Sri Lanka - Country Commercial Guide
Oil and Gas

This is a best prospect industry sector for this country.  Includes a market overview and trade data.

Last published date: 2021-09-28

Overview

Oil Exploration:  Sri Lanka held an international bidding round in 2019 to explore and produce oil and natural gas in two blocks in the Mannar and Cauvery Basins.  The bids were for the Mannar Basin’s M1 block — covering 2,779 square kilometers—and its northern neighbor, the Cauvery Basin’s C1 block—covering 2,246 square kilometers.  The government is currently reviewing the submitted bids; however, it is considering calling for new bids in the M2 block in an attempt to attract top oil and gas companies.

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. 

Sri Lanka’s Petroleum Resources Development Secretariat (PRDS) has identified several blocks for offshore oil exploration in the Mannar Basin, the Cauvery Basin, and the Lanka Basin.  Based on the initial data and regional studies, the PRDS is estimating the Mannar basin alone could have the potential to generate 5 billion barrels of oil and 9 trillion cubic feet of natural gas, which would be sufficient for Sri Lanka’s energy needs for the next 60 years.  The first exploration license in the Mannar Basin was issued to Cairn India (https://www.cairnindia.com/Pages/Home.aspx) in July 2008.  The test wells have produced natural gas, but the company decided to exit oil and gas exploration activities in Sri Lanka in 2015 due to low crude oil and natural gas prices.  The government has also entered into exploration agreements with Total, Equinor, and Bona Vista Energy.

The Government of Sri Lanka entered into an agreement on  August 17, 2019, with the French oil and gas company TOTAL E&P, with the inclusion of the Norwegian oil and gas company Equinor ASA as a joint study partner to explore the hydrocarbon potential in the eastern offshore region of Sri Lanka.  The government also signed an agreement with Eastern Echo DMCC in 2018, subsidiary of major oilfield services company Schlumberger, to collect, market, and license petroleum data on a “multi-client” basis, enabling several data acquisition projects, including 2D and 3D seismic, in selected offshore areas around Sri Lanka at no cost to the government.  The main objective of entering into this agreement is to acquire more petroleum data using modern acquisition and processing techniques, thereby reducing the technical and financial risk of prospective investors in deep water exploration in Sri Lanka and encouraging increased levels of investor participation in oil and gas exploration activities.

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 is planning to modernize the existing refinery and build a new one.  Although the government has made multiple announcements on building a new refinery, no new projects have commenced.  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.

Leading Sub-Sectors

Refurbishment of oil refinery

Appraisal and development of natural gas discoveries  

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.  Once the feasibility study is complete there will be an opportunity for U.S. companies to participate in the 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.

Resources

Petroleum Resources Development                 (PRDS)

Ceylon Petroleum Corporation                        (CPC)

Ministry of Petroleum Industries