September 6, 2010 / 4:16 PM / 10 years ago

Sri Lanka to offer more oil exploration blocks

* Blocks in area off where 25-year separatists war started

* War flare-up ended exploration there by U.S., Russia firms

By Ranga Sirilal

COLOMBO, Sept 3 (Reuters) - Sri Lanka on Monday said it would offer new oil exploration blocks in an area off the northern coast where the initial flare-up of a quarter-century war with the Tamil Tiger separatists ended the hunt for oil.

The Indian Ocean island’s Petroleum Resources Development Secretariat said it was planning to call bids for blocks in 15,000 sq km of the shallow Cauvery Basin, just off the northern area the Tigers controlled until their defeat last year.

“A lot of Indian companies are showing their interest,” Neil De Silva, director-general of the secretariat, told Reuters. “The depth there will be around 100 meters and the cost for explorations will be very low.”

De Silva gave no details on how many blocks would be made available in the Cauvery basin, shared between India and Sri Lanka, which sits at India’s southern tip.

American and Russian companies from the mid-1960s until 1984 did exploration work in the Cauvery basin, but no commercial oil was produced and the war’s flare-up ended exploration.

Calgary-based Bengal Energy Ltd. (BNG.TO) has exploration rights for 1,362 sq km on the Indian side of the Cauvery basin, which already has nearly 30 operating wells.

Indian companies have already committed to exploring Sri Lanka’s oil potential in the deeper Mannar basin, located further south along the western coast.

Cairn Lanka, a subsidiary of Cairn India CAIL.BO, is due to begin drilling there by mid-2011 after completing a seismic survey. It has rights to 3,000 sq km. [nCOL372321]

Sri Lanka’s government has said previous seismic data showed potential for more than 1 billion barrels of oil under the sea in a 30,000 sq km area of the Mannar Basin, located further south along the western coast.

Sri Lanka produces no oil and is totally dependent on imports, which cost it $2.2 billion in 2009. (Additional reporting by Bryson Hull; editing by James Jukwey)

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