First Natural Gas Deposit Found in Sri Lanka

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Sri Lankan President Mahinda Rajapaksa announced  that Sri Lanka has found a natural gas field for the first time. He stated that he had been informed of this by Cairn, the company exploring for oil and gas in the Mannar Basin Sri Lanka.

The President also said he believes that oil will be discovered in Sri Lanka as well in the near future.

Cairn Lanka, which began oil drilling operations in the Mannar basin in August, has confirmed that it had informed the Sri Lankan authorities about the finding, foreign media reported.

The President has said that he is elated of the new discovery and expressed confidence that Sri Lanka will harness crude oil from its own oil fields.

Cairn India, the parent company of Cairn Lanka, in a statement issued Sunday has said that the discovery was made at a depth of 1,354 metres (4,442 feet) below sea level, a Reuters report said. Cairn has said that further drilling will be required to establish the commercial viability of the discovery.

Cairn has said earlier If Sri Lanka's drilling program is successful then commercial oil production can be expected by 2014 with a billion barrels.

The Block SL 2007-01-001 was awarded to Cairn in the 2008 Sri Lanka bid round. Cairn Lanka (Private) Limited, is a wholly owned subsidiary of Cairn India and holds a 100% participating interest in the Mannar block.

Mannar basin has eight oil and gas exploration blocks and two of them have been granted to China and India. Officials of Russia's largest oil company, Gazprom recently visited Sri Lanka to hold discussions on oil exploration in the Mannar Basin.

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Extract From Reuters

Sri Lankan President Mahinda Rajapaksa on Sunday said natural gas has been found off the Indian Ocean island nation in the Mannar Basin, in a well Cairn India Ltd. said required more exploration to see if it is commercially viable.

Cairn, a subsidiary of London-listed Cairn Energy Plc , said the find was Sri Lanka's first confirmed hydrocarbon discovery.

"Explorers have informed me that they have found a gas deposit in the seabed," presidential spokesman Wijayananda Herath quoted Rajapaksa as saying to an audience in the hill city of Kandy.

Cairn Lanka, a subsidiary of Cairn India, has one of eight blocks in the Mannar Basin and began drilling in August.

It struck a 25-metre hydrocarbon column showing primarily gas with "other liquid hydrocarbon potential" in the CLPL-Dorado-91H/1z wildcat well, drilled at a water depth of 1,354 metres (4,442 feet).

"Further drilling will be required to establish the commerciality of the discovery," Cairn said in a statement.

In 2007, the government gave one Mannar block each to India and China, but neither has drilled. The remaining five blocks are to be awarded by tender.

"We are optimistic that this will be commercially successful," Petroleum Industries Minister Susil Premajayantha told Reuters. "Now with this discovery, we can get good competition and offers for the remaining five blocks when we go for tendering."

Interest in the blocks has grown, but most operators have been happy to let Cairn try its luck before making any commitments while the government smooths an erratic oil and gas regulatory regime, diplomats following the exploration in Sri Lanka have told Reuters.

It is unclear whether the find will affect terms of a deal by London-listed miner Vedanta Resources to take a majority stake in Cairn India.

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 north western coast.

Sri Lanka produces no oil and is dependent on imports, which cost it $3 billion in 2009. Since the end of a 25-year war with Tamil separatists two years ago, the government has tried to reinvigorate oil and gas exploration.

American and Russian companies from the mid-1960s to 1984 explored the Cauvery Basin off the northern shore, but only traces were found and no commercial oil was produced.

Violence onshore from Sri Lanka's civil war with the Tamil Tigers ended offshore exploration there.

There are nearly 30 operating wells on the Indian side of the Cauvery Basin, and Calgary-based Bengal Energy Ltd. has exploration rights for 1,362 sq km there. Sri Lanka is hopeful that success will be reflected on its side of the field.

There is also speculation that Sri Lanka's eastern coastal shelf has major oil and gas potential, but there is no seismic data yet to back it up.