|January 24th, 2014, 04:35 PM||#42|
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Apparently only two companies have bid for the blocks in the second licensing round; one of them being Cairn.
Cairn India Ltd. is poised to make history in Sri Lanka with first production from the country's offshore gas fields starting as early as 2016. The oil and gas industry is watching this development with interest as Sri Lanka prepares for the commencement of indigenous gas production. Upstream companies are also looking at potential offshore hydrocarbon prospects which would be offered in the first quarter of next year.
Cairn, until now more focused on producing from onshore fields in India, said it was engaging Sri Lankan authority on appraisal planning and commercial discussion relating to its first two offshore discoveries – the Dorado and Barracuda fields in the Mannar Basin.
“We continue to engage in appraisal planning and commercial discussions with the Sri Lankan government for monetizing the discovered gas resources and have recently secured an extension to the current exploration phase to April 2014,” said Karunakaran Hari, head of commercial, based in the company’s Gurgaon office in India.
“In the wake of Cairn’s success in the Mannar Basin, the Sri Lankan Government is currently conducting a bid round for other exploration blocks in the surrounding area,” he said.
DRILLING SUCCESS IN SRI LANKA
In 2007, Cairn took one of the three blocks under Sri Lanka’s first round of concession offer, and made the Dorado and Barracuda discoveries.
Cairn broke ground in Sri Lanka with two gas discoveries out of the four exploration wells drilled under phase 1 and 2 in its concession.
The gross proved and probable hydrocarbons initially in place in the Sri Lanka block was 74 million barrels of oil equivalent (MMboe) as at March 31, according to Cairn. The Dorado discovery is up for development with first gas officially expected in 2017-18 while Barracuda is being further assessed. But industry observers expected Dorado gas in 2016, with the field set to become a benchmark for future hydrocarbon developments amid intense competition for investments from other prolific basins in the region.
Sri Lanka’s Petroleum Resources Development Secretariat (PDRS) hoped that a second round of offers for upstream exploration blocks would be successful, with the organization banking on the high potential shown in Mannar basin discoveries and the prolific hydrocarbon plays in the region, especially the Bay of Bengal.
PRDS planned to lease out 13 blocks in the first quarter of next year. The challenge is drafting contracts for the blocks and building seismic data on the resources. Except for Cairn’s Dorado and Barracuda, Sri Lanka has no other proven hydrocarbon deposits and is fully dependent on imported petroleum supplies.
A subsea pipeline is one of the preferred development options for Dorado gas, which would be supplied to an onshore power plant. While Dorado gas is in an early stage of development and project details are being kept confidential, the Sri Lankan government has indicated it want to make it a model development with a captive power sector market.
Gas pricing would be a critical issue, given the big gap in international prices, especially with the U.S. gas being cheapest and Australian gas the most costly.
“Commercialization of domestic gas discoveries is likely to overhaul and transform the energy mix of the country,” Hari.
“The Mannar basin is a rifted passive margin with Mesozoic to recent sediments up to 7.5 miles (12 kilometers) in thickness. A range of structures, stratigraphic traps, and good reservoirs are known to exist in the Basin,” he said.
“Cairn’s discoveries de-risked any doubts of a viable petroleum system. Cairn feels confident that there is significant remaining hydrocarbon potential to pursue in the area – both for gas and liquid hydrocarbons,” he stressed.
Additionally, Cairn continues to look at the options and would study prospects of other blocks offered before deciding on the bidding.
CAIRN LOOKS BEYOND SRI LANKA
Cairn has also been working in Block 1 off South Africa.
“We have completed the 3D seismic and the data interpretation is on-going. The results of data interpretation will identify new prospects and decide on the timing for drilling,” Hari told Rigzone.
It has also planned 2D Seismic shooting in Block 1 next year.
Cairn took 60 percent farm-in stake in Block 1 from Petroleum, Oil and Gas Corporation of South Africa (SOC) Ltd. (PetroSA), leaving it with 40 percent share.
“With our current financial strength and capability to leverage, we continue to look into the inorganic growth opportunities globally in the E&P [exploration and production] space to further strengthen our portfolio in addition to monetizing the existing portfolio,” he said.
Cairn has planned a capital expenditure of $3 billion for its financial year 2014-2016.
Cairn currently has a portfolio of 9 onshore and offshore assets spread across frontier to mature basin in India, Sri Lanka and South Africa.
“We continue to work on our current portfolio to ramp up our current production levels and exploration,” stressed Hari.
The company continues to have an aggressive exploration program with capital expenditure allocated for the Rajasthan onshore block and other upstream assets.
Cairn is ramping up oil and gas production in India to 225,000 barrels per day in the current fiscal year, 19 percent up on the year. Rajasthan’s MBA field would account for 200,000 barrels per day.
This ambitious drive has made Cairn one of Asia’s fastest growing E&P companies in this year’s annual top 250 oil and gas awards given in Singapore by Platts, an international energy and commodity pricing and market analysis service provider.
In South Asia, Sri Lanka is set to become second most important market for Cairn. Oil importer Sri Lanka is a ready market. It imports 90,000 barrels per day of crude oil and petroleum products while its domestic market is dependent on liquefied petroleum gas (LPG).
But there would be a major change in the market and the domestic energy mix as Sri Lanka embarks on developing natural gas infrastructure. Plans were on the drawing boards while international exploration companies were expected to invest extensively on seismic surveys to determine hydrocarbon potential around the island.
The offshore blocks would be offered on attractive contractual terms, PRDS Director General Saliya Wickramasuriya said at the recent Asian Oil Week conference in Singapore.
Conceding that there was “very little data” on the offshore blocks, a number of options were however being considered such as leasing of at least two blocks on joint study basis, he added. Industry sources has compared Sri Lankan blocks to many other hydrocarbon producing basins in the region, including India’s oil and gas producing Cauvery basin.
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