With world oil prices hitting new lows and pegged at $48 per barrel on Thursday, there was concern that Cairn India may pullout from the offshore oil and gas exploration in the Mannar Basin because it is uneconomical.
While under-fire Ceylon Petroleum Corporation (CPC) Chairman Asantha De Mel said he was certain that Cairn India will find it not feasible now that oil prices have gone down, Petroleum Resources Minister A.H.M. Fowzie disagreed saying they are not going to run away.
"Cairn won't drill," Me De Mel told this newspaper. "It's costing them US$100 to drill in the sea. They won’t say anything now but they won't come."
Mr Fowzie however said Cairn has already handed over a US$1 million signature bonus and noted that the company is expected to start operations within the next six months.
With oil production coming down, people will have to find new oil sources and alternative energy options. At US$55, Mr. De Mel said – in an interview a week ago – that alternative energy is also not workable. "People's sentiment is bearish and they feel everything is bad," he said. "When you feel the world is crashing around you, you don't want to spend or invest. Market sentiment is down. It's not a supply and demand problem because they are matching." He said this is a great opportunity for Sri Lanka to peg oil at these low prices but that due to the bad publicity (by The Sunday Times) given to the CPC, he felt banks will be unwilling to give credit.