Kohima:  A Canadian firm will collaborate with Nagaland to explore for crude oil in the mountainous region, ravaged by decades of insurgency, an official said today (Dec 22,2006).

The Nagaland Government and Canoro Resources Ltd have signed a joint cooperation agreement to explore crude oil and develop hydrocarbon industry," an official of the state's geology and mining department told sources.

A state of two million people bordering Myanmar, Nagaland has the potential to yield about 600 million tonnes of crude, according to government estimates.

"In northeast India, we believe the thrust belt running through the state of Nagaland to be a highly prospective area to explore for hydrocarbon deposits," Les Kondratoff, president and CEO of Canoro Resources Ltd, said in a statement from Canada.

Canoro is engaged in exploration work in the oil-rich northeastern part of India over a decade.

The Canadian firm is now part of the producing Kharshing oilfield in Arunachal Pradesh that they began exploring in 1995 and in Assam's Amguri oilfield in Sibsagar district.

"Despite being geographically located in one of the most prospective areas, there has been virtually no exploration activity in Nagaland for over 12 years and limited activity prior to that," the Canoro statement said.

"Nagaland's geology is very similar to the thrusting and folding found in the foothills of the Rocky Mountains of Alberta, an area very familiar to Canoro's management and technical team, " he said.

Separatists of the Isak-Muivah faction of the National Socialist Council of Nagaland (NSCN-IM) and several other groups had forced the Oil and Natural Gas Corp (ONGC), India's premier oil exploration firm, to quit Nagaland in 1994.

ONGC had earlier carried out exploratory works in Nagaland's Wokha district.

"The parties would acquire or participate in such projects which would mutually benefit the people of Nagaland and Canoro's shareholders," the company said.

"The joint cooperation agreement contains a provision for the promotion of bilateral cooperation for the development of upstream activities in areas of foreign direct investment and technology," he said.

The NSCN-IM has now lifted the ban on exploration work in the state although the rival group led by guerrilla leader S.S. Khaplang has threatened not to allow any firm to look for crude oil in the region.

"We cannot allow our natural resources to be exploited," Kughalo Mulatonu, a leader of NSCN-Khaplang, told sourcesby telephone.

The two NSCN factions are fighting a bitter turf war in the state. Insurgency in the region has claimed over 25,000 lives since India's independence.