Moily moves Cabinet for operational flexibility

In a significant development, Oil Minister M Veerappa Moily is approaching Cabinet for grant of operational flexibility to help explorers like Reliance Industries and Cairn India start producing oil and gas from 62 discoveries that are mired in contractual disputes.

Moily wants "operational flexibility" in enforcing contracts by way of being able to relax some of timelines prescribed for discoveries so that E&P activities do not suffer on account of excessive rigidity in decision making.

Sources said the production sharing contracts (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 one day.

Moily's ministry is circulating a draft Cabinet note for comments to relax timelines and rules provided for notifying a discovery, getting its commerciality approved and nod for investment plan to bring finds to production.

Currently, 62 discoveries, mostly of RIL and Cairn, 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 four finds (three of RIL and one of Cairn) not found viable at current prices.

Besides field development plan (FPD), approvals for 10 gas finds of RIL in the eastern offshore KG-D6 block are awaited while another 14 finds (6 of Cairn and 8 of RIL) are held up for some or the other reason. Fifteen discoveries lie abandoned in areas that have been relinquished by operators.

Sources said Moily's ministry has proposed that an Empowered Group for Exploration and Production Contracts headed by Oil Minister be formed to decide on extending timelines prescribed in the PSC for appraisal, submission of commerciality and FDP.

The grouping would consist of Principal Advisor (Energy) in Planning Commission, Finance Secretary, Law Secretary, Oil Secretary, Director General Hydrocarbons and Joint Secretary (Exploration) as members.

In the Cabinet note, the ministry has sought up to one year extension in the current 18 to 60 month timeframe for submission of declaration of commerciality (DoC) of finds, a prerequisite before investment plans can be finalised.

Accordingly, the deadline for submission of FDP for the discoveries too would be extended, they said adding the ministry sought relaxation of FDP deadline by up to six months.

The Production Sharing Contract (PSC) provides for time period for submission of 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.

It also wanted flexibility to accept discoveries for which operations had failed to provide prior notification to the government.