The quest for oil
step has been taken in the country’s quest for oil. Bids have
been opened for the Mannar Basin Blocks. Two Indian and one
Cyprus company have submitted bids. China will also be involved
in the exploration.
Petroleum Minister A.H.M. Fowzie says the bids will be
evaluated in three months, to expedite the process of oil
exploration. As many as 18 oil and 11 gas reserves have been
identified on the Indian side of Cauvery Bay in the Gulf of
The Mannar Basin, located between southwestern Sri Lanka and
Indian coastline in water depths ranging from 50 metres to more
than 3,000 metres, lies to the south of Cauvery Basin - known
for both oil and gas production. Experts estimate the new sites
may contain millions of barrels of crude oil.
As the Minister has emphasised, this is a historic event
which will be a boon for Sri Lanka as it steps into the 61st
Year of Independence. For far too long, we have depended on
In fact, we spend billions of US dollars per year to import
crude and refined petroleum products mainly from the Middle
Sri Lanka currently relies on imports to meet all of its
crude oil demand of around 42,000 barrels a day and fifty per
cent of its products demand of about 70,000 barrels a day.
The discovery and exploitation of oil, plus increased
capacity at local refineries, will enable Sri Lanka to cut down
drastically on this fuel import bill.
We salute the Minister for maintaining transparency and
accountability at every stage of the oil quest. This is
essential for a massive project of this nature and there will be
no room for any allegations.
However, one cannot expect success overnight. It will take
several years for oil production to reach profitable levels. In
the meantime, Sri Lanka - and Sri Lankans - will have to live
with the high cost of oil in the international market.
The recent oil price hike came as no surprise, as an upward
revision of prices was expected with world crude oil prices
touching US$ 100 per barrel. Sri Lanka, a net importer of oil,
has no other option in the face of this escalation.
Petroleum is perhaps the most vital component in passenger
and goods transport. Thermal power generation is also heavily
dependent on oil. Kerosene is widely used in rural homes for
cooking and lighting. Thus the immediately casualty of the oil
price rise is the cost of living.
But further subsidies will not be the answer. We quoted the
World Bank’s Chief Economist for South Asia yesterday as saying
that shielding consumers from the real prices of petroleum
products will ultimately cause a great harm to the economy.
Thus the Government has no other option. Asian countries
including Sri Lanka have been traditionally subsidising fuel to
shield the public from the negative effects of fuel price rises.
The Treasury has spent a staggering Rs. 2.5 billion every
month to keep the oil prices artificially low. If world oil
prices remain even at current levels without a further rise, the
State will have to spend more than Rs. 30 billion a year to
subsidise oil prices.
A developing country such as Sri Lanka cannot afford to
allocate funds in this manner every year. Such funds can
otherwise be spent on development and essential welfare
Obviously, the State is still subsidising fuel prices up to a
certain extent, but the subsidy bill will be more manageable.
The eventual goal should be ending fuel subsidies altogether.
We have to face the harsh reality of a relentless escalation
of global oil prices. In this context, there are various steps
that we can collectively take to minimise the effects of the
The first step is saving power. You may not realise it, but
most of our fuel imports go to power massive thermal generators
which supply electricity to homes across the island.
Thus switching off even one light bulb or unwanted appliance
can make a difference. It might seem a minor gesture, but if
this advice is followed in offices, homes, factories around the
island, it will lead to a massive saving.
In the end, though, oil is going to run out around the world
as it is a finite resource. It might take several centuries, but
future generations will certainly see a world without oil. Sri
Lanka must join hands with the rest of the world in developing
and deploying renewable sources of energy to meet this huge