Sri Lanka expects Cairn India to extract oil by 2010 (Lead)

July 7th, 2008 - 9:34 pm ICT by IANS  

By P. Karunakharan
Colombo, July 7 (IANS) The Sri Lankan government Monday entered into a petroleum resources agreement with Cairn India Ltd to explore oil and natural gas deposits in the northwestern Mannar basin and expressed hope that oil could be extracted by 2010. “Today we signed the historic agreement with Cairn India Ltd, formally offering them the rights to explore oil and gas deposits at block one in the Gulf of Mannar,” Sri Lanka’s Minister of Petroleum Resources A.H.M. Fowzie told IANS just after the signing ceremony.

Indrajit Banerjee, chief financial officer and executive director of Cairn India, and Sri Lanka’s petroleum minister signed the agreement in the presence of President Mahinda Rajapaksa, Prime Minister Ratnasiri Wickramanayake and several cabinet ministers and top government officials at Temple Trees, the official residence of the president.

Banerjee handed over $1 million as Signature Bonus on the agreement to President Rajapaksa at the agreement signing ceremony.

According to the agreement, 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.

Noting that block one, offered to Cairn India, covers well over 3,000 square kilometres in the water depth of 200 metres and 1,800 metres, Minister Fowzie said the Indian company would commence the initially $100 million project within next six months.

“I am confident that Cairn India would find the oil deposits in the block allocated to it and get me the first can of oil in 2010. We hope and pray that Sri Lanka will get into the map of the oil producing countries very soon,” Minister Fowzie told reporters Monday evening.

Cairn India, which has discovered 40 oil and gas deposits in India, said the work programme in Sri Lanka included “proposals to acquire 5,000 kilometres of 2D, 1,000 square kilometre of 3D seismic and drill three wells in the initial three years of the eight year exploration in Mannar”.

Banerjee pointed out that the oil exploration “is a risky business, where the success is not always guaranteed”, but said that his company was delighted to be awarded the exploration licence by Sri Lanka.

“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 in class technologies and industry practices in the search to establish whether commercial quantities of hydrocarbons can be found,” he said.

Cairn Lanka (Private) Ltd, a wholly owned subsidiary of Cairn India which would hold a 100 percent participating interest in the block, has also been formed.

According to research reports, eight blocks have been identified for oil exploration bid in the Mannar Gulf and the government has decided to call tenders for other blocks also.

Annually, Sri Lanka consumes not less than four million tonnes of fuel products for various purposes and depends 100 percent on the imports.

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