Cairn India will by month-end exit its Sri Lankan gas block after two discoveries it had made were found to be commercially unviable.
Cairn, whose main assets are the oilfields in Barmer district of Rajasthan, will relinquish the 2,912 sq km block SL-2007-01-001 in the Mannar basin after expiry of exploration period at end of October, sources privy to the development said.
The company has so far drilled four wells on the block and discovered gas reserves in two of them. But the discoveries were assessed to be commercially unviable.
It has therefore decided not to enter the development phase after the end of exploration period this month end, they said.
The discoveries had established hydrocarbon prospectively for Sri Lanka, which does not produce any oil or gas and is dependent on imports from nations like Saudi Arabia for its needs.
Cairn Lanka, a wholly-owned subsidiary of CIG Mauritius Pvt Ltd under Cairn India, held 100 per cent interest in the block.
Its Phase-1 exploration resulted in two gas discoveries – CLPL-Dorado- 91H/1z and CLPL-Barracuda-1G/1. After this it drilled two more exploration wells as part of Phase II.
The fourth well encountered high quality reservoir sands, which were water bearing. The company thereafter reached an assessment that the discoveries will not be commercially viable to produce, they said.
Cairn had in its financial results for the quarter ended March 31, accounted for a one-time, non-cash impairment charge on acquisition goodwill for the the SL 2007-01-001 block.
“Exceptional item in Q4 FY15 pertained to impairment loss of Sri Lanka amounting to Rs. 505 crore (gross of tax) leading to a negative profit after tax (or loss) for the quarter of Rs. 241 crore,” the company had said on April 23 announcing the financial results for January-March quarter.
The charge was triggered by the fall in crude oil prices, which declined 43 per cent in the past year.