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Sri Lanka Equity Forum » Stock Market & Forum Help » Stock Market News » A Billion Barrels Possible in the Mannar Basin!

A Billion Barrels Possible in the Mannar Basin!

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Rapaport

Rapaport
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Cairn India to Make History in Sri Lanka's Petroleum Industry

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.

- See more at: http://www.rigzone.com/news/oil_gas/a/130493/Cairn_India_to_Make_History_in_Sri_Lankas_Petroleum_Industry/?all=HG2#sthash.jDnfKTRF.dpuf



Last edited by Rapaport on Tue Jan 21, 2014 8:00 pm; edited 2 times in total

Rapaport

Rapaport
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
http://www.geoexpro.com/article/Cairn_Discovers_Gas_Offshore_Sri_Lanka/51f1791e.aspx

Cairn Lanka, a subsidiary of Cairn India, has struck gas in the offshore Gulf of Mannar Basin between Sri Lanka and the southern tip of peninsular India.

After a successful track record of petroleum exploration in the Barmer Basin in the Indian state of Rajasthan (see GEO ExPro, Vol. 8, No. 6), Cairn India has expanded its activities to Sri Lanka. Cairn Lanka, a subsidiary of Cairn India, has struck gas in the offshore Gulf of Mannar Basin between Sri Lanka and the southern tip of peninsular India. As operator, Cairn Lanka holds 100% participating interest in the block.

Cairn’s discovery comes after three decades of hiatus in the oil exploration of this small island country. Sri Lanka (previously called Ceylon) has a land area of 64,630 km2 with a coastline of 1,340 km; the country is mainly made up of Precambrian granites and metamorphic rocks, and only 15% of the island, notably its northern corner close to India, is covered by sediments. This area, extending across the Palk Strait, is geologically part of the larger Cauvery Basin, which contains Cretaceous-Quaternary sedimentary rocks. Indeed, only these Cauvery Basin sediments had drawn the attention of petroleum explorers in the past, with wells that included Pesalai 1, 2 and 3 undertaken by Soviet oilmen in 1974, Palk Bay-1 and Delft-1 drilled by Marathon in 1976, and Pedro-1 and Pearl-1 drilled by Cities Services in 1981. None of these wells proved successful, although Pesalai-1 drilled on the island of Manar to a depth of 2,594m encountered some gas in Lower Cretaceous sandstone, and Pearl-1 drilled in the northern part of Sri Lanka’s Gulf of Mannar to a total depth of 3,050m bottomed in a volcanic sill after penetrating an 850m-thick Upper Cretaceous sandstone.


Source: R. Sorkhabi (2012)

Two Discoveries
In 2002 and 2005, Norwegian contractor TGS NOPEC acquired 2D seismic data in Sri Lanka’s Mannar Basin, to the west of the island. Based on their encouraging report, in 2007 the government of Sri Lanka divided the basin into nine exploration blocks and offered three of them for bids from international oil companies. On 7 July 2008, Sri Lanka’s Ministry of Petroleum and Petroleum Resources Development Secretariat awarded to Cairn Lanka Block SL2007-01-001, with an area of 3,340 km2 in water depths from 400 to 1,900m. The period of licensing runs until October 2016. In December 2009, Cairn conducted a 3D survey in its exploration block, and went on to drill its first well in August 2011.

Cairn has reported two discoveries from its block. In October 2011, the company announced that its exploratory well CLPL-Dorado-91H/1z, drilled some 30 km from the Sri Lankan coast in a water depth of 1,354m, encountered 24m of gas-bearing sandstone. A month later, a second well, CLPL-Barracuda-1G/1, located 38 km west of the discovery well and drilled to a total depth of 4,741m in 1,509m of water, hit three similar gas-paying zones. While the pay zones are mainly natural gas, potential for some liquid hydrocarbons has also been indicated. A third well, CLPL-Dorado North 1-82K/1, was plugged and abandoned as a dry well in December 2011.

These deepwater wells were drilled by the Japanese drillship Chikyu (‘Earth’), which was originally built for use in the Integrated Ocean Drilling Program.

After completing its first phase of exploration at a cost of US$150 million, Cairn has launched its second phase, with 3D seismic acquisition in 2012 (by Petroleum Geo-Services aboard the seismic vessel Pacific Explorer) and drilling expected in 2013. The company is reported to be looking for a drillship or semi-submersible rig capable of drilling to a total depth of 5,500m in water depths between 800 and 1,700m.

Window of Opportunity
How much hydrocarbon the Mannar Basin holds is unclear. But in March 2011, Dr. Neil De Silva, then Director-General of Sri Lanka’s Petroleum Resources Development Secretariat, was reported as suggesting a billion barrels of oil equivalent in the basin, based on interpretations of the TGS seismic images.

Cairn’s gas discovery in the Mannar Basin has opened an important window of opportunity for Sri Lanka, which imports all of its petroleum (costing US$3 billion in 2009), mostly from the Middle East. Moreover, these discoveries for Cairn came at a time of significant changes for the company. In 2011, Cairn India, which was largely owned by Edinburgh’s Cairn Energy, sold its majority stake to a London-based Indian mining company, Vedanta, after a complicated series of negotiations with the Indian government. By paying $8.7 billion, Vedanta acquired 60% of Cairn India, while Cairn still retains about 22% of the company’s share as well as the company’s name.

Kithsiri

Kithsiri
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Hope we will be able to enjoy the same kind of benefits that we have been reaping after ending 30 years of spending on waging a war.  Shocked 

worthiness


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Perhaps, the country may be granted a consolation prize in March meeting by American who tactically creep through.

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
@worthiness wrote:Perhaps, the country may be granted a consolation prize in March meeting by American who tactically creep through.  

MR knows how to play the cards. Nothing to worry too much.

Backstage

Backstage
Moderator
Moderator
MR bigger worry is winning western province.

dhanurrox


Vice President - Equity Analytics
Vice President - Equity Analytics
@Backstage wrote:MR bigger worry is winning western province.
No problem at all unless there's a joint opposition which isn't goin to happen before election.

Backstage

Backstage
Moderator
Moderator
Hmmm...

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