By Deepal V. Perera
Sri Lanka, in a bid to becoming an oil producing nation, yesterday entered into a landmark agreement with Cairn India Limited to commence oil and natural gas explorations in the Mannar Basin.
The signing of the agreement for the exploration license was held at the Temple trees under patronage of the President and the Cabinet of Ministers where Minister for Petroleum Development Resources A.H.M Fowzie signed the agreement on behalf of the government whilst Chief Financial Officer and Executive Director of Cairn India Indrajith Banerjee signed on behalf of the company.
The Signing Ceremony of the Agreement of Petroleum Resources between the Government of Sri Lanka and Cairn India (Pvt Ltd) took place at Temple Trees on last morning. Minister of Petroleum and Petroleum Resources A.H.M Fowzi and Chief Finance Officer(CFO) Indrajith BenerjeePresent inset Minister Fowzi making remarks at the media briefing whilst CFO Cairn India Indrajith Benerjee looks on.
Minister for Petroleum Development Resources A.H.M Fowzie told media that signing of the oil exploration agreement is a historical event and first of its kind signed in the history of Sri Lanka.
“Today we reached for an historical agreement with Cairn India with a big hope of placing Sri Lanka on the map of oil producing countries. The government is very confident that oil will be found soon and of Sri Lanka becoming an oil producing nation,” Minister Fowzie said.
He said that in the oil exploration segment the government identified and demarcated six blocks that could bring leads in finding oil.
“Early this year we called for international tenders for three blocks based in the Mannar basin and we received a good response from three companies. After going through every detail of the tender, the benefits and the rules, Cairn become the only company that gave the best offer in the tender. Therefore we awarded the tender to Cairn. Today by signing the agreement alone, Cairn gave US$ one million as a signature bonus to Sri Lanka,” the minister said.
According to the minister the company is hoping to commence its operations in Sri Lanka within six months and by the year 2010 the company is expected to find its first oil barrel. Speaking on the terms and conditions of the agreement the minister said that if oil is found, the Government of Sri Lanka will get 10% of the royalty fee which is calculated to increase to 60% upon the company recovering its expenditure over the sale of oil.
Chief Financial Officer and Executive Director of Cairn India Indrajith Banerjee told the media that there is a great possibility that hydrocarbon could be found in the Mannar basin.
“First of all, oil exploration is a very risky business, success is not guaranteed all the time. We will be starting our exploration in the Mannar frontier where we are hoping to invest US$100 million,” he said.
Mr. Banerjee said that his company is indeed delighted to be the first company to be awarded an exploration license by the Government of Sri Lanka. The Mannar basin has not been explored in Sri Lankan waters and as such represents a frontier petroleum province.
“Our company has extensive experience in the region and we expect to invest tens of millions of dollars exploring the block by applying the best class technologies and industry practices in the search to establish whether commercial quantities of hydrocarbon can be found,” Mr. Banerjee said.
“When we start our operations in Sri Lanka our initial work will be calling for international tenders to carry out seismic surveys in the Mannar Basin. There are many companies in the world which specialize in this work and we are hoping to invest US$20 million for the purpose,” said Head of Commercial and New Business, Cairn India Ajay Gupta.