Sri Lanka has moved into a potentially decisive phase of its offshore petroleum strategy, with the Government setting an end-2027 deadline to complete licensing negotiations for four exploration blocks in the Mannar Basin. The process could determine whether the country’s long-discussed offshore hydrocarbon potential finally moves from geological promise to commercial production.
Energy Minister Anura Karunathilaka told Parliament yesterday that bids called in August will remain open for six months, with submissions expected to close around February or March 2027. The Government will then spend the remainder of 2027 evaluating proposals before opening negotiations with successful bidders. Licensing agreements are expected to be finalised from October, with the entire process targeted for completion by December 2027.
The licensing round, designated SL2026-01, was formally launched under an order issued pursuant to the Petroleum Resources Act No. 21 of 2021 and published in Extraordinary Gazette No. 2497/37 on 16 July 2026.
Four offshore blocks covering nearly 34,000 square kilometres have been offered in the Mannar Basin. Significantly, this represents Sri Lanka’s first international offshore petroleum licensing round in more than a decade.
The commercial structure disclosed by the Minister gives prospective investors considerable responsibility for determining the value of the country’s petroleum assets. Companies bidding through the Petroleum Development Authority of Sri Lanka must submit proposals covering production terms, royalty payments and profit-sharing arrangements.
A signature bonus of approximately US$5,000 is also expected, described by the Minister as the norm for the current round. More importantly, bidders must present development plans covering the entire project cycle—from initial exploration and appraisal through development and eventual production.
Successful companies will receive six months to mobilise operations and an initial three-year exploration period. That exploration period could ultimately be extended to eight years. Production must begin within that eight-year period, after which successful investors would retain the asset for 20 years.
The timeline therefore creates a lengthy commercial horizon for investors, while placing pressure on the Government to ensure that contractual conditions protect Sri Lanka’s interests over potentially decades-long petroleum operations.
PDASL Director General Dr. Neil De Silva has indicated that commercial production could begin by 2032, provided seismic surveys and drilling establish commercially recoverable reserves.
The geological case is strengthened by two existing Mannar Basin discoveries Dorado and Barracuda made in 2011. Their combined P50 resource estimate stands at 839 billion cubic feet, comprising 314 billion cubic feet at Dorado and 525 billion cubic feet at Barracuda.
Dr. De Silva has also indicated that Barracuda’s upside potential could be at least four times its existing estimate.
The Government is now relying heavily on international investor outreach. UK-based Frontier Energy Network, appointed as specialist international marketing partner through its PetroInvest platform, is promoting the round globally.
Investor engagement is scheduled at London’s World Energies Summit on 29–30 September, followed by a virtual briefing on 21 October and further promotion at the Asia Petroleum Geoscience Conference and Exhibition in Kuala Lumpur on 16–17 November.
The crucial question is whether Sri Lanka can convert geological potential into binding investment and ultimately domestic energy production without allowing the long licensing process to become another cycle of unfulfilled offshore expectations