Cabinet approves testing policy for NELP oil and gas blocks

Policy will help in bringing transparency and uniformity in decision-making, says government

The Union cabinet chaired by Prime Minister Narendra Modi today approved a new policy on testing requirement for discoveries in oil and gas blocks awarded under the New Exploration and Licensing Policy (NELP).

"The policy will settle the long pending issue with regard to 12 discoveries in five blocks pertaining to Oil and Natural Gas Corp (six discoveries) and Reliance Industries (six discoveries) but will also establish a clear policy for the future," an official statement read.

It added the policy will also help in bringing transparency and uniformity in decision-making as against the case-by-case approach used in the past.

The approval given by Cabinet Committee on Economic Affairs (CCEA) would pave the way for the development of the 12 discoveries with gas reserves of around 90 Billion Cubic Meter (BCM) valued at over Rs 1 lakh crore at the current gas price of $ 4.66 per unit on Gross Calorific Value (GCV) basis.

The policy approved by CCEA allows the contractors to choose any one of three available options with regard to discoveries stuck on account of testing requirement. The contractor can relinquish the block or develop the discoveries after conducting Drill Stem Test (DST) with 50 percent cost of DST being disallowed as penalty for not conducting the test on time. The cost recovery for carrying out the DST would be capped at $ 15 million.

"The third option is to develop the discoveries without conducting DST in a ring fenced manner," the government statement read. In case the contractor does not opt for any one of the three options within two months of the CCEA approval, the area of the discoveries will be automatically considered relinquished.