Pradhan aborts undrilled well penalties policy

Vol 21, PW 1 (05 Oct 17) Exploration & Production

Once upon a time Reliance could get away with anything.

But today it seems the oil ministry is more afraid of accusations that it's helping Reliance and other private operators than anything else. How else to explain an unreported but hugely significant decision to bury a well-thought out plan to fix the cost of unfinished work programmes at NELP blocks auctioned before NELP-VIII? During a closed door oil ministry meeting in September (last month) the proposal was quietly scrapped, ostensibly over concerns this required an amendment to Article 5.7 of the PSC relating to minimum work programmes.

If accepted, it would have directly benefited private operators, in particular Reliance, whose penalties for unfinished work across 12 blocks would have halved from $200m to $100m. "This policy would have backfired on the ministry," we hear.

Had the proposal passed, the cost of each unfinished onland well would be fixed at $1m, for each shallow water well it would be $3m and for each deepwater or ultra-deepwater well it would be $10m. "Earlier the proposal was to fix the cost of a deepwater or ultra-deepwater well at $6m," reveals a source close to the matter.

"But the DGH increased this to $10m in line with the (recently introduced) Revenue Sharing Contracts (under the HELP regime)." Chairing the September meeting was oil minister Dharmendra Pradhan alongside oil secretary KD Tripathi, joint secretary (exploration) Amar Nath and DGH boss Atanu Chakraborty.

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