Sri Lanka, an island nation off the southern coast of India smaller than Ireland with five times as many people, will open its oil and gas potential to international bidders. The cutoff for bidding on the nation’s first three blocks is the end of next January. Bidding for the three tracts opened in October.

“The government of Sri Lanka is very anxious to develop resources with the help of international investors,” said A.H.M. Fowzie, minister of petroleum and petroleum resources for the country.

The three offshore blocks in the Mannar Basin lie between India and Sri Lanka south of the

Multiple seismic lines cover Sri Lanka’s Mannar Basin southeast of India. The nation’s initial offering includes three blocks. (Map courtesy of Fugro Development and Production)
Cauvery Basin, which has several discoveries on the books. The nation already has offered its northernmost block to India, if that nation chooses to develop it, and it offered the southernmost block to China. Neither nation has accepted, yet. If they do, they will receive the same terms as other investors.

The three blocks on the auction block for production sharing agreements are SL-2007-01- 001, 002 and 003. They lie in 164 to 9,843 ft (50 to 3,000 m) of water with an average depth around 6,562 ft (2,000 m), said Viv Harvey, manager of business development with Fugro Development & Production, at the country’s licensing presentation in Houston.

Most of the potential production will be from Jurassic and Cretaceous rock, said Dr. Neil DeSilva, director general of the Petroleum Resources Development Secretariat.

Exploration in the Mannar Basin started in the 1970s with the Soviets drilling wells to around 6,562 ft (2,000 m). Those wells established rock types and maturation. The Pearl #1 well on the Mannar Basin block offered to India provides the best well control, but that 1980s well didn’t penetrate the full hydrocarbon column, he said.

Most subsurface information comes from seismic acquisition and discoveries in the Cauvery Basin. TGS recorded high-quality seismic acquisition in 2001 and again in 2005, he said, and some 20 oil and gas discoveries were recorded in the Cauvery Basin offshore India.

Maturation studies show most of the area will be oil-prone with gas emphasis to the west.
The area shows both structural and stratigraphic traps on seismic. DeSilva compared faulting in the basin favorably with offshore Brazil.

As for direct hydrocarbon indicators, the seismic shows paths where oil and gas disturbed the sediments. It shows flat, horizontal spots indicating hydrocarbon pools in otherwise dipped formations, he added.

Bids will go into the initial phase of an eight-year exploration program, which can be extended by two years, Fowzie said. Each phase requires a work commitment, but an operator can move forward only if previous phase commitments are satisfied.

The nation will require 3-D seismic acquisition in the first phase, set at three years, and at least one exploratory well in the second (two-year) phase and the third (three-year) phase. If commercial hydrocarbons prove up, the production license is good for 20 years. Sri Lanka plans to award winning bidders in April next year.

In addition to financial and technological credentials, bidders must file work program details. Signature and production bonuses are invited and will receive credit in judging winners, but they are not obligatory. The royalty rate is 10%, and 70% of production can be directed to cost recovery. Among recoverable costs are royalties, signature and production bonuses, environmental funds, some training costs and site restoration, and decommissioning costs.
The going income tax rate is 35%, but the nation may waive duty on imported equipment used for petroleum operations.

The maximum national oil company participation and the percentage share of profit petroleum, based on an investment multiple, also are biddable.

Under the plan, the government share increases with the producing company’s investment, and that share is biddable. It should increase with each exploration period, and it should increase with increases in revenues, said Hamish Campbell, consulting economist.
See the detailed bid format at www.prds-srilanka.com.

Some 3,726 miles (6,000 km) of 2-D seismic has been acquired and processed with field data, Harvey said.

The summary data package
includes gravity and magnetic maps, 193 scanned TIFF and PDF files, well reports, composite well logs, isopach and play maps, seismic interpretation, one strike and three dip lines from the 2001 survey, and the seismic base maps.

“The Mannar Basin has a strong potential for oil and gas,” DeSilva added.