|Govt. cancels NOPEC deal
The JVP and the JHU have been agitating for the cancellation
of a NOPEC agreement, adopting the position that Sri Lanka was
being sold by successive governments to the West. At one stage,
the JVP said that the NOPEC deal had been signed by the UNP
government one day prior to the signing of the ceasefire
agreement in February 2002. However, it was in fact signed by
former President Chandrika Kumaratunga during her tenure in
Now the government has taken corrective action by paying US $
8.5 million and then a further US $ 2 million in order to get
the data necessary for the oil exploration around the coast of
The government has also at the same time invited India and China
to explore oil on two identified locations to be auctioned at a
price. We give below the full details of the government’s
decision to cancel the NOPEC agreement and the subsequent
decision to hand over the two sites identified to the Indians
and the Chinese. The total cost of the cancellation amounts to
US $ 10.5 million. The government has also decided to call for
worldwide tenders to auction off the remaining oil deposits
around Sri Lanka. If petroleum deposits are discovered off the
coast of the island, it would go a long way to uplift the Sri
Lankan economy and alleviate poverty in the country.
The details submitted to the cabinet by Minister of Petroleum
Resources A.H.M. Fowzie are as follows. Are we headed in the
right direction, is the query the cancellation has raised. The
Nation leaves it to its readers to decide.
exploration activities within the territorial waters of Sri
This has Reference to the decision of the Cabinet of Ministers
dated 05.07.2006 regarding the Cabinet paper No. 22/2006
submitted by me on 27.06.2006 in respect of the oil exploration
activities within the territorial waters of Sri Lanka. The said
cabinet decision is attached hereto as annexure 1
02 According to the said cabinet decision, there are two major
functions to be carried out by the Ministry
2.1 Allocation of two exploration blocks to India and the
Peoples’ Republic of China from Mannar Basin for a restricted
2.2 Purchase 2D Seismic data on Mannar basin by making a final
payment to TGS NOPEC and cancellation of the agreement signed
between the said company and Ceylon Petroleum Corporation
03 Regarding the implementation of this cabinet decision, a
meeting was held at the
Temple Trees on 24.08.2004 chaired by HE the President with the
participation of number of different parties. At this meeting
following instructions were given by the HE.
3.1 Obtain absolute ownership of the seismic data on Mannar
basin even by
paying US$ 10 million to TGS NOPEC .
3.2 Immediately after obtaining data, cancel the agreements
signed between the TGS NOPEC and the Ceylon Petroleum
3.3 These activities to be completed before 30.09.2006 and to be
reported. Further instructions on oil exploration in Sri Lanka
will be notified
To carry out above activities, my Ministry had only 25 working
days. As such, following steps were taken expeditiously
4.1 Informed the National Procurement Agency (NP A) on
25.08.2006 to appoint a Cabinet Appointed Negotiating Committee
4.2 Accordingly, the NP A appointed a Negotiating Committee and
4.4 Conveyed to the Secretary, Ministry of Finance and Planning
on 29.08.2006, information regarding the financial allocation /
foreign exchange required to meet the payments due to TGS NOPEC.
4.5 requested TGS NOPEC via fax on 31.08. 2006 to arrive in Sri
Lanka during the first week of September 2006 to discuss about
the purchase of data and the cancellation of the agreement.
Through telephone conversations on several occasions they were
convinced to come to Sri Lanka.
4.6 The MOU to be signed with India and the Peoples’ Republic of
China were drafted and sent to the Ministry of Foreign Affairs
4.7 The Production Sharing Agreements to be signed with India
and China and with other countries in future has been drafted
and the approval of the cabinet of Ministers was obtained to get
foreign consultants views, under reference No.32/2006, on
05. Considering the ongoing security situation the officials of
the TGS-NOPEC declined to come to Sri Lanka, however after
convincing Mr. Paul A. Gillaren the General Manager, Asia
Pacific region of the company agreed to meet in Sri Lanka for a
discussion on 15.09.2006. The document incorporating the matters
discussed at this meeting was faxed to us on 08.09.2006: Please
see annexure 3
06. The said document was referred to the Project Committee,
which has discussed it in detail. Subsequently a document (TOR)
to be used by the CANC in future discussions as recommended by
the Project Committee was handed over to CANC.
07. The CANC had the relevant discussions with Mr. Paul A.
Gillaren of TGS¬ NOPEC on 15.09.2006 and the Project Committee
Members and the relevant officials of my Ministry assisted the
CANC. This discussion was based on the contents of the documents
submitted by both parties, the final decisions were arrived on
the facts which were agreeable to both the parties. Accordingly
the reports submitted by the CANC with their recommendation is
08. It is necessary to find solutions to following questions
when obtaining 2D seismic data from TGS-NOPEC.
8. l. lnspecliol1 and satisfaction on the accuracy and
reliability of the claw to be obtained
Dr. Neil R. De Silva, the Director General of PRDS has submitted
a report based on the inspection of data in Perth on 20.09.2006
to 22.09.2006. Please see annexure 6. His expenses on airfare
and accommodation were borne by the TGS-NOPEC as agreed during
the discussions with CANC.
8.2 Safe storing of data to be obtained
For this purpose it is necessary to have a data storage with
controlling of temperature and optimal humidity. Currently there
is no such facility available. The building, in which the
Petroleum Resources Development Secretariat will be established
has been released on 01.09.2006 from the Ministry of Power &
Energy. In this building such a storage facility has to be
provided according to the appropriate standards.
8.3. Provision of required facilities for studying and copying
data TGS-NOPEC too had stored data in a private company known as
Access Information Management in Perth, Australia. Moreover,
TGS-NOPEC has entrusted yet another private company located in
Perth, Australia namely Spectrum Data for studying and copying
data. However, at the time Dr. Neil R. De Silva visited Spectrum
Data on 22.09.2006 for the purpose of studying data, the
TGS-NOPEC had arranged to store data with the same company.
Storing, studying and copying data is of high technical nature.
The software, hardware and other accessories required for this
purpose is not available in Sri Lanka. Also staff trained for
this purpose is not available within Sri Lanka. Under these
circumstances the instant removal of data from its current
storage, in order to bring them to Sri Lanka is a difficult
task. Accordingly, we have to initiate following steps -
8.3.1. In order to perform the above tasks on payment an
agreement has to be entered to with Spectrum Data which already
carry out these task for TGS-NOPEC.
8.3.2. Find out expeditiously the companies which could carry
out these tasks and select a suitable company by calling tenders
and appoint that company as the custodian of this data and to
proceed with necessary activities.
8.3.3. As early as possible, purchase the required computer
hardware, software and other accessories, send suitable
officials for foreign training, obtain the data and store them
in Petroleum Resources Development Secretariat and fulfill the
8.3.4. Prior to transportation of this data to a new facility
adequate insurance coverage should be bought at our expense.
8.3.5. Settlement of problems, which may arise out of existing
data license contracts between TGS-NOPEC and British Gas and
TGS-NOPEC has received US$ 1 million each from above two
companies with the understanding of a bid round in the Mannar
Basin in the near future. Such auctions responsibilities will
hereafter revert to Sri Lanka, and in case of delays in
proceeding with such auctions the said companies may reclaim the
monies they have paid. Therefore, the auction of exploration
blocks has to be expeditiously carried out. Similarly, as per
the pricing structure established by TGS-NOPEC, the above
companies have yet to pay US$ 1 million each. However, the
actual amount of money owed by these companies depend on the
data price determined by GOSL.
09. On 22.09.2006 TGS-NOPEC submitted a document containing
agreed to by the two parties for the cancellation of the
On 22.09.2006 a discussion was held with officials of the
Attorney General’s office regarding the legality of these
conditions and the drafting of the agreement. Their advise was
to provide all the information to the cabinet and obtain their
approval in principal and then to forward a draft of the
agreement to the Attorney General.
10. Accordingly, I seek approval of the Cabinet of Ministers to
carry out the activities given below in connection with
petroleum exploration, drilling and other related activities in
the territorial waters of Sri Lanka.
10.1. To pay US$ 8.5 million to TGS-NOPEC in addition to the US$
2 million earned by selling Mannar Basin seismic data to acquire
by PRDC, all the Mannar Basin seismic data held by that company
and to cancel all agreements signed by TGS-NOPEC with the Ceylon
10.2. Since an alterative cannot be found instantly an agreement
has to be signed with Spectrum Data to pay and securely store
the data, and to study and copy data as required. (The payment
has to be made in foreign exchange and the amount cannot be
stated at this time)
10.3 To obtain information on similar companies in order to call
tenders and to select a suitable company and to sign an
agreement to carry out secure storage, studying and copying etc.
on payment (the payment is in foreign exchange and the amount is
not known at this time)
10.4 To obtain insurance against any harm to the data during
transportation (the payment is in foreign exchange and this
amount is not known at this time.
10.5 To appoint staff to the Petroleum Resources Development
Secretariat and to send appropriate officials to foreign
countries to obtain broad training for seismic data studies,
evaluation and copying (currently carder has been forwarded to
Director General, of Management Services Department)
10.6 To call tenders to purchase computers, software” and other
devices for seismic data studies, interpretation and copying.
10.7 To establish a suitable seismic data storage-room within
the Petroleum Resources Development Secretariat and after
purchasing necessary computers, software and other equipment and
training of the staff to bring all seismic data to Sri Lanka and
use as required.
10.8. To appoint a committee to hold discussions with India and
China about conditions with respect to giving exploration blocks
in the Mannar Basin to these two countries.
10.9 To call world-wide tenders for petroleum exploration and
drilling for the rest of the Mannar Basin outside those
exploration blocks given to India and China
10.10 To empower the Minister as per section 4 (1) of the
Petroleum Resource Act, No. 23 of 2003, to sign the agreement
prepared on the advise of Attorney General and containing the
information in order to cancel the all agreements between
TGS-NOPEC and the Ceylon Petroleum Corporation.
10.11 To provide from the Government of Sri Lanka Treasury the
financial provisions and foreign exchange required to carry out
the above tasks.
Minister of Petroleum & Petroleum Resources Development
80, Sir Ernest De Silva Mawatha,
27th September, 2006