Minister of Petroleum and Petroleum Resources Development A. H. M. Fowzie addressing the media after signing of the Oil Exploration Agreement between GOSL and Cairn India. Also in the photograph are Chairman, Corporate Advisor Board Sundeep Bhandari and Executive Director and CFR Indrajit Banerjee of Cairn India and Deputy Minister Duminda Dissanayake, Secretary to the Ministry A. P. A. Gunasekera and Director General of the Petroleum Resource Development Secretariat Dr Neil de Silva.

The Sri Lankan government has agreed to pay Cairn India up to 65 per cent of the revenue when commercial oil extraction is commenced by 2010 to cover its investment, the Petroleum Minister said.
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.

Sri Lanka received US$1 million from Cairn India as signature bonus when the government this week signed the Petroleum Resources Agreement for the exploration and licence to dig for oil and natural gas in the Mannar basin.

Minister of Petroleum and Petroleum Resources A.H.M Fowzie told a media conference in Colombo on Monday that the signing of the oil exploration agreement took place in Colombo in the presence of the President, high ranking officials and the main signatory Indrajit Banerjee, Chief Financial officer and Executive Director of Cairn India. The company is to invest US$100 million at the initial stage .

The minister disclosed that the oil exploration in the Mannar basin will commence within six months and they will get the first barrel of oil by 2010 with ‘the blessings of God’. He added that Cairn India has invested millions of dollars on the project although the oil exploration is a risky business.

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. The exploration licence is valid for eight years and divided into three stages of three, two, and three years. The government 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..