Govt allows companies to explore for oil, gas beyond block boundaries

New Delhi: In a bid to make it easier for explorers to find and produce more oil and gas, the government has allowed companies to go beyond their allocated block boundaries if a discovery were to extend outside their contracted area.

In a "Policy Framework for Streamlining the Operations, Relaxation of Timelines", the Oil Ministry yesterday delegated powers to head of its upstream regulatory body, DGH to prove excusable delays and excess cost recovery.

It allowed companies to carry out an appraisal of an oil and gas discovery beyond the boundaries of their allocated exploration area on the recommendation of block oversight panel, called the Management Committee.

The firms can take a Petroleum Exploration License (PEL) of area beyond their awarded block boundaries to "ascertain the extent of the commercial discovery" provided "such area is not of strategic importance, or such area has not been awarded to any other company by the government or is not held by any other party or is not on offer by the government" in any bid round, the order said.

The ministry also simplified the process of companies to pay for unfinished committed exploration and drilling work and enter into next phase of production and development quickly.

While presently the companies have to pay the amount equivalent to unfinished work as determined by DGH within 60 days of the expiry of the exploration phase, the ministry has allowed submission of a bank guarantee for any amount that is disputed between them.

On empowering the Director General of Directorate General of Hydrocarbons (DGH), the order said the head of the regulatory body can approve "excusable delays" in exploration phase due to any delays in government approvals and clearances.

Earlier, the extra period for excusable delays was given only after approval by the ministry. DG, DGH can, however, do this only on review and recommendation by a multi-disciplinary committee, it said.

"The DGH would properly define excusable delays and prescribe the detailed procedure for allowing excusable delays." Presently, the delays are condoned by the government. The DGH has also been asked to furnish a statement listing out the cases decided with brief facts of each case on a quarterly basis to the ministry.

The order also empowered DG, DGH to approve up to 20 per cent increase in exploration or development cost of a company due to change in circumstances after the award of the block. "DG, DGH will constitute a multi-disciplinary committee to review and recommend the proposal for final approval of DG, DGH," the order said.

The ministry order also said operators appoint auditors "not later than six months from the closure of the financial year" instead of the present upper limit of conducting an audit within two years from the end of a financial year.

It halved the timeline for notifying audit exceptions to operators within 60 days from the date of receipt of the audit report and delegated the notifying powers to DGH instead of the ministry.

The unfettered powers to DG, DGH to approve excess cost claims pertains to 164 contracts signed between Round 5 and 9 of the New Exploration Licensing Policy (NELP).