OVL-Cairn consortium set to bid for Sri Lankan oil, gas blocks

OVL MD DK Sarraf

ONGC Videsh Ltd (OVL), the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), and Cairn India will bid together for oil and gas blocks in Sri Lanka. The OVL-Cairn combine will bid for three out of a total 13 blocks together. Bids for the Sri Lankan Licensing Round, only the second in its history, are closing on...

November 29. OVL is looking to hold at least 51 percent in the consortium it intends to form with Cairn. These blocks are M4, M5 and M6 located in the Mannar basin.

Interestingly, Cairn had won the block in Sri Lanka's first licensing round in 2007 by defeating OVL and Niko Resources of Canada. Cairn India holds a 100-percent-stake in block SL 2007-01-001, which is located in the Mannar Basin off the east coast of Sri Lanka. Cairn India has so far made two gas discoveries in the blocks — Dorado and Barracuda.

The country expects to award contracts by the end of the first quarter of 2014. During the first licensing round in 2007, three blocks were offered, but only one was awarded.

Sri Lanka currently does not produce any oil or gas and relies on imports to meet all its hydrocarbon needs. It imports around 2 million mt/year of crude oil.

Sri Lanka's Petroleum Resource Development Secretariat (PRDS) director general Saliya Wickramasuriya had earlier said that oil majors Exxon Mobil Corp, Royal Dutch Shell, France's Total and Eni of Italy have evinced interest in bidding for blocks on offer.  

PRDS is the government agency overseeing petroleum exploration and production-related activities in the island nation. The country expects to award the blocks in the first quarter of 2014.

The blocks on offer in the Cauvery basin range in size from 2,403 sq km, in the shallow waters of the Palk Straight to 4,566 sq km in deep water areas to the northeast of Sri Lanka.

The blocks in the Mannar basin are larger, ranging in size from 2,714 sq km to 8,120 sq km in the deep to very deep waters of the Gulf of Mannar.  

Although there have been no oil or gas discoveries in the Sri Lankan sector of the Cauvery basin, the Indian sector of the basin has significant oil and gas fields. The Mannar basin hosts the discoveries made by Cairn.

OVL is a Miniratna Central Public Sector Enterprise (CPSE) of the Government of India under the administrative control of the ministry of petroleum and natural gas. The primary business of OVL is to prospect for oil and gas acreages outside India, including exploration, development and production of oil and gas. OVL owns Participating Interests in 32 oil and gas assets in 16 countries and contributes 12 percent and seven percent of oil and natural gas production of India, respectively. In terms of reserves and production, OVL is the second largest petroleum company of India, next only to its parent company, ONGC.