Cairn India set to strike gold in Sri Lanka

To sign pact for first commercial gas sale & to get one more block

Anil Agarwal-led Cairn India Ltd will get one more exploratory block in Sri Lanka and will sign within a month a pact to sell commercial gas to power plants, a first in the island nation’s history.

Saliya Wickramasuriya, Director-General of the Petroleum Resources Development Secretariat (PRDS), told Business Standard, “There were only two bidders for the current round of auction. Cairn India bid for M5 block in Mannar and Singapore-based Bonavista bid for Cauvery blocks C2 and C3. Both the bids are good and have high work-up plans. As there are no competitors, once the technical process is over, we would finalise and sign it (the agreement) by March.”

PRDS oversees petroleum exploration and production-related activities in Sri Lanka.

Cairn India holds a block in the Mannar basin expected to start gas production by 2017-18. It had won the block in Sri Lanka’s first licensing round, in 2007, after competing with OVL and Niko Resources of Canada. Cairn had made two gas discoveries there.

The company would also sign within a month a deal for gas supply to three power plants. This would be the first such deal in Sri Lanka’s history.

Wickramasuriya of PRDS said: “Our power sector is in the process of finalising a deal for linkage from the Cairn’s field, which would start production from 2017-18.” The pricing of gas from the block was likely to be import-linked. “We are looking into the cost of production. As there is zero infrastructure, the cost of gas would be high,” Wickramasuriya added.

Cairn had discovered two successive gas and condensate deposits in the Dorado and Barracuda wells in the Mannar basin. According to reports, the sites had reserves of around 74 million barrels of oil equivalent. Cairn’s shares declined 1.23 per cent on the BSE, to end at Rs 326.45 on Wednesday.

Sri Lankan’s second  licensing round had closed on November 29, with only Cairn and Bonavista in the fray. The companies had bids for 13 offshore exploration blocks.

Exxon Mobil Corp, Royal Dutch Shell, France’s Total, ONGC Videsh and Eni of Italy were interested in the initial rounds, but had backed out later.

<B>Seeks extension for Ravva</B><BR>
Cairn has sought an extension of the Ravva production sharing contract (PSC). The contract would expire in 2019. Ravva block is in India’s east coast.

Rich Paces, director operations and development, said, “The Ravva field is significantly larger and has EOR potential. The field could go beyond 2019 if the government agrees to extend the PSC.”

Cairn is awaiting an extension in PSC for its Rajasthan block, RJON-90/1, from the government. The permit expires in 2020.