Sri lanka Country Commercial Guide
Learn about the market conditions, opportunities, regulations, and business conditions in sri lanka, prepared by at U.S. Embassies worldwide by Commerce Department, State Department and other U.S. agencies’ professionals
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Oil and Gas
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Overview

Oil Exploration:  Petroleum exploration in Sri Lanka began approximately 40 years ago with more recent work on seismic surveys conducted in Mannar basin by a Norwegian seismic company.  The first international licensing round was held in 2007 for three exploration blocks (M1, M2 and M3) in 2007 and one exploration block was awarded to Cairn Lanka Pvt Ltd, subsidiary of Cairn India in 2008.  For the first time, two natural gas discoveries were made in two wells out of the three wells drilled in Block M2 by Cairn in 2011.  The present estimate of the Mannar Bay oil and gas resources is around $200 billion. The Petroleum Development Authority (PDA) with its partners SLB (formerly Schlumberger) and Bell Geospace have continued to acquire, process and reprocess the Sri Lankan dataset for hydrocarbon resources.

Investors may now apply for customised groups of blocks, as practiced in advanced countries, which provides operators flexibility and value add ranging from desktop studies to exploration wells to create an active after-market for acreage. Government rules on relinquishment, farm-ins and farm-outs are designed to increase petroleum activity across all Sri Lankan offshore basins and attract competent operators of all sizes. A new offshore hydrocarbon block map, updated July 2022, small blocks areas offered under joint exploration licenses and gas discoveries available for rapid development under multiple options are some of the new initiatives of the PDA.

Based on data acquired from seismic surveys, the government estimates that there are over two 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. 

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 to modernize the existing refinery and build a new one have been discussed for many years with no progress made to implement the project  Several US companies have submitted proposals over the years for this project which has not materialized. 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 published an EOI earlier this year for a petroleum refinery with seven companies offering proposals that has currently been shortlisted to three firms, which includes Sinopec.

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 domesticallyRFP’s have been published.

There will be opportunities to supply equipment and services needed for oil and gas exploration projects.   In June 2022, the government opened up the fuel import and suply sector to oil producing countries.  Three companies were selected to supply fuel including Sinopec, R.M. Parks (a U.S. company), and an Australian firm.

Resources

Petroleum Development Authority (PDA)

Ceylon Petroleum Corporation (CPC)

Ministry of Energy (MoE)

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