7.7.2008

The Government today signed an agreement with Cairn India Ltd to explore and produce hydro - carbon and natural gas in the Mannar Basin in Northern Sri Lanka.

According to the Petroleum Resources Agreement, Cairn Indian Ltd will start exploration activities in Block SL2007/01/001 in the Mannar Basin which covers 3,400 sq. km. at depths between 200 to 1,800 m within 6 months from today.

Minister of Petroleum and Petroleum Resources A. H. M. Fowzie and Chief Financial Officer Indrajith Benerijee signed the agreement on behalf of Sri Lanka and Cairn India (Pvt) Ltd, respectively, in the presence of President Rajapaksa.

Mr. Benerijee handed over USD 1 million as Signature Bonus on the agreement to President Rajapaksa at the agreement signing ceremony held at Temple Trees this morning.

The exploration spending schedule of the company in the next three years is expected to be USD 112 million.

Once commercial extraction commences, the oil company is allowed up to 65 percent of the revenue to cover its investment.

The government will receive a 10 percent royalty, a USD 50 million Production Bonus, the profit share based on the investment multiple, and 15 % tax on Contractor Profit and other necessary taxes.

The Exploration Licence is 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 training of staff, support environmental studies and transfer related technology to Sri Lanka.