Dr Sarath Obeysekera

J R Jayewardene came to power in 1977 and handed over harnessing of the Hydro power potential to his trusted young Gamini Dissanayake . Proposals and funding from Western countries and Sweden ,discussions  negotiations ,extensive travelling to fix deals ,and final output was accelerated high priced power plants and dams  along Mahawali ,Today we reap the benefits and people forgot who did it and who became quite rich 

Now we has exhausted hydra power potential and moving in to rather new source of power which is Electricity generation using (Liquefied Natural Gas) LNG as the fuel for turbines to run generators .Unlike ample water resources, we do not have LNG as yet country is hoping to extract Gas in Mannar and Covery Basin with expensive capital outlay and of course cost of incentives.

Exploration History

Petroleum exploration in Sri Lanka began approximately between 1967-68 Compaigne General de Geophysicque of collected approximately 420 km of onshore and 75 km of offshore seismic data on behalf of the Ceylon Petroleum Corporation (CPC or Ceypetco). In 1974 Soviets spudded Pesalai 1 and Pesalai 2 on the Mannar Island but both failed.

In 1975 Pexamin Pacific acted as a consultant to promote exploration in the Cauvery Basin of Sri Lanka. In 1976 Western Pexamin Pacific signed a contract with CPC for an offshore exploration block.

Marathon Petroleum in 1976 drilled two exploratory wells, Palk Bay-1 and Delft-1 in the Cauvery Basin, and both failed to encounter any hydrocarbons and in 1977, the Marathon -Pexamin group relinquished its interests.

In 1981, Cities Services acquired interests in the Cauvery and Mannar basin. The same year Cities Services drilled Pearl-1, located on the northeast shelf of the Gulf of Mannar no oil and gas was present. 

In 1984 under a tripartite agreement between Phoenix Canada Oil Company, Petro-Canada and CPC, Petro-Canada acquired seismic data in the Mannar Basin. However, no further work was done and by 1984 petroleum exploration work offshore Sri Lanka came to a halt and remained dormant till 2001.

In, TGS NOPEC, a Norwegian seismic contractor with a regional office in Perth, Australia, approached CPC to undertake a speculative seismic program in the Mannar Basin.

After reviewing seismic data set in the Mannar Basin for exploration companies interested in the area.

From 2002 to 2006 the Government of Sri Lanka and TGS NOPEC made attempts to attract exploration companies to Sri Lankan through road shows at various venues. These efforts were unsuccessful. In 2007 under a Cabinet Decision the government of Sri Lanka bought the Mannar Basin 2D data from TGS NOPEC thereby cancelling the exclusive rights that TGS NOPEC had to collect seismic data in the territorial waters of Sri Lanka.

There was a speculation that Norwegian Government was brokering a peace deal with Sri Lank to solve LTTE issue, and the Sri Lankan Government was not in favour of working with Norwegians.

Based on this data out or nine blocks the Cabinet of Ministers decided to offer three for petroleum exploration under an international licensing round.

In 2007 an extensive marketing campaign was carried out globally with road shows and data rooms in London, Houston and Kuala Lumpur.The Cabinet of Ministers decided that the number of bids received for blocks 002 and 003 are not enough and thus directed the Ministry to evaluate only the bids received for block 001.

The bidders for Block 001 in the Mannar Basin licensing Round consisted of Cairn India Limited, Niko Resources (Cyprus) Limited and Oil and Natural Gas Company of India (ONGC). On July 07, 2008 the Government of Sri Lanka, through the Minister of Petroleum and Petroleum Resources Development signed a Petroleum Resources Agreement with Cairn Lanka(Private) Limited marking the beginning of petroleum exploration of Sri Lanka after 25 years.

Cairne has reported two discoveries in Mannar basin in wells Dorado 91/H and in the well Barracuda 1G/1after hitting gas paying zones mainly natural gas .In 2015 Cairne India decided to give up further development in Sri Lanka claiming that after assessment of discoveries and found unviable due to price slump.

Sri Lankan government has again embarked into a program of calling offers to carry our production drilling for which few companies has submitted the proposals now under evaluation 

On 24.09.2020 – Hon. Minister of Energy, Udaya Gammanpila, presented letters of appointment to Mr. Surath Ovitigama as the Director General of the Petroleum Resources Development Secretariat (PRDS) and appointed Ex DG of PDRS Mr. Saliya Wickramasuriya, as an Advisor.

Current DG Mr Surath Ovitigama who claim to have experience in working in Oil and Gas sector in North Sea Industry has stated that a fresh approach has been taken by the government to attract investors for the upstream oil and gas industry of Sri Lanka.He further stated that during the pandemic situation where most oil companies are currently not investing in new ventures the government plans to rectify issues within the legal and fiscal framework of Sri Lanka which would align with the interest of investors when the pandemic ends and the world economy recovers and as the first step Natural Gas Policy of the country has been formulated and finalized. Currently several data reprocessing work under multi-client business model is underway to upgrade the existing data set to a modern one. In addition to that the airborne survey awarded to Bell Aerospace which was planned to collect geophysical data over the Manner and Cauvery Basins will also go ahead soon, after delays due to the pandemic situation.

Whatever the amount of Gas to be found in Sri Lanka is not high enough to find international buyers ,hence government should carefully plan to develop mid stream processing of LNG for transportation to the proposed floating storage and re-gasification Unit ( FSRU ) for which RFP’s will be issued quite soon .

With current expertise ,CEB and CPC are not fully conversant with process planning andconstruction management of Mid-stream and Upstream development of LNG facilities unless local Sri Lankan experts are requested to join a Project Management Team to avoid highly paid expatriates to provide know how.

Experts also predict that Compressed Natural Gas (CNG) facilities may have to be developed on shore to make it available for vehicles .trains and buses as an alternative fuel .Government has not yet plan for such facilities.

We have contacted Dr Sarath Obeysekera who has extensive exposure to Oil and Gas Industry in Norway and UK and inquired about the future of the development of LNG industry in Sri Lanka 

Q What is your opinion about future prospectsof LNG development and what the obstacles we might face ?

I will first give an  interesting preamble to our discussion ..

I came on a holiday to Sri Lanka from Russia where I was studying for a major in the University in the Field of Oil and Gas Exploration and visited the Russian Camp on shore where Oil was drilled .Russians were very helpful and took me to the drilling site and later in the evening we had a  Vodka feast where they told me s startling story. It was the pre-election year and Mr Subasinghe was the minister of Industries under the Premiere Sirimavo Bandaranayake who was adored by Russians for being the first Woman prime minister in the world .As the government needed to attract votes, they got the CPC to get help from Russians to pour a barrel of crude oil into a well and gave wide publicity that Sri Lanka Found Oil Sadly there was no oil in the wells and they packed up and left

As I mentioned before, with my encounter with Russians in 1974 .I was closely monitoring the development of exploration of oil and gas in Sri Lanka. Main problem we are facing is finding the right people with exposure to manage the institutions which are involved in  Oil Gas Production.

Political patronage with vested interest may be a prime criteria during the   appointment of key personnel and also finding the right approach to execute the project .When Sri Lanka came to know of existence of Gas ,we should have drafted the Gas Policy and complete in a short period .Now due to unavailability of an Approved Legislation on Gas and a nominated authority to ensue adherence government went ahead in calling tenders for exploration .If and when Gas starts to flow presumably in two years’ time ,we should have Intermediate ( mid)  stream processing of the Gas to be  filtered and cleaned in order to either store in Croyogenic ( Ultar cold  temperate to -162 C Degrees ) or transport by a pipe line to shore for processing before storage .Sri Lanka has not planned for any of above .

We also note that Sri Lanka is now planning to develop Down Stream LNG processing to provide energy for power production ,until LNG from Sri Mannar or Cauvery start flowing,

Current request for proposal consist of Construction of LNG unloading jerry or a Single Point Mooring Buoy SPM)  along side a ( floating storage and re gasification Unit ( FSRU ) to be deployed by a prospective investor on a BOT and BOO based development with a planned investment of Us $ 400 million .This project is to be completed within a span of 30 to 36 months .

Question is  whether any investor will dare to put forward a proposal to provide LNG to end user LNG power generating company which has to sell power to the government at 15 Rs per unit ,under the current Fitch and Moody downgrading Sri Lanka.These investment companies will look for funds from  international  funding agencies or investment banks who will be forced to carry out due diligence on Sri Lanka ,and they may be discouraged to invest as sovereign guarantees to be provided by the government may not stand ground .

FSRU deployment will also be done providing that the government  concludes the Approval of Gas policy in Sri Lanka and signs a long term LNG supply with world wide suppliers like  Nigeria ,Qatar Australai and Russia .Generally LNG suppliers look  for almost 20-25  yearlong supply contract for which Sri Lanka Government should be ready to undertake .Supplier countries look for long term supply contracts to underpin the financing of LNG terminal developments hence agreeing them to sign shorter term contracts are quite difficult

Q2 How does government ensure signing of continuous LNG supply contracts?

My opinion is that speculation about possible termination the PUCSL ( public utilities commission ) is somewhat connected to the Gas Policy implementation and setting up new Power Purchase Agreements with power generating companies mushrooming up ,as PUCSL may dictate terms on the long term buying rates on LNG and power from LNG driven plants ,which can be an issue to the negotiators of LNG prices. Gas Policy should be again published so that professionals can review the same to advise the negotiators.

As I said best LNG bulk price depends on cost of FSRU ,Unloading Jetty offshore and onshore pipe line to Kerawalapitiya power plant and Kelanitissa  power plant and the cost of the new LNG driven Kerawalapitiya power plant with distribution upgrades of switch gear .

I assume that government has done a detailed feasibility on above .

Finally back to our own production of LNG which may take around 3 to 4 years. Sri Lanka should plan and develop mid-stream facilities from now on in order to provide the LNG to be transported to the FSRU for Regasification or lay a pipeline offshore from  Manar to Kerawalapitiya 

J R built Hydropower plants,MR built Coal Power Plant ,and  now GR has to build LNG plants .

Burning question is what will happen to the plansby environmentalist who are  pushing for shifting to alternative sustainable energy like Solar assisted Electricity Generation Plants and Wind Power generation  and Sea wave assisted power generation plants in Sri Lanka ?.