Petroleum exploration efforts so far have resulted in the slow emergence of a new industry with progressive benefits through direct fiscal gains and added value through participation and the development of national labour, knowledge, technology, goods, services and research capabilities. The potential of the Mannar and Cauvery basins, along with that of the ultra deep water Ceylon basin that includes part of the Bay of Bengal submarine fan, indicate that efforts should be made to increase exploration activity early for maximum economic benefit. PETROLEUM RESOURCES DEVELOPMENT SECRETARIAT Sri Lanka Upstream Petroleum Benefits Report July 2008-March 2014 Benefits Division www.prds-srilanka.com June 2014
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Petroleum exploration efforts so far have resulted in the slow emergence of a new industry with progressive benefits through direct fiscal gains and added value through participation and the development of national labour, knowledge, technology, goods, services and research capabilities. The potential of the Mannar and Cauvery basins, along with that of the ultra deep water Ceylon basin that includes part of the Bay of Bengal submarine fan, indicate that efforts should be made to increase exploration activity early for maximum economic benefit.
PETROLEUM RESOURCES DEVELOPMENT SECRETARIAT
Sri Lanka Upstream Petroleum Benefits Report July 2008-March 2014
Benefits Division www.prds-srilanka.com
June 2014
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014
PRDS Page 2
Acknowledgment
The information presented in this report was gathered from the annual Sri Lanka Benefit reports
submitted by Cairn Lanka (Pvt) Ltd, local and foreign service suppliers, the Presidential
Secretariat, University Grant Commission, and the various divisions of PRDS.
This report was prepared by the Benefits division of PRDS under the guidance of Mr. Saliya
Wickramasuriya, Director General of PRDS.
This submission would not have been possible but for the cordial support & cooperation of the
Chairman & members of the Petroleum Resources Development Committee, members of the
Block M2 Management Committee, Cairn Lanka (Pvt) Ltd & it's service providers, staff of The
Presidential Secretariat, PRDS and all the other government agencies, universities and
individuals who were directly and indirectly involved in the upstream exploration program
within the period July 2008 to March 2014.
Lastly, a deep sense of gratitude is expressed for all those who provided information at various
stages of the exploration project over the period concern in completing this task.
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014
PRDS Page 14
iv Officials of PRDS on invitation delivered series of public presentations to
raise awareness and understanding on oil and gas industry at various
platforms.
Half/Full day
within 2012-
2014
v PRDS organized a presentation on " Global Local Content Development
Initiatives in the Oil and Gas Sector and Adaptation to Sri Lanka". IHS
Global Inc. delivered the presentation.
November 15,
2012
vi Director Benefits of PRDS represented Sri Lanka as a speaker at the Global
Local Content Summit held in London to deliver a presentation on " A Look
at Petroleum and Local Content Development in Sri Lanka"
September 24-
25, 2013
vii Director General of PRDS represented Sri Lanka as a speaker at many local
and international petroleum conferences and seminars.
2008-2014
2.3.4. Short Training Opportunities
i CLPL provided a familiarization training session to PRDS safety engineer
on health, safety and environment related to petroleum operations at Cairn's
facility in India.
10 Days from
July25-Aug 05,
2010.
ii CLPL provided an opportunity to PRDS petroleum geologist to attend a
short term staff training program on " Geophysics for Subsurface
Professional" in India.
March 26 -29,
2012
iii CLPL provided an opportunity to PRDS Petroleum Geophysist to attend a
short term staff training programs on " Seismic and sequence stratigraphy
for play prediction and basin analysis" in India.
May 7-11, 2012
iv CLPL provided a short training session to PRDS and MEPA officials at
Carin's facility in India on "Oil Spill Response information" as a part of
emergency preparedness prior to Cairn's first drilling campaign.
June 20-22,
2011
v PRDS officials conducted an awareness program on " Oil spill response
equipments and management" for a group of 30 members of Sri Lanka
Coastguard.
June 19, 2012
2.3.5. Internship Opportunities
i CLPL offered one paid summer internship placement to a postgraduate
student of Kelaniya University to compile, analyze and report the data
collected from a Sri Lanka oil and gas market survey.
Six Weeks
from July 01,
2011
ii PRDS offered 15 numbers of Internship placements for local and foreign
undergraduates/graduates at PRDS office under the supervision of PRDS
qualified staff.
Each
1 -3 months
duration
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014
PRDS Page 15
2.4 Environmental Research
In fulfillment of the commitment towards Environment Protection CLPL has contributed USD
25,000 annually to the Environment Fund maintained by the GoSL of Sri Lanka to support
environmental research by the GoSL. The following environmental research projects were
carried out or planned for using this fund accumulated to USD 125,000 during the period
concerned.
Figure 7 : Environmental research projects carried out utilizing the Environmental Fund
Research Title Description and Progress
Strategic Environmental
Assessment of the Cauvery
Basin
Following a public tender notification this study was awarded
to EML Consultants PVT Ltd at a cost of LKR 1.7 million.
The scope of the project was to collect existing environmental
data in the area, identify the knowledge and data gaps,
evaluate environmental impact of the associated petroleum
exploration activities and recommend measures to minimize
any adverse effects. This study was commenced in May 2011
and completed in May 2012. The copy of this report can be
obtained from PRDS.
Marine Environmental
Baseline Survey within
Cauvery & Gulf of Mannar
Basin
Work is in progress to conduct an island wide Marine
Environmental Baseline Survey. Expression of Interest were
invited from suitably qualified companies and individuals to
Conduct the above survey for the following study areas;
i. Sensitive coastal and marine habitats study
ii. Marine Mammal Study
iii. Metrological and oceanographic(metocean) study
iv. Resource Survey
2.5 Employment Opportunities
The past exploration activities had very poor impact on employment generation in the oil and
gas sector of Sri Lanka owning to very minimal and limited activities confined only to one
block of the whole basin. There were very few( about 60) permanent positions engaged in
exploration activities related to regularity, technical, logistics, management, etc. and most of
them were attached to the government regulatory agencies, CLPL local office and service sub
contractors. There was a remarkable improvement in short term mobile positions close to
drilling operations, that has given rise to about 100 - 150 each during 2011 and 2013 drilling
operations.
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014
PRDS Page 16
2.6 CSR Activities
CLPL signed a MOU with GoSL to construct 27 school libraries in Monaragala district and have
completed all 27 libraries by March 2014. According to their last annual benefit statement, they
have spent about US$ 145,000 by March, 2013 for this library construction project.
2.7 International Relations
On the international relations front, several reputed national oil companies(NOCs) and
International Oil Companies(IOCs) held discussions with the Government on potential
exploration and business investment collaboration. The following oil companies purchased US$
1 million 2D seismic data package of the Mannar Basin. In addition there were small quantities
of data purchases by few other oil companies depend on their requirement and interest.
i. Cairn Lanka (Pvt), Ltd - 2008
ii. Japan Oil , Gas & Metal Corporation - 2009
iii. Total S.A - 2012
iv. Esso Australia Pty Ltd -2013
Apart, the MOU signed in between the PRDS and MPRC (Malaysia Petroleum Resources
Corporation) on October 11, 2012 paved the way for Malaysian investors to collaborate with
their Sri Lankan counterparts to seek possible business opportunities in the oil and gas sector of
Sri Lanka. Also some large IOCs have shown a keen interest to conduct joint studies in ultra-
deep water areas which have not been explored so far. Discussions are underway to offer several
large, ultra -deep water blocks to suitably experienced and capable operators who qualify, for the
purpose of joint study with GoSL towards identifying long-term hydrocarbon potential.
3 Event Picture Gallery
a. Field Visits to Drill Ships
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014
PRDS Page 17
b. Short Training Programs and Capacity Building Workshops
c. Second International Offshore Exploration Licensing Round
d. Construction of 27 School Libraries in Monaragala District
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014
PRDS Page 18
e. Awareness, Training and internship assistance programs PRDS facility
f. Awareness and Training Sessions for the Business Leaders
g. First Sri Lanka Upstream Oil and Gas Conference
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014
PRDS Page 19
Annex B
Annex A
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014
PRDS Page 20
Sri Lanka Upstream Petroleum Local Content Guidelines
1. Introduction
The Petroleum Resources Act No. 26 of 2003 is the governing legislation for petroleum
exploration and development in Sri Lanka. The Petroleum Resources Development
Committee (PRDC) established under this Act is responsible for implementing the
provisions of this Act, and the Petroleum Resources Development Secretariat (PRDS),
headed by the Director General, is responsible for the administration and regulation of all
exploration and production activities in Sri Lanka.
These Guidelines have been prepared by the Director General, PRDS for the purpose of
adding extra value to the economy through capacity building of national human resources
and technological advancement of the country through the participation of international
Contractors/ Operators in upstream petroleum operations in Sri Lanka.
To achieve the above purpose, these Guidelines are mainly focused on developing a skilled
workforce, procuring optimal supplies and services domestically, improving the livelihood
of needy communities and enhancing Sri Lankan professional capabilities and
competencies.
2. Objectives
As the regulatory and administrative authority of the Sri Lanka upstream petroleum
industry, the PRDS aims to achieve the following three main objectives in improving Local
Content:
1. Ensure maximum employment opportunities for Sri Lankan nationals in all areas
and during all phases of upstream petroleum operations.
2. Improve local capacity building through education, training, knowledge and technology transfer aimed at increasing local competence levels to those expected by the international petroleum industry. 3. Encourage local stake holders to invest in various activities of upstream petroleum operations and thereby increase the capabilities and competitiveness of the domestic business community in the sector.
3. Implementation
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014
PRDS Page 21
To implement the above objectives, the PRDS requires that every Contractor, Operator, Sub Contractor, alliance partner and other foreign entity involved in any oil and gas projects, operation and activity in Sri Lanka; 1. Consider local content as an important element of their overall project development and management philosophy for project execution.
2. Submit an annual Local Content Development (LCD) plan, for review and approval
by the PRDS, outlining planned local goods and services sourcing, employment,
education, training, and R&D opportunities earmarked for Sri Lankan nationals, and
initiatives to uplift the livelihood of needy communities, not later than 6 months
from the Effective Date of the relevant PRA or other agreement, and within thirty
(30) days from the beginning of each subsequent financial year. The specific
provisions to be followed are given in Sections 4.a to 4.c below.
3. Submit a verifiable Local Content report outlining the progress in utilising Sri Lankan resources during the preceding Financial Year, within sixty (60) days of the end of each financial year, in a prescribed format with agreed metrics.
Every Investor participating in a licensing round is required, under specific terms of a Bid Inviting Document, to develop and submit a conceptual Local Content Development Plan based on the Guidelines as part of the bid package. At the evaluation of bid proposals, a weighting will be allocated to the proposed local content improvement and enhancement in line with evaluation parameters specified in the Bid Inviting Document, and the submitted plan shall form part of any agreement subsequently entered into.
4. Areas of Focus
a. Employment and Training Every Contractor, Operator, Sub Contractor, alliance partner and other foreign entity involved in any oil and gas projects, operation and activity in Sri Lanka shall; i) Consider recruiting a minimum number of permanent Sri Lankan
employees who may be deployed globally to gain experience in the industry, and thereby increase the number and level of technical and managerial Sri Lankan staff in-country over the exploration, development and production phases with a view to progressive replacement of expatriates.
ii) Employ Sri Lankan nationals for Sri Lankan operations to the maximum extent possible, making allowance for additional training that may be required to build local competence to the level required
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014
PRDS Page 22
to meet generally accepted international standards, and always encourage its Sub Contractors to act in the same manner. iii) Submit, for acceptance and approval by the PRDS, an Activity Specific Employment and Training Plan before the commencement of any petroleum activity that involves a considerable number of personnel at any stage of the project, which shall include: a) Hands on Training/internship opportunities with the breakdown of the skills needed. b) Employment opportunities in support of clauses (i) & (ii) above. c) A time frame for the opportunities listed in (a) and (b) above to enable members of the Sri Lankan work force to prepare themselves for such opportunities d) Anticipated skill shortages in the Sri Lankan workforce iv) Make an annual contribution to the Petroleum Training Fund maintained by the PRDS, and contribute in kind where possible to the various training programmes that may be coordinated by the PRDS from time to time.
b. Knowledge and Technology Transfer Every Contractor, Operator, Sub Contractor, alliance partner and other foreign entity involved in any oil and gas projects, operation and activity in Sri Lanka; i). Shall, where beneficial to national development, and at the request of the PRDS, negotiate in good faith Technical Assistance agreements with the PRDS, setting forth the terms by which the technical assistance partner may render technical assistance and make available industry proven tools and techniques of a proprietary nature for use in Sri Lanka by the PRDS. The issues to be negotiated in such technical assistance agreements may include, but not be limited to, licensing issues, royalty conditions, confidentiality restrictions, liabilities, costs and methods of payment. ii). May, if suitably qualified, carry out research programmes in acreage yet unallocated on a production sharing basis, within the framework of a Joint Study agreement. More details of such activities can be obtained from the PRDS.
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014
PRDS Page 23
c. Local Goods and Services Every Contractor, Operator, Sub Contractor, alliance partner and other foreign entity involved in any oil and gas projects, operation and activity in Sri Lanka shall; i). Give preference to the purchase and use of goods manufactured, produced or supplied in Sri Lanka provided that such goods are offered on terms equal to or better than imported goods with respect to timing of delivery, quality and quantity required, price and other terms; ii). Give preference to Sri Lankan services or service providers, if such services are available in Sri Lanka or can be obtained through Sri Lankan service providers, provided that such services are offered on terms equal to or better in respect of timing of delivery, quality and, price compared to foreign service providers. iii). Give preference to foreign Sub Contractors who utilise Sri Lankan goods and services to the maximum extent possible, where direct Sri Lankan providers or suppliers are not available. iv). Not award contracts solely on the basis of lowest price. Where a Sri Lankan local service provider or company has the capacity to provide tendered goods or services, such service provider or company shall not be disqualified provided their price does not exceed the lowest bid price by more than ten percent (10%).
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014
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ANNEX C
Annual Exploration Local Content Reporting Format
Petroleum Resources Development Secretariat
Benefits Division - PRDS
August 26,2013
www. prds-srilanka.com
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014
PRDS Page 25
INTRODUCTION
This document is designed to provide an operator engaged in petroleum exploration activities,
including geophysical, geotechnical, drilling, etc., in Sri Lanka with guidance for the preparation
of the annual Local Content Report which is required under a Petroleum Resources Agreement
and the Sri Lanka Upstream Local Content Guidelines(March 2013 by PRDS).
The operator is required to outline the progress of the Sri Lankan Resources utilized in the
preceding financial year and include the following information as applicable:
a brief description of the exploration activities including time periods during which the
activities occurred;
a total annual local content expenditure summary categorized by major activities.
Appendix A outlines the PRDS's suggested reporting format;
an employment summary, reported in work-months, for the Contractor and all Sub
Contractors dedicated to Sri Lanka exploration program. Appendix B outlines the PRDS's
suggested reporting format;
a summary of education and training provided or sponsored. Appendix C outlines the
PRDS's suggested reporting format;
a description of technical assistance programs provided or facilitated. Appendix D
outlines the PRDS's suggested reporting format;
a description of research and development activities conducted or sponsored. Appendix
E outlines the PRDS's suggested reporting format;
a summary of activities connected with Corporate Social Responsibility as an expression
of goodwill of the operator or any other dedicated to the program. Appendix F outlines
the PRDS's suggested reporting format; and
a listing of activity specific goods and services acquired in Sri Lanka including associated
actual expenditure. Appendix G outlines the PRDS's suggested reporting format;
The annual Local Content Report should be prepared on a financial year basis and should be
submitted to PRDS within sixty(60) days after the end of each Financial Year.
This reporting format guidance will be administered by PRDS, and may be revised from time to
time.
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014
PRDS Page 26
APPENDIX A
Annual Local Content Expenditure Summary
Activity Expenditure ($)
Goods and Services
Training & Education
Research & Development
Base Office in Sri Lanka Cost
Technology Transfer
Corporate Social Responsibility
Bonuses/Fees/Levis/Taxes paid to Sri Lanka
Contribution to Training Fund
Contribution to Environment Fund
Any Other
Total Local Spend
Total Contract Cost
% Local Spend
APPENDIX B
Annual Employment Summary - Dedicated to Sri Lanka Exploration Program
Company Category
Total Employees
Total Sri Lankans
Remarks
Head
Count
Work
Months
Head
Count
Work
Months
Total
Note : Company includes the operator, goods/services/vessel & support vessel sub-contractors
and any other contractors dedicated to the program
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PRDS Page 27
APPENDIX C
Education and Training
Description of the Education/Training
Activity
Numbers trained in each
program(if applicable) Cost
a. Internship Opportunities offered
b. Training Programs conducted or
sponsored
c. Other educational Assistance
activities conducted or sponsored
APPENDIX D
Technology Transfer
Type of Technical Assistance
Program
Name of
Transferee/Beneficiary Progress and Cost
APPENDIX E
Research and Development
Title of Research/Development
Activity Conducted or Sponsored Description Progress and Cost
APPENDIX F
Corporate Social Responsibility
CSR Activities Description Progress and Cost
Sri Lanka Upstream Petroleum Benefits Report, July 2008-March 2014