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French Total Lands Exploration Deal With Sri Lanka

French Supermajor Total S.A. (TOTF.PA) signed a deal Thursday with the government of Sri Lanka to explore potential offshore ultra-deep water blocks, according to the Sri Lanka’s Oil Ministry.

The agreement, which has been in the works since 2014, would allow Total to explore marginal areas on Sri Lanka’s East Coast.

The call for proposals came after India’s Cairn backed out of the deal in 2015 after the deal lost appeal amid falling oil prices. Cairn discovered two gas wells in 2011.

As part of the agreement, Total would conduct technical surveys and analyze data to assess the viability of oil and gas at commercial volumes. This data, worth several millions, would be owned by Sri Lanka, and would allow Sri Lanka to more accurately assess the potential for production in the region.

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Under the joint agreement, Sri Lanka will also get ground rental of US $1 per square kilometer for the entire acreage, valued at roughly LKR $7 million per year.

Total could begin studies as early as April or May.

If Total finds oil or gas reserves in commercial quantities, it will have the right to negotiate a production sharing contract with Sri Lanka. Should these negotiations fail, the government may offer the opportunity to other bidders. Total would have the right to match the highest bidder within a specified timeframe. Residual rights will lapse after 51 months.

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China, India, Russia, and Vietnam were some of the other countries that had expressed an interest in bidding on Sri Lankan oil and gas explorations.

In a statement made by Petroleum Resources Development Secretariat, Director General Saliya Wickramasuriya noted, “The opportunity we are offering is not just in exploration but in the linkages that follow from the emergence of an entire natural gas industry in Sri Lanka, which decouples risk with the rest of the world."

By James Burgess of Oilprice.com

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