However, the applicants will have to pay signature bonds and production bonds to the Sri Lankan government. Also they will have to pay a 10% loyalty fee to Sri Lanka during the exploration period.
The permits will be for a period of eight years and will consist of three phases. The permit will be broken up as follows: three years for the first phase, two years for the second phase and three years for the third phase. If additional exploration is needed, a two extension could be granted.
The Mannar Basin has seen relatively minor exploration activity in the past; however, recent seismic data have indicated that the basin has significant potential for hydrocarbon accumulations. According to the reports by the Government, seismic data shows more than 1.0 billion barrels of oil lie under the sea off Sri Lanka's northwest coast, though no reserves have yet been proven. If proven, the reserves would be a major boost for the country, which produces no oil and imported $2.1 billion worth in 2006.
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