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Thu, 28 August 2014 20:22:01
Sri Lanka private sector concerned over oil exploration delay
17 Apr, 2008 14:08:10
April 17, 2008 (LBO) – Sri Lankan companies aiming to provide support services to petroleum firms in anticipation of an offshore oil strike say they are disappointed by a government decision to award only one block instead of three.
Industry officials said they were worried the supply service providers might not have enough business to start operations if the government commences the search for offshore oil with only a single block.

"We're worried we might lose out on the supply side," said Irshad Musheen, Head of Shipping at the Hemas conglomerate, one of the companies positioning itself to get into the offshore petroleum supply services business.

The government offered three exploration blocks in the northwestern Mannar Basin and received bids in January from three firms, mainly regional players focusing on India and south Asia.

But only block No 1, in the north of the exploration area, drew interest from all three bidders, ONGC Videsh, Cairn India, and Niko Resources of Cyprus.

Petroleum minister A.H.M. Fowzie said Tuesday they were only evaluating the block for which it received three bids and that it would be awarded to the bidder who will give most profits to the government.

Neil de Silva, head of the petroleum resources development secretariat overseeing exploration efforts, said no decision had yet been taken on what to do with the other two blocks that had been offered.

De Silva acknowledged the need to speed up the exploration process and said a decision on awarding the first block would likely be made in May.

Industry officials said the chances of finding oil in one block would be much lower than if all three blocks had been awarded.

"The probability of finding oil is higher if you look at a larger area than a smaller area," de Silva acknowledged.

Musheen of Hemas said that if oil was not found in the single block that is to be awarded, the chances of getting bidders for the next two blocks would be less.

"Also, if you start with only one block, there's a chance that we might lose out on goods and services supply to competitors in the region."

Sri Lanka's private sector has been hoping an offshore oil strike would open up business and employment opportunities in providing support services.

Several firms have visited Norway for talks with offshore oil industry players there and have also formed an oil and gas committee within the Ceylon Chamber of Commerce.

One firm, Capital Maharaja Organisation, a big unlisted conglomerate, has earmarked a group of 30 engineers for training in offshore petroleum skills.

Maharaja officials had earlier warned delays in starting oil exploration could be costly, especially with exploration fields elsewhere coming on the market.

It has struck a joint venture deal with Norwegian oil drilling firm Aker Kvaerner for future involvement in oil and gas exploration in the island.

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