The Hindu Business Line : Discovered blocks: Oil Ministry wants cos to stick to timeframe

The contract
There is an exploration period is divided into divided development and production phases, and relinquishment of original contract area.
The contractor has the option to relinquish a minimum of 25 per cent of the area after phase one (three years) of the contract.

Richa Mishra

New Delhi, July 4 The Petroleum Ministry wants companies that have struck oil and gas to stick to the prescribed timeframe for taking up development activities in the discovered blocks. An official source said that the Ministry has told the Directorate-General of Hydrocarbons (DGH) to ask the companies to ensure that the appraisal programme in the exploited block is started from the date of discovery.

Activities

This would guarantee that the companies undertake their exploration activities more diligently, the official told Business Line. The issue came to the forefront when the Ministry was considering Reliance Industries Ltd (RIL) case. < /p>

Before taking a call on whether to rectify the DGH decision to allow RIL to own the entire prolific Krishna-Godavari block and not relinquish a portion of the area, an option which is available under the production sharing contract (PSC) to the contractor, the Ministry wanted to assure itself that the company had a development plan in-place and that the appraisal programme was being undertaken within the stipulated time frame.

Exploration, production

As per the contract, there is an exploration period (divided into phases), development and production period and relinquishment of original contract area. The contractor has the option to relinquish a minimum of 25 per cent of the area after phase one (three years) of the contract.

At the end of the second phase, the contractor has to relinquish all areas except those in which hydrocarbons have been discovered and for which an appraisal programme or a development plan has been drawn up as per the contract.

Sources said that the intent behind this proposal is not to force the contractor to surrender the area, but to exploit the entire potential. In the case of RIL, the company after the end of phase one of the exploration activities informed the management committee that it was confident of hydrocarbon reserves in the entire block and wanted to retain the entire contracted area.

In turn, the company was asked to do a technical assessment – a three dimensional seismic study to prove their claim. However, by the time the company came back with its report, the block had entered the second phase of activity.

Besides, these decisions are not taken by the DGH alone but by the management committee, which apart from contractor nominees, has Government nominees on Board.

The DGH agreed with that operator that on the basis of the work done by RIL, it felt that there was substantial hydrocarbon reserve in the block.