National Oil Company to be set up after passing new Petroleum Act

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The proposed National Oil Company, akin to Petronas Nasional Berhad of Malaysia and Bharat Petroleum Corporation of India, is set to get materialised only after Parliament passes the new Petroleum Resources Act (PRA) following a parliamentary debate, The Sunday Morning Business learns.

Speaking to us, Minister of Energy Udaya Gammanpila said the proposed National Oil Company will be 100% state-owned. 

He said the proposed Petroleum Resources Bill, which would replace the Petroleum Resources Act No. 26 of 2003, was set to be taken up for debate in Parliament on 9 September, adding that due to the pandemic, however, it was postponed indefinitely. 

When questioned whether the new oil company has plans to export its products, the Minister said that the decision to export would be determined by the quantity of production and the local demand. 

“If there is an excess of supply, then, of course, the decision will be made to export, but there is no definite time period in which we can say that it would happen by this year, since we have not produced a single barrel of oil yet,” he stated. 

A statement from the Parliament on 9 September on the Energy Consultative Committee meeting said that Minister Gammapila had claimed the existence of $ 267 billion worth of oil and gas resources in the country’s seas. 

The new bill will also evolve the Petroleum Resources Development Secretariat (PRDS) to the Petroleum Resources Development Authority under which the said National Oil Company will be established. 

PRDS Director General Surath Ovitigama said that it would be an upstream operations company which would participate in oil exploration in Sri Lanka with any foreign investor that comes. 

He noted that if a big oil company comes to Sri Lanka to explore oil, the Sri Lankan Government will have a right to get 15% stake in any venture according to the proposed bill. 

According to him, the idea behind it is not just to make revenue, but also to start developing the locals to make them competent in oil and gas exploration. “So, as time passes, the company should be able to do it on its own,” he said. 

Although oil and gas exploration in Sri Lanka began in the late 1960s, it was not allowed to consistently develop due to the years of conflict and economic instability. 

Exploration for fossil fuel was initially handled by the Ceylon Petroleum Corporation (CPC/Ceypetco) and done mostly onshore. Due to the years of conflict, the capability to do this was reduced and the department handling the explorations in Ceypetco was shut down. 

In 2011, Cairn India, an Indian oil and gas exploration and production company, found gas deposits in the Mannar Basin – known as the M2 Block – which remained untouched since its discovery. 

Malaysia’s Petronas has ongoing upstream operations across more than 23 countries while Bharat PetroResources Ltd., a subsidiary of Bharat Petroleum, does upstream operations for the country. 

According to the Central Bank of Sri Lanka (CBSL), Sri Lanka imported $ 2,542.6 million worth of fuel in 2020, from the UAE, India, and other countries. 

Once fully implemented, the said new company is said to save millions of foreign exchange to Sri Lanka, which is used to import fuel, and become a huge supporter to achieve the country’s development goals energy-wise.

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