Go for Oil and Gas
Posted on July 27th, 2022

Sugath Kulattunga

It is sad to see the long never-ending queues for fuel and gas. Already the queues have claimed 25 lives. There is no light at the end of the tunnel that the supplies of gas and fuel would improve in the near future. The lost to the economy in the impact of the shortage of these commodities is immense. In addition, the opportunity cost of manpower wasted in these queues must be more than the direct cost to the economy.

It is bewildering why the smart Prime Minister, smarter Sajith or AKD nor the Aragalaya superstars have not even given a thought to an obvious and long-term solution to this opportunity of exploiting our proven resources of oil and gas. Is it that all these political vultures relish the dead economy?

For the first time, two natural gas discoveries were made in two wells out of the three wells drilled in Block M2 by Cairn in 2011. It was revealed that Norway struck oil only on the tenth well.

Sri Lanka’s Petroleum Resources Development Secretariat (PRDS) with the assistance of regional experts estimated that the Mannar basin alone could have the potential to generate over two billion barrels of oil and over nine trillion cubic feet of natural gas(9 TCF), which would be sufficient to fulfil a substantial portion of Sri Lanka’s energy needs for the next 60 years.  


It took another 10 years to enact Petroleum Resources Act, No. 21 of 2021 to provide for the establishment of the petroleum development authority of sri lanka; the formulation of a national policy on upstream petroleum industry and regulation and management structure capturing the maximum economic value of domestic petroleum resources.

The present estimate of the Mannar Bay oil and gas resources is claimed at US$ 267 billion. Cabinet approved the proposal of the then Minister of Energy to invite investors to exploit the resources on a fifty/ fifty basis. He was planning to present the proposal to a forum of oil explorers on the 15th of March 2022 but before that the Minister was sacked.. This act of preventing the presentation of the present proposals to the international oil interests at this moment when oil prices at their peak is criminal.

We should offer one well to an investor for 10 years on a Build Operate and Transfer basis with a condition that we have the first call on the gas and oil at say at a discount of 10 percent. When this well iss in operation other investors could be invited on our terms.

So, the present crisis is a result of all governments from 1960 onwards for lack of a vision and inability to exploit a proven resource. While we were dilly dallying Ghana attracted investors, such as China Development Bank Corp, which lent $1 billion to Ghana for developing its natural gas infrastructure and resources. In 1990 a US dollar was 246 cedis but today a dollar is only 8 cedis. At this critical moment we should not be wasting time in calling for tenders. We should negotiate directly with China or Russia to invest in the first well.

Another failure in the determination of development priorities was on the Sapugaskanda Oil Refinery built in 1969 with a capacity of 35,000 bbl/d. This was expanded thereafter to a processing capacity of 50,000 bbl/d to meet the domestic requirement of Petroleum fuel. Singapore, which does not produce a drop of crude oil developed a refinery capacity of 1.51 million bpd by 2018. Our vision was to build a refinery capacity to meet only the domestic demand whereas Singapore went into the export of refined products.

Sapugaskanda refinery also had a facility for the production of urea.It had a capacity for an annual production of over 294,000 tons of granulated urea valued at US $ 79 million. This facility was sold to an Indian buyer and it is mentioned that there is no information in the public domain as to how much this urea plant was sold by the Sri Lankan Government to the Indian company. (https://www.ft.lk/Agriculture/The-saga-of-the-fertiliser-industry-in-Sri-Lanka/31-700789)

Sri Lanka has a golden opportunity of holding a reserve of crude oil which even USA does, using the Trincomalee oil Farm which we got for a pittance from the British. Now that Sri Lanka has a reasonable arrangement with India for the use of the Oil Farm, they could be used to hold a strategic reserve.

Sugath Kulattunga

Leave a Reply

You must be logged in to post a comment.



Copyright © 2023 LankaWeb.com. All Rights Reserved. Powered by Wordpress