News Features

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 office.
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 Sri Lanka.
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.

Oil exploration activities within the territorial waters of Sri Lanka
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 time frame
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 Corporation
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 a Project
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 on 25.08.2006
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 01.09.2006. “
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 attached.
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 required tasks.
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 ONGC, India.
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 conditions
agreed to by the two parties for the cancellation of the agreement.
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 Petroleum Corporation.
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.
A.H.M. Fowzie
Minister of Petroleum & Petroleum Resources Development
80, Sir Ernest De Silva Mawatha,
Colombo -7.
27th September, 2006
(Cabinet Paper)