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JVP, JHU caused abrogation of TGS Nopec agreement resulting US $ 10 mn loss
Oil exploration from today, despite controversies

The JVP had cautioned the President about signing the Petroleum Resources Agreement with Cairn India as the country did not have adequate measures in place to monitor the progress in oil exploration.

In a letter addressed to President Rajapake the JVP said that the party had requested the formation of an all-party parliamentary committee to monitor the oil exploration process from its very inception of calling for tenders.

"The reason we wanted a committee appointed was because this was going to be a significant juncture for our country and a broader consultative process with professionals in this field was required because as a nation, our knowledge and expertise in this field is limited," the JVP said.

The leftists pointed out that Minister of Petroleum and Petroleum Development Resources A. H. M. Fouzi had told parliament that such a committee would be appointed but nothing had transpired since then.

"People should be appraised about the developments in oil exploration and before any agreement is signed by the government it is only right that the matter is taken up for debate in Parliament. The social, economic and environmental implications of signing such an agreement cannot be taken lightly. Public debate on these issues cannot be negated."

They alleged that the UNP had entered into an oil exploration agreement with TGS Nopec without public debate, in secrecy, which was later abrogated by the government because it late transpired that it was not in Sri Lanka’s best interests.

"This resulted in a US 10 million loss to the then government for terminating the contract."

However, as planned, Cairn India Ltd will sign the Petroleum Resources Agreement with the government of Sri Lanka today at Temple Trees at 11.00 am according to Fouzi.

"The JVP brought up the matter in January and I notified the speaker to appoint the committee and if it was not done I cannot be blamed. It’s been seven months since then and it does not make sense for the JVP to object now. We have done our job and cannot cause anymore delays," he said.

Commenting on the TGS Nopec deal, Fouzi confirmed the deal was entered into by the previous UNP government.

"It was in December last year that the JVP and JHU pressured this government to abrogate the agreement and it cost the country US $ 10.5 million. As a result the rupee depreciated by Rs.3 to a dollar. I was not happy about this but we had to terminate the agreement. It has cost the country dearly. We cannot repeat the same mistakes again. If the JVP were truly concerned about having a parliamentary committee it is never too late. Everything so far has been done according to the law of the land," he said.

Cairn India won the bid to explore for oil in Block SL2007-01-001 where water depths range from 15 to 1,500 metres on the 3,400 sq km and experts estimate that an investment between US$ 10-30 million would be required.

A press conference is to be held this evening to explain the details of the agreement signed today.

Sri Lanka is expected to receive a signature bonus upon signing the agreement.

Once oil is found and commercial extraction commences, the oil company is allowed up to 70 percent of the revenue to cover its investment. The government expects a 10 percent royalty, the profit share based on the investment multiple, taxes (currently at 15 percent) and the revenue of the participating National Oil Company.

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

To progress from one stage to another the oil exploration company would have to complete whatever it laid down in the work programme, for which the government would charge a 25 percent guarantee of the investment.

Meanwhile legal action had been initiated against awarding the license to Cairn India on the basis that proper legal procedures were not followed in awarding the tender.

However Fouzi said the court had thrown the case out as the government had followed all the legal procedures in calling for tenders and awarding it to Cairn India.

Fouzi said that the case was filed by a certain individual whose name he could not recall.

"The fact that court rejected the application is indicative of the fact that the government has followed all the legal procedures and conducted affairs in a transparent manner," he said.

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