Cabinet may decide on oil drilling holiday next week

The Cabinet is likely to decide next week on giving a three-year drilling holiday or moratorium on firms like state-owned Oil and Natural Gas Corp (ONGC) and Reliance Industries that are facing problems in sourcing drilling rigs because of the global scarcity.

"The Cabinet Committee on Economic Affairs may take up the issue at the next meeting on February 18," an official said.

ONGC and RIL have not been able to meet their work commitments for the blocks they had won under the New Exploration Licensing Policy (NELP) rounds due to a shortage in the availability of deep-sea drilling rigs.

The official said the proposal is for giving a drilling holiday from January 1, 2008, to December 31, 2010, for 35 blocks awarded up to the fifth round of NELP.

Of the blocks where the drilling moratorium would apply, 18 are with ONGC, 18 with RIL and one with ENI of Italy.

Globally, oil and gas explorers are facing a huge scarcity of drilling rigs as countries had stepped up their oil and gas hunt in the wake of the surge in crude oil prices. Day-hire charges for a deep-sea drill rig have shot up 250 per cent over the past two years.

But for the drilling holiday, the companies faced huge penalties for not fulfilling their work commitments, which included drilling a certain number of wells.