Addressing a news conference yesterday evening, Petroleum Resources Director General, Titus Jayawardena said that the country pays on average $ 750 million annually on oil imports, but the escalating oil prices globally has created this situation.

Announcing that that bidding for oil exploration in Sri Lanka will be held during the first quarter of 2005, he admitted that the state continues to pay exorbitant prices for petroleum products, amidst promising prospects of oil reserves in the country�s off shore areas of the Mannar and Cauvery basins.

He noted that it will cost somewhere between US $ 10 million and 15 million to drill a single oil well. And if oil is not found in that well, this money cannot be recovered. �If ten oil wells, are drilled, oil can be found in only one well,� Mr. Jayawardena emphasised.

He however claimed that the prospects of Sri Lanka striking black gold was �very promising�. According to him, several international leading oil drilling companies from the United States, United Kingdom and from Beijing has already given a commitment to be present when bidding begins in Sri Lanka early 2005.

Actual exploration for oil would however begin by the year 2006, he said, if, �all goes according to plan�. But he also noted that it would take a four to five year period for commercial production to begin.

The Ministry also noted that the country�s demand for petroleum products grows at 8% a year, the same as the nation�s electricity demand.

Meanwhile, reports indicate that there is around 200 million barrels of oil deposits in the country�s coastal areas. It is believed that there is a large oil deposit in the Sri Lankan coastal region of the Cauvery Basin. This underwater basin extends upto the Arabian Sea. The waters belonging to India have already been successfully exploited.

A reputed oil exploration firm in Australia, T.S.G. Norpack last year, conducted an extensive survey in the Gulf of Mannar for possible signs of oil and the results have proved to be very encouraging, the report added.

According to Ministry officials, even though in the late 1970s and early 80s, the Ceylon Petroleum Corporation along with a foreign investor made an attempt to explore the possibilities of discovering oil by drilling seven wells in the Gulf of Mannar basin, unfortunately all seven test wells were dry and no further attempt was made.

But India has become more successful, after continuously drilling 30 dry wells since 1954, today they enjoy over three million barrels of oil per annum with a daily output of more than 180,00 cubic meters of gas a day. �If we also had drilled continuously without abandoning the project, we too would have been successful,� the source claimed.