Thursday July 8, 2010
The government has decided to give a three year drilling holiday or moratorium to firms such as Reliance Industries and state-run ONGC. This is because of global shortage of offshore drilling rigs. Prime Minister Manmohan Singh chaired the meeting of CCEA (Cabinet Committee on Economic Affairs) on Thursday.
The official sources said the meeting approved a drilling moratorium from 1st January 2008, on 30 exploration blocks, one of Italy’s Eni, 13 for RIL (Reliance Industries) and 16 on ONGC.
Because of a crunch in availability of deep-sea drilling rigs companies such as RIL and ONGC have not been able to meet their work commitments for the blocks they had won under the NELP (New Exploration Licensing Policy) rounds.
For 30 blocks awarded in the fifth round of NELP, sources said the CCEA approved a drilling holiday from 1st January 2008 to 31st December 2010. In the wake of surge in crude oil prices in 2008, oil and gas explorers are faced with huge shortage of drilling rigs as countries stepped up oil and gas hunt, globally. Between 2007 and 2008 day-hire charges for deep-sea drill rig had shot up 250 percent. For not fulfilling their work commitment which includes drilling of certain number of wells, the companies faced huge penalties.
The ministry of finance wanted a system of incentives and disincentives to be introduced to rewards and punish companies based purely of performance during the period. Sources said, a grade system of incentives and disincentives will distinguish between companies which have completed the drilling work programme in deepwater acreages, which are being considered for a rig moratorium within the projected three-year exploration holiday period or earlier and those who are not able to complete the work.