Expect new guidelines on work programme extension

Vol 9, PW 12 (22 Sep 05) People & Policy

A common complaint among foreign oil companies is that they routinely lose good blocks in Indian licensing rounds because of unfair bidding by local operators.

ONGC or Reliance, the argument goes, happily bid ten wells, knowing full well theyll get a government-approved extension to the work programme if the wells are not drilled in the allocated timeframe. Contrast that with BP, British Gas or Exxon, who would never bid ten wells if they knew they could only drill two in the allocated timeframe.

Luckily, someone in government seems to be listening. We hear the oil ministry is preparing a new policy that would limit the grant of extensions to a work programme and in some cases outlaw it completely.

All indications are that the policy will be ready by the end of September and enforced immediately on all past, present and future PSCs. As of now there is no formal government policy on extensions.

Existing PSCs allow extensions for a maximum six months. Anything beyond six months is considered on a case-by-case basis, but more often than not granted.

The idea behind the new policy is to minimise any element of discretion, says a source. Theres no clear-cut policy on this subject and a lot of discretion has to be exercised while deciding applications for grant of extensions.

The new policy will take into account the following factors: is the extension sought to make up delays in receipt of official clearances If yes, it will be granted. Is the extension meant to make up delays caused by the contractor If yes, then it is unlikely to be granted.

Even in such cases, the ministry will look at the contractors performance while carrying out the work programme. Has the performance been up to the mark or not Also considered will be the contractors track record on other exploration and production blocks.

A contractors track record in dealing with government will also be examined.