S.Lanka oil exploration bidders seen unfazed by well shutdown

Last Updated: Fri, Mar 01, 2013 10:40 hrs

* Sri Lanka to kick off road shows for new exploration licences

* Sri Lanka expects abandonment won't affect new licences

* Cairn discovered gas, condensate in first two wells

By Shihar Aneez

COLOMBO, March 1 (Reuters) - Sri Lanka kicks off a second round of bids for licenses to explore for oil and gas off its northwest coast next week, but expects bidders to be undeterred by news of an exploration well abandoned by the sole license buyer in the previous round.

Sri Lanka is in the process of inviting companies to bid for licences on some of the 13 blocks in the Cauvery and Mannar Basins off its northwest coast.

Saliya Wickramasuriya, head of the country's Petroleum Resource Development Secretariat, told Reuters in an e-mail he did not expect the abandonment of the latest well "to have an impact on the second licensing round starting next week".

Cairn India's latest abandoned oil exploration well in Sri Lanka suffered a mechanical problem and its hydrocarbon potential has not been fully tested, the Sri Lankan petroleum official said on Friday.

Cairn India, a unit of London-listed Vedanta Resources Plc , said on Thursday it plugged and abandoned an exploration well as it encountered multiple thick high-quality reservoir sands that were not hydrocarbon bearing.

But the well's potential had not been fully tested, said Wickramasuriya.

"We do not feel the hydrocarbon potential of this particular prospect has been fully tested yet," he said, adding that he understood the well had suffered a mechanical problem, based on a statement from Cairn's Sri Lankan unit.

"(This) caused the operator to plug the well for abandonment prematurely," he added.

Cairn kicked off the well drilling on Feb. 2, after discovering gas and condensate in two of the three wells drilled in an earlier phase, though commercial viability has yet to be determined.

Sri Lanka has tried to reinvigorate oil and gas exploration efforts since the end of a three-decade war with Tamil separatists in May 2009. The island nation does not currently produce oil and spent $5.04 billion on imports in 2012.

Earlier seismic work 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.

Sri Lanka has said the seismic data shows the potential for more than 1 billion barrels of oil under the sea in a 30,000-sq km area of the Cauvery basin.

Cairn has the rights to drill in one of eight blocks in the offshore Mannar basin. China and India have been offered one each, which they are yet to accept, while the remaining five are expected to be tendered in the upcoming licensing round.

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 cooperation pact in 2011.

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