Sunday Times 2
Revisit of US$200–300 Billion Upstream Deliverables of the Mannar Oil and Gas Basin
View(s):By Sumith Thennakoon
Sri Lanka’s Mannar Oil and Gas (MOG) Basin has reported prospective upstream-phase deliverables in the range of US$200–300 billion. These estimates represent only the upstream phase of development. The absence of comprehensive midstream and downstream value-chain studies has resulted in the lack of an end-to-end business model for MOG development. A complete MOG value-chain assessment is essential to define a country-specific use case, particularly as Sri Lanka’s economy is highly dependent on annual oil and gas imports, costing about US$4–5 billion a year and representing the largest outflow of foreign currency.
To achieve this, it is necessary to overcome multiple technical, commercial, regulatory, and institutional challenges and implement a well-designed development programme supported by a detailed value engineering process, transparency, and strong governance. Such an approach would enable the formulation of a domestic business model capable of meeting national demand for power and petroleum products.
A new approach
It is necessary to identify a more suitable development pathway for exploiting MOG prospects, using the officially published US$200–300 billion upstream estimates as the baseline. Under such an approach, an LNG export–led development model would not be suitable considering costly liquefaction is involved and also given Sri Lanka’s heavy reliance on oil and gas imports. Instead, domestic integration of Mannar oil and gas is considered the base case, particularly for power generation and refining applications. While gas-to-power and refinery feedstock integration form the foundation, additional scale-up options should also be assessed, taking advantage of Sri Lanka’s strategic geographical location and regional energy dynamics.
Oil and gas projects of this nature typically require several years to reach first production. Therefore, in the short to medium term, LNG imports and temporary infrastructure solutions may be required to reduce reliance on costly oil-based power generation. This proposed approach necessitates a rigorous value engineering process, detailed capex (capital expenditure) optimisation, and comprehensive end-to-end value chain studies covering upstream, midstream, and downstream phases. To support this methodology, selected global use cases are reviewed to identify key challenges, opportunities, and uncertainties relevant to the Mannar Basin.
Global use cases: Asian frontier markets and marginal field developments
Numerous global examples demonstrate how marginal or frontier oil and gas prospects have been successfully developed for domestic consumption and regional supply. Rather than focusing on large-scale liquefaction projects in mature markets such as the Middle East, Australia, or the deepwater Gulf of America (Mexico), this analysis emphasises frontier and emerging markets that have effectively monetised offshore gas through domestic integration with the following three use cases.
Deepwater Krishna Godavari R Cluster, India
The Deepwater Krishna Godavari R Cluster project exemplifies India’s efforts to enhance domestic gas production in a technically challenging offshore environment and represents the deepest offshore oil and gas development in South Asia. Located off India’s east coast, the R Cluster lies about 60 km from the KG-D6 control and riser platform in water depths exceeding 2,000 metres. Developed by Reliance Industries Limited in partnership with BP, the project is a cornerstone of India’s gas supply strategy.
India’s policy framework mandates that oil and gas resources discovered within national territory be prioritised for domestic consumption. This approach reduces market risk by securing demand and allows developers to focus on subsurface and execution risks. The successful deployment of subsea production systems, pipelines, and ultra-deepwater infrastructure demonstrates that South Asia possesses the technical capability to execute complex offshore developments comparable to the challenges posed by the Mannar Basin.
Iwafune-Oki Offshore Oil and
Gas Field, Japan
The Iwafune-Oki Oil and Gas Field, located about 4 km offshore from Niigata Prefecture, is Japan’s only offshore oil and gas field with currently operating platforms. It plays a strategic role in enhancing Japan’s energy security by supplying about 23 million cubic feet of natural gas a day via subsea pipelines to the Iwafune-Oki onshore terminal.
Annual production averages include about 23.3 million barrels of crude oil, 46 billion cubic feet of natural gas, and 210,000 barrels of condensate. In 2019, Japan imported 76.5 million tonnes of LNG while domestic gas production accounted for only 2.2% of national demand. Given this dependence on imports, Japan strongly supports the domestic integration of any hydrocarbon volumes discovered within its
territory through regulatory,
fiscal, and infrastructure
support mechanisms.
Leviathan Gas Field, Israel
The Leviathan gas field, located approximately 130 km offshore from Haifa, is central to Israel’s energy independence strategy and regional energy cooperation. The field contains an estimated 16.27 Tcf of proven and probable gas reserves and about 35.8 million barrels of condensate. Development drilling reached depths exceeding 6,500 metres, highlighting the project’s technical complexity.
Israel has successfully leveraged Leviathan for both domestic consumption and regional exports. In 2018, Israel signed a US$15 billion agreement to supply Egypt with 64 bcm (about 2.25 Tcf) of gas over ten years. Additional agreements signed in 2020 further expanded regional exports. These developments enabled Israel to phase out coal-fired power generation by 2025, significantly reducing emissions while strengthening regional diplomatic and commercial ties.
Domestic integration of
MOG: The way forward
In this context, the volume of gas prospects averages around 10 Tcf. Thus, the MOG prospects are not marginal for a domestic use case for a type of demand in Sri Lanka. Though the depth and location of MOG are challenging, the technology required is sufficiently available, and it is not even the very first deepest in South Asia. Therefore, MOG volumes could be considered as strong prospects for further development and appraisal for domestic consumption.
Sri Lanka’s existing domestic demand provides a strong foundation for commercial viability. To develop a robust Mannar Basin business model, the entire natural gas value chain must be clearly defined at the outset, with explicit identification of demand sectors such as power generation, domestic refining, industrial consumption, and pipeline gas supply. A comprehensive project delivery model incorporating detailed value engineering, cost estimation, financing structures (NPV, IRR, payback periods), and risk mitigation mechanisms will be essential to attract investment.
Successful implementation will require strong legal and regulatory frameworks, clear institutional roles, disciplined project governance, and the involvement of experienced oil and gas subject matter experts throughout the development lifecycle.
(The writer is an energy sector professional based in Japan. He holds a B.Sc Engineering degree from Peradeniya University, M.Sc. Engineering from Yokohama National University. He is also a member of the Institution of Engineers of Sri Lanka.
Any comments/
objections spt99x@gmail.com)