Cairn begins $100 million oil hunt off Lanka coast

Cairn Lanka, a fully owned subsidiary of Cairn India, has started a $100-million seismic survey off Sri Lanka's north-western coast to explore for crude oil - incidentally marking the first time that a ship chartered by an Indian company is hunting for oil in Sri Lankan waters.

Cairn India, a unit of Britain's Cairn Energy Plc, said it expects to complete the 3D data acquisition by March and commence drilling in the first half of 2011.

Sri Lanka has said previous seismic data had showed the potential for more than 1 billion barrels of oil under the sea in the Mannar Basin, though no reserves have yet been proven.

"While there are no guarantees of success when exploring, the Mannar basin is under-explored and we are encouraged by the studies we have conducted to date," said Indrajit Banerjee, director at Cairn Lanka said.

Cairn will survey Block SL 2007-01-001. The acreage was awarded to Cairn India in an auction held in 2008. The block lies at water depths ranging from 400 to 1,900 metres. Cairn has chartered the survey vessel Veritas from Norwegian firm CGG for the purpose.

Sri Lanka has awarded one of eight blocks to Cairn, with an area of 3,000 sq km. The island nation offered one block each to India and China in 2007, but neither of the countries has responded positively so far.

Any proven reserves would be a boost for Sri Lanka, which produces no oil and imported $3.4 billion worth in 2008.

Cairn India also said it merge oil and gas businesses of some of its subsidiaries with itself with a view to improving administrative efficiencies. The company's four subsidiaries - Cairn Energy India, Cairn Energy India West BV, Cairn Energy Cambay BV and Cairn Energy Gujarat BV - will merge their Indian oil and gas businesses with Cairn India.