Total Likely to Sign Exploration Agreement with Sri Lanka Soon

France's Total S.A. is likely to sign an agreement with the government in Sri Lanka next week for the exploration of potential oil and gas resources off the island's east coast, according to a report by local media economynext.

Exploration activity by the French supermajor could commence offshore Sri Lanka as early as April or May after the Sri Lankan Cabinet gave its approval to the Petroleum Resources Development Secretariat (PRDS) -- which is entrusted by the government with responsibility for the South Asian nation's upstream oil and gas industry -- to ink the agreement in early February.

"They will start by investing about $10 million to acquire seismic data off the East Coast of Sri Lanka,” Saliya Wickramasuriya, director general of the Petroleum Resources Development Secretariat Director General said, as quoted by economytext Tuesday.

Total's interest to explore for hydrocarbons offshore Sri Lanka comes amid a downturn in the global petroleum industry, with oil prices currently hovering 70 percent below the levels in the second half of 2014.

However, PRDS' Wickramasuriya believes that Total is making use of the industry slump to invest in new upstream assets. "With the global oil industry in a slump Total will be able to make use of lower prices for services and equipment to get a lot more done," he commented.

According to economytext, Sri Lanka will sign a "joint-study agreement" with Total, giving the firm three years of exclusivity for the data it acquires after which the latter can be viewed by other oil companies. Ownership of the data will be held by the government from the point of its acquisition.

Total has the right to negotiate for a production sharing contract with Sri Lanka if it finds commercial quantities of oil or gas reserves. But should these talks failed within a stipulated period, the government may open the reserves to other bidders although Total will be given the right to match the highest bidder within a specified timeline. All residual rights will lapse after 51 months.


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Chee Yew has covered the upstream and downstream sectors of the oil and gas industry in Asia for more than 15 years. Email Chee Yew at cheeyew.cheang@rigzone.com

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