The Ministry for Petroleum & Natural Gas has to persuade not only the investors, but also the South Block, which houses the Prime Minister’s Office, for making the oil and gas exploration business lucrative.

A major challenge coming in the way has been the existing norm that restricts the contractor from undertaking further activity once the exploration phase has expired.

Based on representations made by the players in the business, the Ministry has been working on a proposal to ease norms and adopt global practice. But the proposal does not seem to pass muster with the PMO, which has been closely monitoring the sector.

Sources in the know said, a meeting was held at the PMO recently where the Ministry made its presentation. However, it failed to convince the PMO, which felt that any relaxation in norms will impact government revenues.

Such restrictions go against the essence of the uniform licence concept launched by the Ministry, which enables the contractor to explore conventional as well as unconventional oil and gas resources, including CBM, shale gas/oil, tight gas and gas hydrates, under a single licence. The restriction is proving to be a point of contention between the Ministry and the contractors when marketing the Open Acreage Licensing Programme and Discovered Small Field Policy, an official involved with the developments told BusinessLine .

Terming of the initial period to complete Minimum Work Program as Exploration Period in any production sharing contract (PSC) is only in the context of completion of minimum work program and surrendering the area in case of no success post the period is over.

“Nowhere does the PSC specify that exploration should be done only during the said period. There is clearly no bar under PSC on any exploration at any time. In fact the PSC and global practices encourage continued exploration beyond the period,” an oil explorer argued.

Norms issued in 2013 for exploration in mining lease area prevent unconstrained exploration in the block, which ideally should be a natural petroleum operation as being done globally and also recommended in the General International Petroleum Industry Practices (GIPIP). This, according to the industry, is also not in line with some of the existing PSCs that allow continued exploration in mining lease area with immediate cost recovery.

Besides, provisions of the PSC provide for recovery of exploration costs as part of the cost of petroleum from the contract area, which the contractor has incurred in any year after the date of commercial production.

Even under the New Exploration Licensing Policy (NELP) the contractor is allowed full cost recovery with unlimited carry forward period on contract area. Even the recently finalised GIPIP, which has been developed on the basis of best practices globally, recommends unconstrained exploration in mining lease areas without any limitation of cost recovery or ring fence.

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