In a move that may boost oil and gas output in the country, the union petroleum ministry decided to allow exploration in mining lease area with cost recovery on establishment of commerciality, the ministry said in an order.
Thus, oil companies would be allowed to explore in already producing areas and all approved exploration costs would be allowed for cost recovery on declaration of commerciality.
The ministry also allowed the contractor to develop and monetise the existing discoveries, if any, in the Mining Lease area (or oil and gas producing region) which could not be developed or monetised earlier because some of the activities may have been in deviation from Production Sharing Contract (PSC) provisions.
After this, companies can drill exploration wells within an oil and gas field, but with the condition that cost recovery of such wells would be allowed only in case there is a commercially exploitable discovery.
This essentially means that cost of drilling any well that does not lead to a discovery, or a small find that could not be independently produced, will not be allowed.
RIL and Cairn have maintained that exploration being a continuous process is allowed in the mining lease under which they currently produce gas from eastern offshore and Rajasthan blocks, respectively.
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