The Hindu Business Line : Ministry extends deadline for drilling activities in NELP

In a major relief to oil companies, the Petroleum Ministry has decided to extend the deadline for exploration activities to be undertaken by these entities for blocks awarded earlier under the New Exploration Licensing (NELP) round three and four. The oil companies, which were facing delays in implementing their drilling plans under a stipulated time frame due to rig shortages, will get an additional two years for fulfilling their commitments.

A senior Ministry official told Business Line that the Government has decided to club two phases (one and two) of the exploration activities for the said NELP rounds instead of the existing three phases. With the merger of phase one and two, the revised phase one gives the companies between five and six years, depending on the block category, to complete the drilling activities.

Typically, 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 for both shallow and deepwater blocks, the time scheduled is two years. These shallow and deepwater blocks are offshore areas.

Additional years

Now under the new plan the companies get additional two years for phase-one drilling activities. However, there would be no change in the entire time period for finishing these activities, which takes between seven and eight years.

Noting that the period for phase one activity completion for NELP III has expired or is about to expire this year, while that for NELP IV would start expiring next year the companies have been knocking at the doors of the Ministry for a possible extension.

The rider

This decision of the Ministry comes with a rider that the Directorate General of Hydrocarbons will monitor the activities and the companies will have to demonstrate the availability of rigs, among other things.

The Government has awarded 23 blocks in the third round and 20 blocks in the fourth round of auctions. ONGC and Reliance Industries Ltd are among winning bidders. It’s not only ONGC but others as well who have experienced equipment shortages and struggled to meet the deadlines.

Industry sources said it is difficult to get hold of rigs. Offshore jack-up rig hiring rates have risen to as much as $100,000-$145,000 a day from $40,000 a day in 2002 and 2003, a senior ONGC official said. ONGC has 29 offshore rigs operating in India. The boom in exploration activities has saw rising demand of rigs in the past four years, adding to a global shortage, and hence, causing delay in tapping oil and gas.