New state company to handle oil and gas exploration and production

The Energy Ministry is awaiting Finance Ministry approval to register a new entity named Lanka National Petroleum Company ( LNPC) to handle the upstream segment of the oil and gas industry which includes exploration, geological surveys and production.

“As the word ‘national’ is involved, the Registrar of Companies requires the go-ahead of the line ministry which, in this case, is Finance,” said Energy Minister Udaya Gammanpila.

“We are waiting for this to be granted.” The proposal was first announced in November last year.

The LNPC will be fully owned by the Ceylon Petroleum Corporation and modelled on companies like Malaysia’s Petronas, the minister said. Through it, the State will buy 15 or 20 percent stakes (by raising its own equity) in any foreign entity-led joint venture that invests in Sri Lanka’s oil and gas industry, the minister said.

Meanwhile, several multinational oil companies have bought “millions of dollars worth of Sri Lankan data over the past few months”.

“We haven’t had such significant data purchases, ever,” said Saliya Wickramasuriya, chairman of the regulatory body, the Petroleum Development Authority of Sri Lanka (PDASL), which was enacted in

September last year.

The data were bought by international oil and gas companies from service companies that had invested in carrying out the research, acquiring new and re-processed old data. A royalty or licensing fee of 10 percent is paid to Sri Lanka.

“We don’t have the money to shoot seismic, acquire airborne gravity magnetic data and so on,” Mr Wickramasuriya, an expert in the oil and gas industry, said. “However, if we invite international companies in those lines of business to come and acquire this data on their account and we license them to sell it on our behalf, the benefits amplify.”

“Nobody will take that risk (and cost) if they do not see a potential reward,” he said. “The fact that, over the past two years, specialist oil and gas companies have been acquiring Sri Lanka data at their own expense is telling me that the market is receptive to our potential. Recent availability of new data, a new law, independent regulator and national operator all contribute to this confidence.” A new exploration map has been released, going from 20 blocks to around 880. “We have changed the offshore block grid into a uniform, 15km by 15km type block grid, to increase petroleum activity offshore Sri Lanka by providing geographical and contractual flexibility to operators,” Mr Wickramasuriya said.