Colombo: A unit of Cairn Energy Plc.,Cairn India Ltd said it will invest $100 million (Rs431 crore) in exploration of oil in Sri Lankan waters, after the company was awarded an offshore block in the South Asian island’s first round of competitive bidding.

Cairn India will start the three-year exploration phase in 2009, chief financial officer Indrajit Banerjee said at a briefing in Colombo, Sri Lanka’s capital, on Monday.

A pact was signed between Sri Lankan minister for petroleum and petroleum development resources A.H.M. Fowzie and Banerjee, a company release said.

Cairn India was picked over India’s ONGC Videsh Ltd, the overseas firm of Oil and Natural Gas Corp. Ltd (ONGC), and a unit of Niko Resources Ltd, which bid to look for hydrocarbons off Sri Lanka’s northwestern Mannar basin. Bids were invited in October to tap a field that may contain 1 billion barrels of oil.

Sri Lanka, which imports all its oil requirements, needs its own petroleum supplies as costlier imports and military purchases to combat Tamil Tiger rebels have fanned consumer price gains to the fastest in at least four years. The island nation consumes about 31 million barrels of crude oil every year, according to the Central Bank of Sri Lanka.

PTI contributed to this story.