The epoch-making Petroleum Resources Agreement was inked between Sri Lanka and India for the exploration and production of oil in Northern Sri Lankan waters in the Mannar basin, at Temple Trees yesterday with President Mahinda Rajapaksa presiding.
This historic agreement signed between Sri Lanka and India will now pave the way for the exploration and production of natural gas and hydrocarbon resources yet untapped by the nation.
The agreement was signed by Petroleum and Petroleum Resources Minister A..H.M. Fowzie for Sri Lanka and Indrajit Benerijee, the Chief Financial Officer of Cairn (Pvt) Limited of India.
A Bonus Cheque of US $ one million was also handed over to President Rajapaksa, following the inking of the agreement.
Minister Fowzie addressing the participants at the signing ceremony, asserted that it was a ray of hope in relieving all Sri Lankans from the ongoing global fuel crisis which has also plunged the whole world into a coma .
He thanked President Rajapaksa for his unstinted and concerted effort and his foresight in making this milestone venture a successful reality.
The Chief Financial Officer Cairn (Pvt) Limited Indrajit Benerijee noted that they were delighted to participate in this great venture as the first Licencee , to make Sri Lanka less dependant on oil imports.
Benerijee said the best practices and technology available in the sphere would be deployed in the process.
In accordance with the agreement signed, Cairn India Limited will commence its exploration activities in Block SL2007/01/001 in the Mannar Basin which covers 3400 sq. km, at depths between 200 to 1,800 metres within six months from today.
The exploration spending schedule of the company in the next three years is expected to be US$ 112 million. Once commercial extraction commences, the oil company will be allowed upto 65 per cent of the revenue to cover its investment.
The Government will receive a 10 per cent royalty, a US$ 50 million Production Bonus, the profit share based on the investment multiple and a 15 per cent tax on Contractor Profit and other taxes.
The Exploration Licence is deemed to be valid for eight years and divided into three stages of three, two and three years.
The Government of Sri Lanka will receive all exploration data and the contractor will be required to support education and the staff training, support environmental studies and transfer the related technology to Sri Lanka.