capacity building and operational coordination to
address threats from non-state actors, disaster relief, support to United
Nations peacekeeping and rescue and extrication missions.
In fact, India's maritime diplomacy is now an essential component of New Delhi's
"Look East" policy. India has concluded bilateral arrangements with Thailand and
Indonesia for joint coordinated patrols by the three navies in the Bay of Bengal
at the mouth of the Malacca Straits.
New Delhi is also ready to contribute to capacity building of
the littoral states in the interests of maritime security. Southeast Asian
navies participate in the bi-annual MILAN exercises. At the multilateral level
and within the maritime domain, India has launched a series of initiatives to
provide an inclusive and mutually-consultative forum in which the navies and
maritime security agencies of the region - whether large or small - can meet and
discuss common issues that bear upon international security.
Economic growth and opportunities in the Asia-Pacific and Indian Ocean have
attracted China into taking an interest in the region. Beijing feels compelled
to look outwards in order to craft joint strategies for achieving faster
economic growth and peace and security.
China is a long-term concern by reason, not only because of its
phenomenal economic growth and military power, but because of its ambitious and
determined drive towards great global power status.
The drive is already manifesting itself in the modernization of
its armed forces � in particular the expansion of its navy and maritime
capabilities. The Chinese, however, argue that their initiative towards the
Indian Ocean is guided by both strategic and economic compulsions and
capabilities, as a significant proportion of its sea borne trade (around 85
percent) passes through the Indian Ocean.
Given its sensitivities to the United States and India, China has supported
proposals for the Indian Ocean as a Zone of Peace. The country's long-term
strategic outlook is global and not regional. Beijing seeks to develop its naval
capabilities and seek definite sea superiority over other naval powers in the
region.
Some of China's initiatives in the Indian Ocean are also geared
to preventing any littoral country from granting Taiwan their membership.
China's ability to deter Taiwan thus is more effective since the Indian Ocean
states seem willing to oblige Beijing. Thus, Taiwan is not a member of the
Indian Ocean Tuna Commission although it is represented in the fishing
associations of the Pacific and Atlantic Oceans.
By 2020 China plans to deploy task forces consisting of two aircraft carriers,
two S.S.B.N.s, six S.S.N.s, 18 destroyers and about 30 frigates in the I.O.R.
However, until about 2045, it will be difficult for China to deploy its naval
forces permanently in the Indian Ocean. By that time, it remains to be seen if
Pakistan, Myanmar and other countries in the region become full-fledged Chinese
allies.
India is trying to create a balance of power in the I.O.R, as the country is
emerging as a major power and is often regarded as a pivotal influence in the
region's geopolitics.
It has established a "Far Eastern Strategic Command"
headquartered in Port Blair to monitor the military situation in the region.
However, in order to have a strong hold over the region, India needs economic
assets as well as a strong military presence.
India must have access in the region of Chinese influence, by
establishing political, economic and security ties with East and Southeast Asian
countries. New Delhi must strengthen its ties with other major regional and
global forums to maintain its sphere of influence.
At a strategic level, India will have to attempt to balance
China's power realistically, through development of its own economic and
military potential and through building strong relationships with neighbors, and
regional organizations like the Association of Southeast Asian Nations
(A.S.E.A.N.)
Oil exploration; the
battle begins
-
Natasha Gunaratne, Sri Lanka Sunday Times, 9 September 2007
Documents for tenders for offshore oil and gas exploration in the Mannar Basin
are to be distributed by end 2007 including during several road shows that have
been planned, according to Minister of Petroleum and Petroleum Resources, A.H.M.
Fowzie.
He told The Sunday Times FT that tenders will be examined until April 2008 and
the contract is expected to be handed over to the successful bidder in August
2008. Out of the eight available blocks in the Mannar Basin, three are up for
sale for offshore oil exploration. Two have already been sold to India and
China. Fowzie said he is very confident of the estimated figure of one
billion barrels of offshore oil which oil experts have also concurred with him.
According to 2D surveys of the area, Fowzie said the data has been interpreted
by experts who have confidently concluded the existence of oil and gas deposits.
But an expert on oil exploration told this newspaper that the Norwegian company
which the minister refers to is the controversial
TGS NOPEC who received
US$8 million from the Sri Lankan government to hand over data from 2D seismic
surveys it conducted. The expert further added that the claim of one billion
barrels is unsubstantiated since there is yet to be 3D seismic surveys conducted
in the area in question.
The expert also added that regulations under the Petroleum Resources Act have
not been framed or finalized and it is unknown as to what stage the Production
Sharing Contract (PSC) is at. However, Fowzie contended that the PSC has been
drawn up and that once it is handed over to the companies interested in offshore
oil and gas exploration, the profit sharing, part of the PSC, is what the
companies will have to offer.
The contract will subsequently be awarded to the highest bidder. Fowzie also
added that the regulations under the Petroleum Resources Act have been
finalized.
Sri Lanka to allow India, China to explore oil along its coast
- China
Institute, University of Alberta, 7 July 2007
COLOMBO, Sri Lanka (AP) - The Sri Lankan government has decided to allow India
and China to explore for oil along its coast, a news report said Saturday.
India and China will be allowed to explore two of the six blocks identified for
oil exploration off the island nation's northwest coast, the state-run Daily
News quoted Petroleum Resources Development Minister AHM Fowzie as saying.
"The proposal received Cabinet approval this week. We will shortly call tenders
for exploring the four remaining blocks," Fowzie said.
Sri Lanka, which now imports all of its oil and gas, might be able to produce
oil within three years if exploration efforts were successful, according to the
Petroleum Resources Development Ministry, which was established in 2005 to help
facilitate the country's oil and gas exploration efforts.
The Gulf of Mannar, between the southern tip of India and the west coast of Sri
Lanka, has been identified for the first phase of oil exploration, which is
likely to begin in August 2007, the news report said.
Fowzie said many countries engaged in the oil trade, including giants Saudi
Arabia and Iran, have been told about opportunities in Sri Lanka and have
provided technical assistance and expertise for local oil exploration.
In October last year, a Norwegian seismic survey company, after completing a
second phase of studies, said there may be oil and natural gas reserves off the
west coast of Sri Lanka. An earlier survey had showed the possibility of small
hydrocarbon reserves in the northwest Gulf of Mannar.
From the mid-1970s to the mid-1980s, overseas companies had explored areas off
Sri Lanka's coast, but failed to find any oil or gas reserves.
China's
Oil Quest Across India's Cauvery Basin, SAAG Paper no. 2181 - B. Raman
26.March 2007 (The writer is Additional Secretary (retd), Cabinet
Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For
Topical Studies, Chennai. He is also associated with the Chennai Centre For
China Studies.)
China's oil quest is set to reach the Mannar area of Sri Lanka adjoining the
likely oil/gas bearing Cauvery basin of South India. A Chinese energy foothold
in this key area has been facilitated by the Government of President Mahinda
Rajapakse to balance an Indian presence in this area.
2. Exploration for oil and gas in certain parts of Sri Lanka between 1967 and
1974 did not yield any useful results. That exploration did not cover the Mannar
area. In 2001, the Ceylon Petroleum Corporation awarded a contract for a seismic
study of the Mannar area to TGS NOPEC, a Norwegian company.
Under this contract, the Norwegian company was permitted to sell
the data collected by it to third parties too. It sold the data to the Oil and
Natural Gas Corporation (ONGC) of India and British Gas, India.
In 2006, the Sri Lankan Government purchased the entire data
from the Norwegian company for US $ 10.5 million and cancelled its right to sell
the data collected by it to third parties.
According to Dr. Neil de Silva, Director-General of the
Petroleum Resource Development Secretariat (PRDS), the data collected by the
Norwegian company indicated the possibility of the presence of oil and gas in
the Mannar Basin. The data was given to an Australian company, Spectrum, for
analysis.
3. On September 22, 2005, A.H.M. Fowzie, the Minister for Environment and
Natural Resources, stated as follows in a press interview:
"The Sri Lankan Government hopes to get foreign expertise for the exploration of
oil and natural gas deposits in Sri Lanka. We have been informed that oil and
natural gas resources are found in Sri Lanka from Puttlam to Matara and also in
the Bay of Mannar as well."
4. During a three-day visit to New Delhi, Mangala Samaraweera, the then Foreign
Minister of Sri Lanka, announced on May 9, 2006, that Sri Lanka would offer one
oil and gas exploration block to the ONGC on a preferential basis. He said:
�Given our close relations, we are offering one block on a preferential basis to
the ONGC. We are confident that the discussion on this will be finalised soon."
5. During a visit to New Delhi in the third week of January this year, Fowzie
announced that the Sri Lankan Government had divided the area to be explored
into eight blocks, of which one each would be offered to India and China without
bidding and there would be international bidding for the remaining six. He
announced at Colombo on March 6, 2007, that the Government would be entering
into a Memorandum of Understanding with the Government of China on the oil
exploration process within the next two months.
6. Earlier, the "Asian Tribune" of Bangkok reported on January 4, 2007, as
follows: "India�s state-owned Oil and Natural Gas Corporation Videsh Ltd. has
announced that it will explore for oil and gas in Sri Lanka�s Mannar basin very
soon. The ONGC Videsh Ltd said the company�s own experience in India�s Cauvery
basin would help them to explore oil and gas in the neighbouring Sri Lanka. It
has been speculated by geologists that the same Cauvery oil deposit string also
runs beneath Sri Lanka�s Mannar bay."
7. In a press interview on March 4, 2007, Dr.Neil de Silva was asked what was
the reason for the decision to offer one block to the ONGC without bidding.
He replied as follows: "We have to collaborate with the Indian government in the
management of oil in the border area.
This is because all over the world, oil and gas fields do not know the country
boundaries and in many instances they span over country boundaries. Countries
have agreements to exchange technical data. India has found oil fields but not
close to our border. India is not tapping our oil."
8. He was then asked why a block was being offered to China without bidding.
He replied as follows: "It is the government's decision. May be to strengthen
relations with China. However, we have to live with regional politics. What we
have to do is to manage them to get the maximum benefits to the country."
9. In other words, the policy of the Rajapakse Government is whatever benefit
is offered to India, an equal benefit will be offered to China.
10. In the meanwhile, the US Embassy in Colombo has disseminated the following
advisory to American oil companies:
"Sri Lanka is hoping to begin offshore oil prospecting soon.
Licensing to open 6 drilling plots in the Mannar basin will be handled
through a competitive bidding process. According to current plans, the
exploration round will be announced in May 2007 with bids closing in
December 2007. The Government hopes to do a road show after opening the bid
round, including stops in the US, London, Dubai, and Singapore. The US stop
will likely be Houston during the May 1 Offshore Technology Conference. In
addition to the exploration round, the government is planning to procure the
following services in Spring 2007:A. Designing the production sharing
agreement; B. Designing a computer model to analyze and evaluate the
exploration bids; C. Designing of the regulatory regime governing petroleum
exploration (to be funded through a US Trade and Development Agency (USTDA)
grant); and D. Designing and executing a marketing campaign to promote the
bid round."
11. A press release issued by the US Embassy on March 14, 2007,
stated as follows:
"Promoting energy security in Sri Lanka through the
development of the nation's oil and gas sector is the goal of a grant from
the U.S. Trade and Development Agency awarded today to the Ministry of
Finance and Planning. The 51 million Rs. ($474,000), grant will fund
technical assistance to the Ministry of Petroleum and Petroleum Resources
Development in support of its efforts to develop a comprehensive oil and gas
regulatory system and establish an organizational structure for the
regulatory authority. The USTDA grant was conferred in a
signing ceremony at the Finance Ministry in Colombo. U.S. Ambassador to Sri
Lanka Robert Blake and Dr. P.B. Jayasundera, Secretary for the Ministry of
Finance and Planning, signed the grant on behalf of the U.S. and Sri Lankan
governments, respectively. The USTDA grant awarded today will help Sri Lanka
transition from a consumer-driven to a production-oriented oil and gas
regulatory structure, based on the Sri Lankan government's plans to open up
promising offshore oil and gas blocks for exploration and development.
"Development of the offshore oil and gas sector could be an
important opportunity for Sri Lanka to reduce energy imports, generate
revenue and create jobs. The United States wants to help Sri Lanka maximize
its potential gain from oil and gas exploration," said Ambassador Blake. Sri
Lanka presently has no oil or gas production of its own and imports
approximately 80,000 barrels per day. The establishment of a sound
regulatory regime will contribute to Sri Lanka's nascent petroleum industry
and reduce the nation's dependence on imports. "A well-developed regulatory
structure is essential to attracting and keeping high-quality investors in
the oil sector," remarked the Ambassador; "We hope our assistance will help
Sri Lanka establish an open and transparent regulatory system that both
protects Sri Lanka's interests and gives investors confidence that they can
earn a worthwhile return on their investment."
Sri Lanka Will Seek Bids for Oil Exploration Licenses
- Anusha Ondaatjie, Bloomberg News, April 5, 2007
Costlier oil and military purchases to combat separatist Tamil Tiger rebels have
fanned consumer prices, curbing growth in the island's $26 billion economy.
China and India, Asia's two fastest-growing economies, are competing for
overseas oil and gas reserves to meet soaring energy demand.
"Escalating oil and gas prices have not only led to the increase in the cost of
living but also the reduction of competitiveness of Sri Lankan exports,'' the
Ceylon Chamber of Commerce, the island's biggest industry grouping, said in a
statement. "The oil and gas industry has the potential to change the destiny of
Sri Lanka.''
Sri Lanka, a country that imports all its oil, will next month ask explorers to
compete to develop a field that may contain 1 billion barrels of crude, 17
percent of neighboring India's reserves.
China and India's state oil companies have already been promised two of the
Mannar basin's five blocks. Sri Lanka will seek bids to develop three
remaining areas on May 1, said Neil De Silva, director general of petroleum
resources development. Licenses will be awarded in early 2008, he said
yesterday.
Sri Lanka needs to secure its own oil supplies to reduce petroleum imports.
Costlier oil and military purchases to combat separatist Tamil Tiger rebels have
fanned consumer prices, curbing growth in the island's $26 billion economy.
China and India, Asia's two fastest-growing economies, are competing for
overseas oil and gas reserves to meet soaring energy demand.
``Escalating oil and gas prices have not only led to the increase in the cost of
living but also the reduction of competitiveness of Sri Lankan exports,'' the
Ceylon Chamber of Commerce, the island's biggest industry grouping, said in a
statement. ``The oil and gas industry has the potential to change the destiny of
Sri Lanka.''
Demand for fuel is rising in line with economic expansion, projected at 7.5
percent this year. Oil prices in New York have risen 5.4 percent this year to
trade at $64.35 a barrel today.
West Coast
The auction for the three remaining blocks in the basin off Sri Lanka's west
coast will be launched at an offshore technology conference in Houston on May 1,
De Silva said in a telephone interview yesterday. Bids will be open until early
November, he said.
China National Offshore Oil Corp., parent of overseas- listed Cnooc Ltd., may
develop one coast, Petroleum Minister A.H.M. Fowzie said in an interview in
Shanghai on March 1. The basin contains the equivalent of one billion barrels of
oil, he said. The Beijing-based company may start exploration off the Sri Lankan
coast by 2008, he said.
``A block will also be going to the government of India,'' De Silva said. India
had proved oil reserves of 5.9 billion barrels at the end of 2005, according to
BP Plc's Statistical Review of World Energy.
China's Help
The Chinese government is helping Sri Lanka build its first coal-fired power
plant at Norocholai, north of capital Colombo, as the island seeks cheaper
electricity. The plant will produce 300 megawatts by 2010 and as much as 900
megawatts as demand rises. The electricity will cost half that of an oil-fired
unit.
Sri Lanka Oil Exploration Map Showing Cauvery Basin
(yellow lines shows boundaries of Cauvery Basin on land, see map below),
October, 2003, Sharp IOR eNewsletter. "...there is a resurgence of interest in
offshore exploration in Sri Lanka, after a lapse of about 20 years. The main
impetus is the success achieved on the Indian side of the Cauvery Basin, which
straddles India and the north of Sri Lanka, where fields are in production and a
significant discovery has been made close to the median line."
NTPC Ltd., India's largest power company, in December signed an agreement to
build a 500 megawatt coal-fired power plant in the Sri Lankan port town of
Trincomalee. The plant is expected to commence operations in 2011.
Surging crude oil prices raised Sri Lanka's oil import bill by 25 percent last
year to $2.07 billion. Import costs have been boosted by a depreciating
currency.
The Central Bank of Sri Lanka's last week maintained its 2007 growth forecast
even as renewed fighting in the island's civil war and the highest interest
rates in Asia slowed the pace of expansion in the fourth quarter.
US grants Sri Lanka $474,000 to develop upstream licensing rules
- Platts,
Singapore, March 23, 2007
The United States has given Sri Lanka a grant of Sri Lanka Rupees 51 million
($474,000) to fund the development of an oil and gas regulatory system, the US
embassy in Sri Lanka said in a statement last week.
The grant will help Sri Lanka transition from a consumer-driven to a
production-oriented oil and gas regulatory structure, based on the Sri Lankan
government's plans to open up promising offshore oil and gas blocks for
exploration and development, the US embassy said. Sri Lanka plans to unveil its
much-delayed maiden bidding round around mid-April, oil minister A H M Fowzie
told Platts earlier.
Some eight blocks have been identified in the Mannar Basin close to India's
Cauvery Basin, but Sri Lanka has already promised two of these to China and
India.
The contracting round was originally scheduled for the third-quarter of 2006 but
has faced several setbacks as the government changed tack mid-way on the
acquisition of seismic data.
Lack of adequate human resources and supporting infrastructure also caused the
delay.
The creation of a regulatory regime will contribute to Sri Lanka's nascent
petroleum industry and reduce the nation's dependence on imports, the US embassy
said. "A well-developed regulatory structure is essential to attracting and
keeping high-quality investors in the oil sector," Robert O. Blake, US
ambassador to Sri Lanka, said.
Barring some sporadic exploration activities in shallow waters along Sri Lanka's
west coast in the 1970s and 80s, which yielded nothing, the south Asian country
has seen almost no upstream activity.
But since 2001, with help from the Asian Development Bank, Sri Lanka began
taking steps toward exploring its upstream potential and in October 2005 set up
a Ministry of Petroleum Resources Development under the president's office to
manage oil and gas exploration and production activity.
The Mannar Basin, located between southwestern Sri Lanka and the Indian
coastline in water depths ranging from 50 meters to more than 3,000 meters, lies
immediately to the south of the Cauvery Basin, known for both oil and gas
production in the Indian waters.
Sri Lanka currently relies on imports to meet all of its crude demand of around
42,000 b/d and 50% of its products demand of around 3.5 million mt/year (about
70,000 b/d).
Offshore back on agenda after Mannar basin rethink -
Dr. Ray Shaw, Asian Oil & Gas, 26 April 2002, team leader of the ADB-Sri
Lanka Project, University of New South Wales� School of Petroleum Engineering.
With newly acquired seismic data serving to dispel earlier
suggestions that the Gulf of Mannar basin was devoid of rift basin architecture,
the Sri Lankan government is gearing up for petroleum exploration of its
offshore areas for the first time in almost 20 years. Dr Ray Shaw* summarises
the current state of play.
A recent report sponsored by funding from the Asian Development Bank recommended
new fiscal and legal frameworks be implemented as part of a major overhaul of
Sri Lanka�s promotion of its upstream oil and gas potential.
The report, prepared by the School of Petroleum Engineering within the
University of New South Wales (UNSW) based in Sydney, Australia, sets out a
draft Petroleum Resources Act as well as the conclusions of a technical review
of the petroleum prospectivity of the offshore areas.
Prepared in 2001, the draft Petroleum Resources Act was being considered by a
cabinet committee at the time Sri Lankan president Chandrika Kumaratunga
announced the proroguing of Parliament and new elections. Following December�s
election of a new government under prime minister Ranil Wickremesingsinghe and
the appointment of Karu Jayasooriya as minister for power and energy, it is
expected that reconsideration and passage of the bill will be high on the agenda
during the first part of this year.
Once adopted, a formal announcement will be made outlining details of the
bidding round process. This is likely to take place during a workshop to be held
in Colombo at which senior government and UNSW representatives will outline in
detail key legal, fiscal and administrative aspects of the new Act and technical
conclusions of the report.
Earlier exploration
From an exploration perspective Sri Lanka has been virtually
ignored by the international upstream oil and gas community for nearly 20 years.
Prior to Petro-Canada pulling out in 1984 there had been a number of forays,
between 1966 and 1984, by both Western and Soviet entities, principally focused
on exploration within the shallow offshore areas of the Cauvery basin located
off the Jaffna Peninsula.
During this period some 18,000km of seismic data were recorded and seven wells
drilled, of which four were structural tests. All were plugged and abandoned
without encountering commercial hydrocarbons, although the three stratigraphic
wells drilled by the Soviets on Mannar Island (Pesalai 1, 2 and 3), were
reported to have encountered wet gas shows at several levels. In the Palk Strait
region of the Cauvery basin, Marathon drilled the Palk Bay-1 and Delft-1 wells
and Cities Service drilled Pedro-1. Cities Service also drilled Pearl-1 on the
eastern flank of the Gulf of Mannar basin located to the south of the Adam�s
Bridge high which separates the two basins.
Principal targets were sought by Marathon and Cities within Cretaceous sands
across horsts and tilted fault blocks in the Palk Strait region. Interest here
was kindled by a flow on test of 1488b/d from Cretaceous sands in the PH-9-1
well located just 30km to the north of the Pedro-1 structure, within Indian
waters of the Cauvery basin.
It was this interest in pursuing PH 9-1 lookalikes in the nearby shallow waters
of the Sri Lankan Cauvery basin that focused attention away from the
comparatively much deeper water setting of the Gulf of Mannar basin. Only Cities
Pearl 1 well tested the Gulf of Mannar basin and that well was located high up
on the shelf, again in shallow waters. Although penetrating a thick sequence of
Cretaceous sands, Pearl-1 failed to encounter any shows. Terminating prematurely
in Late Cretaceous basalts, similar in age to basalts in Asamera�s Mannar 1,1A
well drilled on the northwestern Indian counterpart side of the basin, Pearl-1
led to speculation that this basin may be underlain by oceanic crust and so lack
any of the syn-rift sequences thought to host the likely source rocks of the
Cauvery basin to its north.
Alternative viewpoint Contradicting this view, the UNSW report
concluded that the area holding the best potential in the offshore Sri Lankan
region is the Gulf of Mannar basin. The Bay of Bengal margin side of the island,
first thought to have good potential, appears to have been transform dominated
and much of the syn-rift sequences may have been detached during the inception
of seafloor spreading along this margin. Following interest by a number of
seismic acquisition companies, TGS-Nopec was awarded a licence by the Ceylon
Petroleum Corporation (the national oil and gas enterprise of Sri Lanka) to
acquire the first reconnaissance seismic coverage across the deeper water
portions of the Gulf of Mannar basin.
During June and July 2001, some 1100km of 2D seismic were recorded by TGS-Nopec
and subsequently processed by WesternGeco. Their preliminary results, presented
in Singapore at a Southeast Asia Petroleum Exploration Society (Seapex)
conference last December, confirmed the UNSW view and have now encouraged moves
by TGS-Nopec to acquire a much more elaborate survey of some 7000-8000km across
the Gulf of Mannar basin during 2002.
The previously-undescribed Gulf of Mannar basin developed during at least two
periods of rifting and associated continental breakup, as part of the multiphase
fragmentation of Gondwanna during the Mesozoic.
The first phase began as a precursor to the commencement of seafloor spreading
in what is now the oceanic Bay of Bengal. This was followed by a second phase of
rifting associated with the detachment of Madagascar from the western side of
the developing Indian sub-continent, culminating in a second breakup
unconformity at the top of the Late Cretaceous.
Subsequently the Sri Lankan margins entered a phase of subsidence, driven by
thermal contraction, which continued until uplift and a major period of
regressive sedimentation began in the late Miocene.
TGS-Nopec data has confirmed up to at least six seconds of section lies above
basement in the Gulf of Mannar basin. Sediments comprise four packages. The
oldest package, Megasequence 1, was deposited during the initial syn-rift phase
of basin development, prior to the commencement of seafloor spreading west of
Sri Lanka within the Bay of Bengal. Megasequence 2 sediments were deposited
during the rift and sag phase, after the commencement of seafloor spreading in
the Bay of Bengal but before the onset of spreading about the West Indian Ridge.
The boundary between Megasequences 1 and 2 coincides with an Albian
unconformity, whereas a Late Cretaceous to Paleocene unconformity separates
Megasequences 2 and 3. Megasequence 3 was deposited during a Tertiary sag phase
of basin development, which terminated in the late Miocene following
compression. Subsequent basin-wide regression resulted in deposition of
Megasequence 4.
Petroleum geology There are three potential source intervals. The
first are associated with the Upper Gondwanna Group sediments which occur in
outcrop both on the Indian and Sri Lankan landmasses. These are likely to be
mainly terrestrial and associated with initial syn-rift development. Another
source sequence is associated with the basal transgression over the Albian
unconformity, and the third with the open marine Cretaceous sediments. On the
basis of synthetic burial history modeling discrete hydrocarbon generation
phases are envisaged both in the Late Cretaceous-Early Tertiary and again in the
Late Tertiary.
Good clastic reservoir intervals are predicted in Megasequence 2, based on the
results of the Pearl-1 well. Megasequence 3 contains good potential clastic
reservoirs towards the base, immediately overlying the breakup unconformity and
carbonate reservoir potential is also present in the Paleocene to middle Miocene
section.
There are a wide variety of potential trapping mechanisms including horsts and
tilted fault blocks and associated compactional drape. Regionally,
compressionally-induced traps together with turbidite-related and carbonate
stratigraphic traps are recognized, there being a major fairway along the
basin-floor and lower slope of the Sri Lankan margin comprising at least three
discrete stratigraphic intervals of stacked and interbedded turbidite and
channel deposits, some up to 1.0 seconds thick. Several structures have
associated flat spots, phase changes and amplitude bursts on the seismic
sections, consistent with direct hydrocarbon indicators. These occur across a
wide range of stratigraphic levels.
Conclusions A review of pre-existing exploration data together
with recently acquired new seismic data clearly dispels earlier interpretations
that the Gulf of Mannar basin is devoid of rift basin architecture. It is now
established as a basin containing thick syn-rift and post-breakup sedimentary
infill. The Gulf of Mannar basin represents a new deepwater frontier region
which has the indicia for hosting significant hydrocarbon accumulations.
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