The Government of Sri Lanka and Cairn India have recently signed the Petroleum Resources agreement for the exploration licence to explore for oil and natural gas in the Mannar Basin. The signing took place in Colombo with the Minister for Petroleum and Petroleum Development Resources A.H.M Fowzie from the Government of Sri Lanka and Indrajit Banerjee the Chief Financial Officer and Executive Director of Cairn India.

The Block SL 2007-01-001 which is offshore North West Sri Lanka and covers approximately 3,000 Km2 in water depths of 200 metres to 1800 metres was awarded to Cairn India in the recent Sri Lanka bid round. The work programme includes proposals to acquire 5,000 kilometres (km) of 2D, 1,000 km2 of 3D seismic and drill three wells in the initial three years of the eight year exploration period. Cairn Lanka (Private) Limited, a wholly owned subsidiary of Cairn India has been formed which would hold a 100% participating interest in the block.

Oil exploration expert Philippe Solomon commented on the recent deal: \"This new deal represents a major boost for Sri Lanka. This agreement has the potential for the first time to explore natural gas and hydrocarbon resources by this nation.\"

Currently, Sri Lanka imports all its oil needs. India currently imports some 2m barrels of oil per day (bopd).