Govt provides operational flexibility to oil firms

In a bid to make it easier to produce oil and gas, the government has granted operational flexibility to help firms like Cairn India and ONGC start producing oil and gas from several discoveries that are mired in contractual disputes.
Originally proposed by the then Oil Minister M Veerappa Moily a year back, the Cabinet on October 18 approved a policy framework for relaxation, extensions and clarifications in timelines for development and production of oil and gas under the Production Sharing Contracts (PSC).
"This a reform initiative which will help in monetisation of some of the pending discoveries, lead to resolution of various long pending operational issues which are hampering exploration and production (E&P) operations and create better climate for investment," Oil Secretary Saurabh Chandra told reporters here.

Operational flexibility has been provided in enforcing contracts by way of relaxing some of timelines prescribed for discoveries so that E&P activities do not suffer on account of excessive rigidity in decision making.
The PSC between the government and the explorer has rigid timelines for each stage of exploration and actions have been initiated against firms even if deadlines are missed by a day.
Chandra said 3-6 months extension in the current 18-60 month timeframe for submission of declaration of commerciality (DoC) of discoveries, a prerequisite before investment plans can be finalised, has been approved.

Also, the deadline for submission of investment plan for the discoveries too would be extended by up to six months.

The PSC provides for time period for submission of field development plan (FDP) for hydrocarbon discovery after DOC. There is no provision in the PSC for extension of this time period and non-acceptance of FDP due to late submission results in non-monetisation of discoveries.
Also, upstream regulator DGH has been given flexibility to accept discoveries for which operators had failed to provide prior notification to the government.
The Secretary said the Cabinet has also provided for reduction in committed work programme in case a block or its part is not available for exploration activities consequent to denial of permission by government agencies.

DGH has been given powers on extensions and relaxation and the upstream regulator is expected to act within a specified timeframe, he said.
Currently, discoveries, mostly of Cairn, ONGC and GSPC are stuck because of lack of flexibility in timelines. These include 10 finds of Cairn in Rajasthan which have not been endorsed by the Directorate General of Hydrocarbons (DGH).
Besides FDP approvals for more than two dozen finds are held up for some or the other reason. Fifteen discoveries lie abandoned in areas that have been relinquished by operators.
Chandra said easing norms will help early monetisation of these oil & gas discoveries. ONGC, Cairn and GSPC are among the companies that will benefit from easing, he said.