Business Times

New questions over Sri Lanka's bid to strike oil

Cairn Factor
By Dulip Jayawardena

Since my focus on the Cairn factor in Sri Lanka striving to strike oil in the BT on 24 October 2010, some confusing reports appeared in the print media both locally and abroad (not the Business or Sunday Times).

In a memorial lecture delivered by Chas Charles, CEO of Cairn Lanka Pvt Ltd (CLPL) local partner Hayleys Energy Services (Pvt) Ltd (HESPL), titled 'Oil and Gas Exploration in Sri Lanka' it was reported that CLPL will award the global tender to drill off shore in Mannar by next month.

The CEO was a Vice President of Halliburton who was in charge of the South and Far Eastern operations and was based in Singapore. Halliburton is a US drilling firm where Dick Cheney, the Secretary of State to President Bush had a major interest especially in Iraq after the invasion. The CEO of HESPL is promoting Halliburton to get involved in oil drilling here.

When the CEO of HESPL was questioned by the audience over the reasons for the delay in drilling, he responded "the project being the first ever off shore drilling exercise in the country." This statement is incorrect as the Russians and Americans drilled off shore in the Mannar basin in the 1970s and 1980s.
The figures quoted by the CEO HESPL on the expenditure of $25 million to date out of a total of $80 million set apart for "initial work" is erroneous as the signed Petroleum Resources Agreement (PRA) with CLPL gives a figure of $42 million. Further the CEO said that "we will enjoy the first barrel by 2016". However the former Minister of Petroleum Resources has gone on record saying the first barrel of oil will flow in 2010.

The CEO HESPL has also stated that "the whole drilling of one well will cost up to a handsome $400 million." This is in contrast to the PRA which gives the estimated cost of drilling three exploratory wells only as $70.5 million!!!

Adding to the above confusion as reported in the Business Line newspaper of the Hindu Group, Susil Premajayantha, Minister of Petroleum Resources addressed the ministerial session of the Petrotech2010 conference in New Delhi on November 1, 2010 and stated that Cairn India Private Ltd (CIPL) has "promised a $110 million well drilling programme" to commence in May 2011.

In the first instance it must be questioned as to the authority that the CEO HESPL has in making statements on behalf of CLPL and clarification is required whether HESPL has farmed in any equity up to 50 % of CLPL as offered in May 2010.However the CEO HESPL had also stated that "CLPL is a wholly owned subsidiary of CIPL" adding further to this confusion.

In conclusion, it appears that the Cairn factor continues to complicate the oil drilling process and the Government has a responsibility towards the public to issue a statement on the present status of the oil exploration and the relationship of CLPL to CIPL especially in the light of Vedanta's attempt to buy the controlling interest of 60 % in CIPL from Cairn Energy Pvt Ltd (CEPL), the Edinburgh based company.

It is also reported that ONGC will stall the Cairn Vedanta deal as the Government of India (GOI) is unwilling to let go an opportunity to improve ONGCs stock in the producing field at Rajasthan but CEPL is certain to counter ONGC's pre-emption right on the ground that the Vedanta deal is an ownership change of a corporate and not equity sale of an individual asset. It is also reported that in 2004, CEPL and ONGC which is a 30 % partner and licence in Barmer oil field in Rajasthan almost finalized a final sale for $2.4 billion and the GOI thought that the price was too high. However now Vedanta is offering nearly $10 billion and this shows the volatility of the Oil Exploration and Production (E&P) industry.
The Government of Sri Lanka should now intervene and see that the oil drilling in Mannar basin is nor kept in limbo in the light of uncertainty of Vedanta's deal to buy the controlling interest of CIPL. It must also be queried again where CLPL stands now.

(The author is a retired Economic Affairs Officer, United Nations ESCAP and can be contacted on fasttrack@eol.lk )

Top to the page  |  E-mail  |  views[1]
SocialTwist Tell-a-Friend
 
Other Business Times Articles
Sri Lanka rejects compensation claim in hedging dispute
WTO: Structural reforms needed for growth in Sri Lanka
Jobs: From Israel with love
GK assets including Ceysands Hotel sale suspended
Air Senok soon to fly
SLT Group’s 9-mth pre tax profit tops Rs. 3.73 billion
Not interested?
Comment - Quick-fix tenders, short-cut to development
Feature - Foreign higher education risk rises to highest levels
Feature - ‘Stressed out?’ Learn how to cope
Laugfs IPO opens, says aggressive campaign improved recent revenues
India launches green tribunal
South Asian countries drawn to Sri Lankan trade and investment prospects
Letters
Controversial share offer plan to Golden Key depositors shelved
ComBank Q3 pre tax profits up 54%
Serendib Hotels Plc gets new CEO
SL should target 15% GDP thro’ remittances : Cabraal
On ‘expert’ views on telecom charges
State banks unwilling to give cheap housing loans to ETF members
ComBank cuts interest rates on credit cards
Social Media and Facebook new tools for marketers
Merchant Credit, Ceylease to be merged with MBSL
Sri Lanka’s legal luminaries call for competitive law regime in attracting FDIs
Dr Uditha become Professor
3-day Trade Fair "Trincomalee opens its doors"
Lanka Bell earns coveted ISO 9001 quality certification
More consultation needed in SEC’s proposed public float rules
Piramal Glass show 1st half profit from loss earlier
KVPL posts 9-month net profit of Rs 160 million
Hydro Power Free Lanka Ltd IPO oversubscribed by 57 times
LOLC’s Working Capital Business Unit reports 53% growth
Aitken Spence half-year profits up 37%
JKH earnings up partly due to gains from share sales in subsidiary firms
CSE listing rules may be changed
New questions over Sri Lanka's bid to strike oil
NIC number as new ID for EPF members
2010 Budget created very bad precedent, says senior economist
Memories of the South Asian Econ Undergrads Conference
Book Review: Money, inflation and output
Undersea, western theme events, ‘The Banquet Company’ does it all
MBSL’s rescue formula changes from win-win to threat of liquidation
Shell handover on Nov 15
Sri Lanka one of the safest places for tourists
Harmonisation of IFRS will help Sri Lanka to attract foreign investments
Heraymila investments in SL springboard to South Asia, China
Cargills expands into dairy through Kotmale

 

 
Reproduction of articles permitted when used without any alterations to contents and a link to the source page.
© Copyright 2010 | Wijeya Newspapers Ltd.Colombo. Sri Lanka. All Rights Reserved.| Site best viewed in IE ver 6.0 @ 1024 x 768 resolution