Sri Lanka delays two oil exploration blocks-oil min

Sri Lanka has delayed evaluating bids for two oil exploration blocks in its northwestern offshore Mannar basin and is to evaluate one with the most competition first, the island's petroleum resource minister said on Wednesday.

"We decide only to evaluate where there is a competition of three ... once that is over we will consider the other two," Minister A.H.M. Fowzie told Reuters.

In January Sri Lanka received six tenders from Cairn India (CAIL.BO), ONGC Videsh (ONGC.BO) from India and Nico Resources from Cyprus for the offered three blocks.

All three companies bid for the first block, while Cairn India and Nico Resources bid for the second block. The third block has only received a bid from Nico Resources.

The first block is the smallest out of the three with 3,338.1 square kilometres, while the third block is the largest with an area of 4,126.5 square kilometres.

Sri Lanka has eight exploration blocks in the Mannar basin, three of which are to be given for exploration once the government decides on a successful bidder.

Two have been assigned to China and India on a nomination basis. The government earlier said it plans to delay bidding on the last three blocks to get higher revenue.

Oil and Natural Gas Corp (ONGC), which was offered the block nominated to India, said in September it was not interested in the assigned block, citing low prospectivity and the fact that Sri Lanka was asking for a big signature bonus.

The Sri Lankan government later said it would negotiate with ONGC for a new oil block. The outcome of the negotiation has not yet been revealed.

The bidding process was closed in January and the government expects to select the best bidder soon. The government had earlier said it aimed to select the three highest bidders by April 2008 and start the oil exploration process by August.

"The bids are before the technical evaluation committee and once they study and submit a report to the cabinet negotiating committee we will decide," Fowzie said.

"The committee has sat already and very soon they will submit a report."

A non-oil producing nation, Sri Lanka expects its first commercial crude oil production by 2010.

Prior to the bidding, the government had said exploration licences would be awarded to firms that can provide most advanced technological and economic benefit to Sri Lanka.

A 35 percent tax from net profit, a 10 percent royalty on annual production revenue and allowing the planned National Oil Exploration Company to invest 10 percent in exploration activities were the conditions put forward by the government.

Signature bonds, production bonds and profit-sharing ratio are to be considered in selecting the best three bidders.

Roadshows to attract investors were held in London, Houston and Kuala Lumpur in September last year.

The government says seismic data shows more than a billion barrels of oil lie off Sri Lanka's northwest coast, though no reserves have yet been proven.

If proven, the reserves would be a major boost for the war-torn country, which imported oil worth $2.2 billion in the first 11 months of 2007.

Source: Reuters