Cairn to start Sri Lanka oil exploration 2nd phase

Mon Dec 26, 2011 1:55pm GMT

Quotes

   

* Two wells hit, third abandoned as a dry hole

* Seismic, drilling exceed commitments in 1st phase

* Five of 8 offshore blocks still not awarded

By Shihar Aneez

COLOMBO, Dec 26 (Reuters) - Cairn India said it intended to start the second phase of oil exploration in Sri Lanka's offshore Mannar basin after completing the first phase and successfully discovering gas and condensate.

"Cairn Lanka's successful drilling programme ... has established a working petroleum system in the frontier Mannar Basin," Cairn India said in a statement on Monday, referring to its wholly owned subsidiary in Sri Lanka.

"Following this success, Cairn Lanka has notified the government of Sri Lanka of its intention to enter the second phase of exploration," it added.

The company has said it is too early to provide estimates of the size of reserves discovered and that further drilling will be required to determine whether they are commercially viable.

The first phase of the exploration programme involved the acquisition, processing and interpretation of 1,753 square kilometres of 3D seismic data and a three-well, deepwater drilling programme.

"This programme resulted in two successive gas and condensate discoveries: the CLPL-Dorado-91H/1z well and, the CLPL-Barracuda-1G/1 well," Cairn said in a statement on Monday. It gave no estimates

"The third well, CLPL-Dorado North 1-82K/1, was plugged and abandoned as a dry hole on 14th December, 2011."

Cairn India said that in the first phase it had exceeded its commitments in the seismic programme by 20 percent. In the drilling programme, it exceeded the drilling depth commitment by 50 percent, it added.

Shares in Cairn India closed 1.7 percent firmer on Monday. The company announcing its success in the first phase just before the market closed.

ONE OF EIGHT BLOCKS

Last month, the Sri Lankan president's office said the Barracuda well, drilled to a depth of 4,700 metres (15,400 feet), had three petroleum-bearing formations with gas and an indication of liquid hydrocarbons.

The Barracuda well is located approximately 60 km off Indian Ocean island's northeastern coast.

In October, Cairn India informed the government that it had found natural gas in its first well, the first hydrocarbon discovery in Sri Lanka, but said it was too early to determine whether would be economically viable to drill.

Cairn has rights to drill in one of eight blocks in the Mannar Basin. China and India each have one, and the remaining five are expected to be tendered after Cairn's exploration campaign is completed, which is expected in early 2012.

Russia's natural gas monopoly Gazprom and Malaysian state oil company Petronas have held talks with Sri Lanka on potential exploration, and Vietnam and Sri Lanka signed a deal on oil and gas cooperation in October.

Seismic work done earlier by Norway's TGS Nopec Geophysical Co ASA showed some potential in the northern Cauvery Basin, which on the Indian side has producing wells, and in a basin off the island's southern coast.

Cairn's well is the first drilled in three decades. There were signs of oil and gas finds in the 1970s, but the breakout of violence onshore with Tamil militants which erupted into a 25-year civil war halted any exploration efforts.

Sri Lankan forces defeated the Tamil Tiger separatists in 2009, and the Indian Ocean nation is on a campaign to revitalise its $50 billion economy. (Reporting by Shihar Aneez, editing by Jane Baird)