Director National Benefits Petroleum Resources Development Secretariat Prospecting And Use of NG in Sri Lanka as a Fuel For Power Generation and Other Uses Eng. Preeni Withanage Director National Benefits Petroleum Resources Development Secretariat 11/20/2018

Projected Long Term Domestic Natural Gas Supply Scenarios

Mapped Risked Potential - Mannar Basin Hydrocarbon Potential – Offshore 3 2 Mapped Risked Potential - Mannar Basin 1 Discovered Resources Total Total Block M2, Mannar Dorado – 300 BCF Barracuda – 1.8 TCF, 10 Mbbl Oil Mannar Basin Gas – 9 TCF Oil – 5 bbl Cauvery Basin and JS Blocks to be explored 11/20/2018

Frequently Asked Questions General Public ඇත්තට ම අපේ රටේ ගෑස් තියෙනව ද? කවද්ද අපට ගෑස් දෙන්නේ? ඔයාලගේ තෙල්, ගෑස් වලට බාලගිරි දෝෂය ද? ඇයි අපිටත් බැරිද ගෑස් වලින් අඩුගානේ රජයේ බස් ටිකවත් දුවන්න? අපේ ගෑස් වලින් යූරියා හදලා පිටරටටත් දෙන්න බැරි ද? ඇයි ගෑස් වලින් විදුලිය නිපදවලා Electric car, මොනොරේල් promote කරන්නේ නැත්තේ? අපේ ගෑස් වල ගාන කීය ද? etc Professionals At what depths those reserves are found Cant we convert our existing CGGT PP to NG Can you compete with coal and LNG in future Do you have any plans to export gas Can you technically recover the quantities you have estimated Do we have the expertise locally to face the future challenges , etc

Exploration Phase – ( 3 – 8 years or more) Understand the Industry Challenges Exploration Phase – ( 3 – 8 years or more) High Risk, Discover HC Appraisal Phase – (1 – 2 or more) Reduce risk and uncertainty, Assessment of the size and commercial viability of the resource Reserves Commercialization- Economic viability based on market demand , policies and sales price – Enter into Gas sales agreement Development Phase- ( 1 – 3 y or more) High cost , Maximize early production Production Phase – ( 10 – 30 or more) Ensure Economic Returns

Exploration Challenges – M2 Block Discoveries ( 7 years, Exp cost USD 235 Million) Dorado Barracuda 300 BCF 1.8 TCF 315 MW – E 40% (Continues supply) Eg : 630 MW – PF 50% 1000 MW -E 40% (Continues supply) Eg: 2000 MW – PF 50% 70 MMscf/d for 9 years 210 MMscf/d for 22 years 11/20/2018

Techinical Challengers - Eg : Proposed Dorado Field Development Concept – USD 900 Million (2013) Based on peak production 70MMscfd Sub sea facilities Onshore gas processing plant Proposed location for onshore processing plant about 55 km, 10” sub sea pipeline to Norocholai Production to start with two initial wells with additional wells later to maintain the production rate Possible offtake Three power plants currently using liquid fuel (630 MW, 40% E, 50%PF) About 150 km onshore pipe line to bring gas to power plants and other consumers

Commercial Challenges – Key Factors affecting the commercialization Reserve assessment – Supply potential Global market conditions Demand for NG National Gas policy Assured offtake (take or pay) Export potentiality Local Market - Infrastructure, benchmark for estimates Flexible Contractual fiscal terms Political situation Execution challenges – ecological sensitive area

Projected Long Term NG induction Strategy as a Fuel/Feedstock

A study to identify the best way to utilized domestic NG in all sectors to gain long term economic benefits under the expected following scenarios 1. BAU - Business as Usual; present consumption and forecasts future trends using the same fossil fuels   2. NG1 - Natural Gas will be expanded into power and other sectors where it can be used, but energy demand growth will remain the same as in BAU. A low penetration rate is assumed in this scenario for industrial transport and household sectors and the CEB case for introducing natural gas in place of coal was adopted for the power sector 3. NG2 – A higher penetration rate is assumed in this scenario for the 3 sectors outlined above. For the power sector, in addition to the gas operated power plants included in Scenario NG1, the proposed coal power plant at Trincomalee will be replaced by an NG plant 4. NG3 - Optimum take-up of NG into the domestic economy over time will yield the true long-term economic benefit of the resource, and this scenario includes new industries and new power plants along with the liquefaction and export of produced surplus.

Projected Fuel Oil Consumption under BAU - These figures give the daily requirement of NG if the entire thermal energy requirement is to be obtained from NG combustion, replacing diesel oil, kerosene, gasoline, LPG, fuel oil, residual oil, coal and naphtha referred to as NGEq.

Demand for NG as a Feedstock

Total Demand NG1 - 6 TCF Total Demand NG2 - 10 TCF Total supply - 1.4TCF Max Shortage - 8.6 TCF(NG2) Gas Potential - 9TCF Total Demand NG1 - 6 TCF Total Demand NG2 - 10 TCF Total supply - 1.6TCF

Economic Model – NG Pricing Mechanism Fiscal Terms Royalty, Cost Recovery Ceiling, Tax, Bonus, Profit Share Who gets What Contractor ROI, IRR NPV Government Profit Share Royalty, Bonus, Tax NOC Capital Cost Daily Production Rate Economic Model Price Discount Rate Operating Cost

Case Study 1 - Economic Scenario Analysis - (300 BCF) vs (2 TCF) – Year 2013

Benefits for the period Jul 2008 to Mar 2015 – Block M2 Exploration Expenditure $ 25M 11% for Local Content LC 11% 230 235M Petroleum Data 3D Seismic data 2400 Sqkm Gravity magnetic data 5700 lkm Well log and other data of 4 Exploration Wells Other processed data of the two gas discoveries

Key Concerns Explore more – Increase Volumes Conduct Research Feasibility of introducing NG to Transport Number and types of vehicles Order of priority Conversion of existing fleet – feasibility and cost Comparison between electric vs CNG , DME options Feasibility of producing Fertilizer locally using NG Feasibility of using NG for HH& Commerce Cost – Benefit analysis to compare replacement of NG with other energy sources (not to play with numbers) Maximize local participation in this industry Flexible NG and fiscal policy to attract foreign investors Expedite development and production - if we delay this ,we are accountable

Acknowledgement Sincere thanks are due to Eng. Shavindranath Fernando for giving me this opportunity Mr. Saliya Wickramasuriya, DG, PRDS and staff for their support, guidance and encouragement. For you all for listening to me patiently My Contact Details preeni@ prds.lk, Tel : 2332002