Cairn India, a unit of Britain's Cairn Energy has signed a memorandum of understanding (MoU) with Government of Sri Lanka for exploration license to explore oil and natural gas in the Mannar Basin.

Under the agreement, Cairn India will commence its exploration activities in Block SL2007/01/001 in the Mannar basin which covers 3400 square km, at depths between 200 to 1,800 meters within six months.

The work program includes proposals to acquire 5,000 kilometers (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. The company will invest US$100 million on the block and start the three-year exploration phase in 2009.

Sri Lanka has eight exploration blocks in the Mannar basin, two of which have already been assigned to China and India.