The Hindu Business Line : Oil exploration cos seek changes in merger policy

New Delhi, Sept. 1 Oil exploration companies including Reliance Industries Ltd have sought modifications in the proposed extension policy which seeks to merge exploration phases of offshore blocks under NELP three and four rounds thereby giving these companies additional two years to undertake activities.

The exploration companies have cited technical hitches in implementing the proposed policy.

Industry sources said the recently formulated policy falls short of intent to address the unforeseen situation of non-availability of offshore rigs in the international market.

Precondition

A precondition for availing the merger policy is that the contractor should have availed the 18-month extension provided for under the existing extension policy. This, in effect leaves the contractor with just additional six months to undertake exploration activities under the new dispensation, they added.

Rather than providing relief to the operators in these blocks by granting an extension of exploration phases, the status quo continues for the contractors, the sources said.

A Directorate General of Hydrocarbons (DGH) official told Business Line: “The concerns of the exploration companies are under consideration.”

A final call on the issue would be taken by an Empowered Committee of Secretaries. The Government has decided to club the two phases (one and two) of the exploration activities for the said NELP rounds instead of the existing three phases.

Operating time

With the merger, the revised phase one gives companies between five and six years, depending on the block category, to complete the drilling activities.

Under the existing policy, a company is given three years in phase one for shallow water blocks and four years for deepwater blocks for such activities. In phase two of both these block categories, the time schedule is two years.

In the new policy, the companies get additional two years for phase one, however, there is no change in the entire time period (including the third phase) for finishing these activities, which takes between seven and eight years.

The industry has argued that the rig scarcity has worsened the situation and the continued insistence upon bank guarantee, imposition of liquidated damages and relinquishment before availing of the new dispensation is unfair.

The requirement for the contractor to exercise its option for merger of exploratory phases within 60 days of the new policy also contradicts the objective of such a concession, the industry sources said.

The Government has awarded 23 blocks in the third round and 20 blocks in the fourth round of auction.