Cairn India, a subsidiary of London-listed Cairn Energy, confirmed the first discovery of the natural gas in Sri Lanka, but has yet to establish commercial production schedule.
Sri Lanka’s President Mahinda Rajapaksa on Sunday announced the discovery of an offshore gas deposit and Cairn said further drilling was needed to establish the commerciality of the discovery.
“It will take 18 to 24 months to commercial exploration,” said Petroleum Industries Minister Susil Premajayantha referring to the gas deposit discovered in Mannar Basin.
In July, Cairn said they will start drilling in August and it will take two years to assess how much oil or gas there may be and if there is oil, it will take a minimum of six years to start commercial production.
Cairn has drilled one well out of the three it had planned.
Sri Lanka has awarded one of eight blocks to Cairn Lanka, a subsidiary of Cairn India, with an area of 3,000 sq km.
The government in 2007 offered one each to India and China, but neither has responded positively, and the remaining blocks are to be awarded by tender.
Premajayantha also said the government can now speed up the process of calling tenders for the remaining blocks and is optimistic of getting a competitive bidding after the discovery.
Sri Lanka’s government has said seismic data shows the potential for more than 1 billion barrels of oil under the sea in a 30,000 sq km area of the Mannar Basin, off the island’s northwestern coast.
Sri Lanka produces no oil and is dependent on imports, which cost it $3 billion in 2010. Since the end of a 25-year war with separatists Tamil Tiger rebels two years ago, the government has tried to reinvigorate oil and gas exploration.
US and Russian companies from the mid-1960s to 1984 undertook exploration work in the Cauvery Basin off the northern shore, but no commercial oil was produced and Sri Lanka’s civil war ended exploration there.
There are nearly 30 operating wells on the Indian side of the Cauvery Basin, and Calgary-based Bengal Energy has exploration rights for 1,362 sq km there. Sri Lanka is hopeful that success will be reflected in its side of the field.
