Sri Lanka finalizes oil exploration rules and awards 900 offshore blocks.
The start of oil production is part of President Ranil Wickremesinghe’s plan to attract foreign investment as he seeks to stabilize the economy amid the country’s worst economic crisis in seven decades.
Surat Ovitigama, the oil company’s chief executive, told Reuters the new rules were finalized by the government this week, creating a framework for companies to sign expressions of interest (EOIs) to explore for offshore assets in the country. telephone interview.
He said oil exploration regulations will be announced this month and the government hopes to start issuing licenses for some of the 900 blocks in the coming weeks.
“In the coming months, we hope to resume oil and gas exploration with the first credible entities. We believe this will boost investor confidence and serve to attract the next wave of expressions of interest this year,” Ovitigama told Reuters.
Sri Lanka’s previous attempts to start oil production have focused mainly on the country’s northern coast, but this time the government has mapped assets that cover all sides of the island.
The Mannar Basin, located between southern India and northwestern Sri Lanka, may contain oil and gas reserves worth about $260 billion, Sri Lanka’s energy in parliament in 2021.
Ovitigama said Sri Lankan authorities hoped exploration could begin in March, and any success in the initial drill would lead to production-sharing agreements for gas and oil.
Two companies have already shown serious interest, he said, and requests for proposals (RFPs) will be issued soon, which will lead to negotiations for exploration licenses.
Ovitigama declined to name the companies because the ongoing discussions are confidential.
However, a source with direct knowledge of the talks said ONGC Videsh Limited (OVL), the foreign arm of India’s state-owned oil explorer, is a leading candidate to explore several blocks in the north and northeast coast.
“OVL is the company that made the most efforts, made the most calls and continued meetings. They made representations at all levels,” said the source, who did not want to be named. Because the discussions were confidential.
An OVL spokesman did not immediately respond to an email request for comment.
As Sri Lanka nears a $2.9 billion loan deal from the International Monetary Fund and its economy begins to stabilize, India is set to make ambitious long-term investments worth more than $1 billion, particularly in the energy sector. against the influence of its regional rival, China.
MILLION BARRELS
A rise in world oil prices early last year exacerbated Sri Lanka’s financial crisis caused by a severe foreign exchange shortage, leaving it with few dollars to finance imports of fuel, food and medicine.
These shortages led to violent protests that forced then-President Gotabaya Rajapaksa to flee the country in July.
Sri Lanka is currently completely dependent on fuel imports, which will cost the cash-strapped country an estimated $4.2 billion in 2022.
However, the government estimates, based on seismic surveys, that there are more than a million barrels of oil reserves in an area of 30,000 square kilometers off the country’s northern coast.
Sri Lanka held its first international oil exploration license in 2007, with the exploration block awarded to an Indian company that pulled out of the deal in 2015 when oil prices fell.
In 2019, the country invited the large French company “Total” and the Norwegian company “Equinor” to study the oil production potential of the two blocks.
