Cairn Lanka sets Feb 01 for spudding fourth exploratory well

* US$ 150mn invested on phase one, local companies, Navy & Air Force get US$ 12.4mn
* IF commercially viable hydrocarbon deposits found, extraction could start 3 to 5 years from now


Cairn Lanka will commence drilling a fourth exploratory well 21km off the Kalpitiya coast on February 01, 2013, in its search for commercially viable hydrocarbon deposits in Sri Lanka’s side of the Mannar Basin.

The availability of a drillship, the ‘Discoverer Seven Seas’ owned by Singapore-based Transocean Inc, made it possible for Cairn Lanka to advance the drilling by a quarter, paving way for the team to exploit a prime ‘weather-window’.

Cairn Lanka, fully owned by Cairn India, has already invested US$ 150 million on the first phase which resulted in the discovery of two (out of three) successive gas and condensate discoveries on wells named CLPL Dorado and CLPL Barracuda.

Spudding, or the start of drilling, on the fourth exploratory well is part of phase two and the well will be called CLPL Wallago, named after a breed of catfish found in the Central Province of Sri Lanka, Cairn India Head of Corporate Affairs and Communications Dr. Sunil Bharati, told The Island Financial Review yesterday.

The company has already exceeded commitments under phase one, which was the drilling of three exploratory wells, by acquiring 3D seismic data covering 600sq km of the Mannar Basin sea bed.

Data from the CLPL Wallago well, 1.1km from the sea-level and 3km from the seabed, the seismic data and data from the two successful wells would be subject to a series of gruelling analysis, which could take months.

"IF the data is promising then we could commence appraising the hydrocarbon deposits within a year or two," Dr. Bharati said.

The appraisal process referred to the process of finding out the size or volume of hydrocarbon deposits. This data is again analysed and a commercialisation study is done to determine whether the hydrocarbon deposits are commercially viable.

For an industry where guess-work is shunned for meticulous study and preparation Dr. Bharati cautiously said: "IF all goes well, and IF the data points to commercially viable hydrocarbons, then extraction could commence within three to five years time." He stressed again, that everything depended on finding such a deposit, and this takes time, and money.

Cairn Lanka’s commitment for phase one was US$ 110 million but it had spent more than US$ 150 million for additional work, such as the acquisition of 3D seismic data. Dr. Bharati was tight-lipped on how much would be invested on phase two.

Sri Lankan companies, alien to the hydrocarbon exploration industry, have already forged partnerships with Cairn Lanka, and Dr. Bharati said he was impressed.

"We have already spent US$ 12.4 million on Sri Lankan businesses for their services and goods. We appreciate the services carried out by the Sri Lanka Navy (security) and Sri Lanka Air Force (helicopter ferrying) both on commercial terms," he said.

Hayleys Energy, GAC Shipping, NARA, Lanka IOC were some of the others doing business with Cairn Lanka, apart from the city hotels that provides accommodation to an international team conducting operations on the drill ship for three to four months at a time.

"At any given time there are more than a hundred people on the drill ship," Dr. Bharati said.

During exploratory activities in phase one, around six Sri Lankan professionals and scientists were on board the drillship providing their services.

He paid to a tribute to Sri Lanka’s bureaucracy, saying it was more efficient than a few other regions where Cairn operated.

"Government approvals are a lot quicker than in some places, and full marks to them, given that this was a relatively new industry," Dr. Bharati said.

IF, commercially viable hydrocarbon deposits are found, it would belong to the government of Sri Lanka, where a royalty fee and profit sharing with Cairn Lanka would ensue according to the Petroleum Resources Agreement signed in 2009.

The government expects a 10 percent royalty, apart from the profit share based on the investment multiple, taxes and the revenue of the participating National Oil Company which will be incorporated IF and WHEN commercial oil extraction commences.

According to this agreement IF commercially viable deposits of hydro carbons are found, based on the investment multiple, the shares in profits will begin from 12.5 percent to Sri Lanka and increase to 60 percent within five years of commencement of oil extraction.

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