Overview
Oil Exploration: Petroleum exploration in Sri Lanka began approximately 40 years ago, but the first international licensing round was held in 2007 for three exploration blocks (M1, M2, and M3) and one exploration block was awarded in 2008 to Cairn Lanka Pvt Ltd, a subsidiary of Cairn India. For the first time, two natural gas discoveries were made in two out of the three wells drilled in Block M2 by Cairn in 2011. It is currently estimated that the Mannar Bay may hold around $200 billion worth of oil and gas resources. In October 2021, Parliament amended the Petroleum Resources Act to establish the Petroleum Development Authority of Sri Lanka and formulate a national policy for the upstream petroleum industry covering the exploration, development, production, and management of all petroleum resources in Sri Lanka. The law aims to provide the legal framework for all upstream processes in Sri Lanka, including the provision of operational guidelines.
Based on data acquired from seismic surveys, the government estimates that there are over one million barrels of oil resources in a 30,000 square kilometer area in northern waters. The seismic surveys were conducted by an Australian subsidiary of Norwegian firm TGS-NOPEC in 2003 and 2005. Bell Geospace conducted the first aerial mapping of petroleum resources in Sri Lanka in Q4 of 2021.
Oil Refinery and Pipeline: Sri Lanka’s only refinery and the main port-to-refinery pipeline are in urgent need of upgrading and expansion. The state-owned Ceylon Petroleum Corporation (CPC) runs the Sapugaskanda refinery and plans to modernize the existing refinery and build a new one have been discussed for several years. Several companies have submitted proposals for this project, but the government has yet to award a contract. The CPC expects to increase the refining capacity from the current 50,000 barrels per day to 100,000 barrels per day. Sri Lanka’s main 5.8-kilometer oil pipeline also needs urgent replacement. The Government awarded a feasibility study to a Singaporean company to explore options for refinery upgrade and refurbishment.
In July, the government decided to allow international companies to import, distribute, and sell petroleum products in Sri Lanka. Also in July, the Ministry of Power and Energy issued a request for Expressions of Interest (EOI), marking the first opportunity for new company to enter the Sri Lankan market since 2004.
Leading Sub-Sectors
- Refurbishment of oil refinery
- Appraisal and development of natural gas discoveries
- Fuel Supply
Opportunities
The refurbishment of the Sapugaskanda oil refinery is a high priority for the Government of Sri Lanka. Output from the Sapugaskanda oil refinery meets 40 percent of Sri Lanka’s demand for refined fuels, while the government imports 60 percent of the refined fuels consumed domestically. A feasibility study was carried out in 2021, however the government has yet to publish a Request for Proposals (RFP).
The government is also interested in the construction of a private sector owned refinery that could serve both the domestic market and export market. The Ministry of Petroleum will consider these proposals on a regular basis (no tender required) and will seek the Cabinet’s approval on vetted viable projects. Companies must secure requisite financing to be a serious contender.
There will be opportunities to supply equipment and services needed for oil and gas exploration projects.
The government is expected to offer an international licensing round for the appraisal and development of natural gas discoveries in block M2 of the Mannar Basin.
In July, the government opened up the fuel import and supply sector to international firms. Companies interested in the opportunity would have to source foreign exchange outside of the Sri Lankan financial system in order to be eligible.
Resources
Petroleum Development Authority
Ministry of Petroleum Industries