Almost every government since the 1970s has either announced that they have ‘struck oil’ or has made plans to extract black gold from Sri Lanka’s coastal waters. However, despite much hype, little progress has been made. Extracting petroleum products from the sea-bed is an expensive, often lucrative and high-risk affair which requires the right expertise, infrastructure, economic planning and a good regulatory process for a nation to exploit safely and profitably.  

While energy security is a key issue for Sri Lanka, the island nation can ill-afford to ‘rush in’ to oil extraction. Many challenges and risks need to be considered and addressed. Questions regarding the safety of offshore drilling, its impact on the island’s critical marine ecosystems, and its dependent coastal tourism (an industry which governments believed could shoot them out of the economic crisis), storage, piping, and refining capacity must all be addressed. Further, the geopolitical implications of ‘striking black gold’ or LNG, and the invariable influence which will come to secure drilling contracts will need to see Sri Lanka stand robust on a clear and well-defined foreign policy.

During the Gotabaya Rajapaksa Government, the former Energy Minister Udaya Gammanpila restarted discussions on oil and gas exploration, initiated amendments to the CPC Act, and established a new entity to accelerate the exploration process.  He estimated in 2022 that Mannar Basin resources were worth approximately $ 267 billion. According to his projections, even if investors receive a 50% share, Sri Lanka would still retain $ 133.5 billion – a sum that could significantly transform its economy. Following these claims, questions arose as to why Sri Lanka had delayed the process of attracting investors, especially given the country’s severe foreign exchange crisis, which continues to cause significant public hardship.

Once again, after decades of stalled projects, Sri Lanka is pushing forward with plans to tap into its vast offshore oil and gas reserves, valued at an estimated $ 267 billion. This is as the island nation struggles to find its feet after a bruising brush from the severe economic crisis it experienced over the last five years.  With a lot of debt to be paid back in the coming years, the Government is moving to finalise contracts for exploration in the Mannar Basin. However, Sri Lanka’s energy sector has a long history of unfulfilled promises and stalled projects. Investors have withdrawn in the past, and political and regulatory uncertainties have repeatedly hindered progress. As officials prepare to call for Expressions of Interest (EOIs) and float tenders, industry experts question whether Sri Lanka possesses the necessary stability, infrastructure, and policy framework to attract serious investment and translate its petroleum ambitions into reality.

The Sunday Morning yesterday reported that authorities are in the final stages of drafting contracts of upcoming oil explorations. The Energy Committee, which drafts plans are chaired by Energy Minister Kumara Jayakody and comprises Ministry Secretary Prof. Udayanga Hemapala, Ceylon Electricity Board (CEB) Chairperson Dr. Tilak Siyambalapitiya, Ceylon Petroleum Corporation (CPC) Chairperson D.J.A.S. De S. Rajakaruna, CPC Managing Director Dr. Mayura Neththikumarage, and Sri Lanka Sustainable Energy Authority (SLSEA) Chairperson Prof. Wijendra J. Bandara. The committee is expected to complete the contract and invite EOIs within the next six months. Additionally, a consultant will be appointed to provide guidance on gas exploration efforts.

“Based on global industry standards, it takes a minimum of three years to begin commercially viable extractions, and even then, we are looking at an overall timeline of five years for the entire project to reach its full potential. As soon as this Government assumed power, we made it a priority to accelerate the process, consulting with industry experts to draft a contract that ensures both investor confidence and national benefit. Our target is clear – we will finalise the contract and call for EOIs within the next six months,” CPC Managing Director Dr. Neththikumarage told The Sunday Morning.

Let us hope that the Government will move forward on this matter with due diligence and sound advice. Sri Lanka can ill afford another environmental catastrophe, nor be the subject of yet another geopolitical tug-o-war over a new energy reserve find.