The Sri Lankan government has announced the details of its Petroleum Resources Agreement, reached with Cairn India in regards to the exploration of the Mannar basin.

Under the new deal, the Indian company, which has already provided a $1 million up-front payment for the commencement of the digging, will receive as much as 65 per cent of total commercial oil and gas revenues from the basin.

At the same time, it has been agreed that the Colombo government will receive a ten per cent share of all royalties as well as a $50 million production bonus once operations commence within the next six months.

In return, for the duration of the eight-year exploration deal, Cairn India will be required to provide education and training for staff in addition to carrying out environmental studies and investing in technological infrastructure.

Speaking at a press conference given on the back of signing the deal, Sri Lankan minister of petroleum and petroleum resources, A H M Fowzie, confirmed that the first oil is expected to be produced in the Mannar basin by 2010 at the latest