Financial Times

Oil exploration needs adequate laws and regulations
By C. Srinath Fernando, (Former Deputy Director Merchant Shipping)

A series of articles appeared in many newspapers on the subject of ‘Awarding of Oil Exploration rights’ where according to what has been reported, the Director General of Petroleum Resources Development Secretariat (PRDS) has stated that the cabinet will soon make an announcement awarding exploration rights to the successful bidder.

While appreciating the interest and the enthusiasm of the PRDS to get on with the test drilling, it will be prudent to ensure against any undesired consequences which may occur in the course of exploration, specially because oil exploration is a very risky business.

If all Sri Lankans are not careful, we may find ourselves in deep trouble, due to any slips and omissions in our contractual documentation that may occur, consequent to our inexperience in the process. Judging by the past experience we have to be careful.

Being cautious is not being lethargic, but being vigilant to safeguard the national resources, which are the common heritage of all Sri Lankans, not only that of the PRDS. Therefore every citizen has a stake in this matter, and public opinion is of paramount interest. It has to be borne in mind that when one drills for oil, it is not only the petroleum that you are looking for, but also other hydrocarbons including natural gas, as well as other mineral resources that may be available in the seabed of the continental shelf. It is necessary that all these aspects be covered adequately, prior to starting operations.

It is a well-known fact that Sri Lanka is not sufficiently experienced or knowledgeable, or skilled in the oil exploration process. Although the subject has been discussed we as a nation have not built up our expertise and skills so far. Although few experts have given their opinions, is it in the best interests of the nation to plunge into unknown territory without even having any safety valves like adequate laws and regulations?

Interestingly the need for new laws have been highlighted as far back as November 2002, and February 2003 in the newspapers but since then there appears to be no proper legislation in force. Since the focus of attention has been on oil exploration, the possibility of the existence of other natural resources has been forgotten. Appropriately this subject should be covered under the National Aquatic Resources Research and Development Agency (ARA) Act No. 54 of 1981.

The Ministry of Environment could have drafted the necessary regulations easily under this law. This Act provides for the development, management and conservation of aquatic resources in the inland waters, coastal wetlands, and offshore areas.

It is surprising to note that a Bill on “Marine Pollution Prevention” published in the Gazette on February 18, 2008 under Part XI ‘Miscellaneous Provisions’, contains under section 51, three clauses relating to petroleum exploration:( h) specifying the procedure to be adopted in respect of exploration of natural resources, including petroleum or any related activity in accordance with such directions as are issued by the Cabinet of Ministers in the territorial waters of Sri Lanka or any other maritime zone;

(i) Specifying the standards to be maintained by the contractors and operators conducting or engaged in the exploration of natural resources including petroleum or any related activity in accordance with such directions as are issued by Cabinet of Ministers;

(j) Specifying the standards, the quality of the equipment used, the type of mobile platforms and other related anti-pollution equipment to be utilized for off-shore and shore based petroleum operations in accordance with such directions as are issued by the Cabinet of Ministers;

Accordingly the Cabinet of Ministers can give directions on these matters, which in turn may become unethical in business, as the cabinet is due to select the suitable bidder for exploration.
Further the above-mentioned paragraphs appear to be ultra-vires, to the subject of Marine Pollution Prevention as mentioned in the Bill.

There is a United Nations Environmental Programme (UNEP) document passed by the UN General Assembly, recommending guidelines on “Offshore Mining and Drilling”. It says that all states should by all appropriate means, take preventive measures to protect the marine environment from adverse effects of exploration and exploitation of hydrocarbons and other minerals, and related activities (operations) within the limits of national jurisdiction.

These recommendations are very specific on Offshore Mining and Drilling, and consists of eight Headings / Sections, containing forty-two recommendations. These recommendations are to be used, “When formulating national legislation or undertaking negotiations for the conclusion of International Agreements in this field. States should ensure that their laws, regulations, and other measures relating to operations are no less effective than international rules, standards, and recommended practice and procedures.” Therefore while appreciating the keenness of the PRDS, we would also like to point out, that the nation must be able to obtain the maximum benefits of an expensive and risky operation of exploration while preserving the marine environment at the same time. It is therefore necessary to get our regulations in order prior to proceeding with the exploration.

Also it is necessary that we select the most promising site for exploration. Listening to a lecture by an expert on the “Strategy on oil exploration in Sri Lanka” at the Sri Lanka Association for the Advancement of Science (SLAAS) on June 12, one wonders whether we are on the correct track. If we rush into this matter now we will be creating a precedent, which will be disadvantages to the future of offshore exploration of natural resources.

What is needed at this stage is to draft appropriate and adequate regulations on “Offshore Mining and Drilling” under the existing Laws, so as to achieve a balance between:

(a) To attract experienced and reliable parties for exploration, and

(b) To ensure implementation of proper standard operational procedures for extraction and exploitation of natural resources, while ensuring the safety of operations and the marine environment. And identify the most promising sites for exploration. Not based on the number of bids received, but on correct scientific analysis.

The authorities should seriously reconsider their strategy to ensure appropriate exploratory operations based on adequate data and expertise, as all Sri Lankans have a stake and a claim to the benefits from offshore natural resources, which is their common heritage, according to the Law of the Sea.


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