The Sri Lankan Government yesterday signed an agreement with Cairn India for exploration of hydro-carbon and natural gas in the Mannar Basin in the north.
The Minister of Petroleum and Petroleum Resources A. H. M. Fowzie, and Chief Financial Officer of Carin India, Indrajith Benerijee, signed the agreement on behalf of Sri Lanka and Cairn India (Pvt) Ltd, respectively, in the presence of President Mahinda Rajapaksa.
Mr. Benerijee handed over $1 million as signature bonus on the agreement to President Rajapaksa at the agreement signing ceremony. Under the agreement, Cairn India will start exploration activities in Block SL2007/01/001 in the Mannar Basin which covers 3,400 sq. km. at depths between 200 m to 1,800 m within six months from Monday. The exploration spending schedule of the company in the next three years is expected to be $112 million.
Once commercial extraction commences, the oil company is allowed up to 65 per cent of the revenue to cover its investment.
The government will receive a 10 per cent royalty, $50 million production bonus, the profit share based on the investment multiple, and 15 per cent 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.