The Nation learns that the decision by Cairn Lanka, an entity coming under the umbrella of Cairn India, to halt petroleum exploration in the Mannar basin, had been necessitated as the project was not commercially viable.

India’s The Hindu newspaper reported on Friday (July 10) that the agreement between the Sri Lankan government and Cairn Lanka, holding the license for petroleum exploration in the Mannar basin, will come to an end in October this year.

The Hindu also reported that an official document states that the termination of the agreement has been necessitated by the “policy decision” of Cairn India not to go ahead with further exploration, after drilling four wells, three in 2011 and one in 2013. Natural gas was discovered in two wells, which were estimated to have the recoverable volume of around 60 billion cubic meters. The Cairn Lanka had spent US$230 million for the exploration, the newspaper also reported.

The Nation learns that this ‘policy decision’ was arrived at as the project was deemed to be no longer commercially viable. “They have to dig over 1 1/2 km below the surface. The more viable option would be to drill further north off the tip of Jaffna,” revealed an authoritative source knowledgeable with the company’s decision, who spoke on grounds of anonymity.

At Thursday’s Cabinet press briefing, it was disclosed that Cabinet had approved a proposal made by Minister of Power and Energy, Patali Champika Ranawaka, to select a suitable investor through international competitive bidding for commercially developing the national gas deposits found in block SL 2007-01-001 in the Mannar basin. Cabinet had also approved a proposal to appoint a Cabinet Appointed Negotiation Committee to assist in the above task. However, it remains to be seen what sort of impact Cairn Lanka’s pullout will have on further investments and exploration activities.

Repeated attempts were made to contact Minister of Power and Energy, Patali Champika Ranawaka for comment on this issue. However, due to constant meetings related to the current political situation, he proved unavailable.