Following the discovery of a natural gas deposit in the country's seas off the northwest coast, the government is planning to call for a competitive bid soon to explore oil in the remaining blocks of the Mannar Basin.

Petroleum Industries Minister Susil Premajayantha told Reuters yesterday that the government will now launch a bidding round for the remaining five blocks in couple of months.

"We will call tenders soon for the five blocks. It will be in couple of months," the Minister said.

Cairn Lanka, a wholly owned subsidiary of Cairn India, which began oil drilling operations in the Mannar basin in August, on Sunday, confirmed the presence of a natural gas deposit in the block that has been awarded to the company.

The Block SL 2007-01-001, one of the eight blocks in Mannar basin slated for oil exploration was awarded to Cairn in the 2008 Sri Lanka bid round. Another two blocks have been granted to China and India.

Cairn signed the Petroleum Resource Agreement (PRA) with the government in July 2008 to explore oil and natural gas in the Mannar Basin with an investment of US$110 million, spread over three years.

Cairn has said earlier If Sri Lanka's drilling program is successful then commercial oil production can be expected by 2014 with a billion barrels.

Russia's largest oil company, Gazprom has also expressed interest in oil exploration in the Mannar Basin and company officials recently visited Sri Lanka to hold discussions on the possibility.

Minster Premajayantha further said the discovery is a great boon to the country and the country will be able to utilize the natural gas deposit to produce electricity at lower cost. Power plants including Kerawalapitiya and Kelanitissa can be fuelled by natural gas, the Minister added.

However, he said it will take 18 -24 months for commercial production of natural gas if the deposit is found to be commercially viable.