RIL, Cairn India can explore production fields: Veerappa Moily
The Oil Ministry, which had been sitting on the proposal for over a year, wrote to the Directorate General of Hydrocarbons (DGH) earlier this week saying that it has been decided to permit exploration in already producing oil and gas fields, sources privy to the development said.
Moily, who took over as the minister at the end of October, allowed companies to drill exploration wells within an oil and gas field, but with the condition that cost recovery of such wells would be allowed only in case there is a commercially exploitable discovery.
This essentially means that cost of drilling any well that does not lead to a discovery or a small find that could not be independently produced, will not be allowed.
Currently, when a company finds oil or gas in an area, the discovery area is ring-fenced and a mining lease granted for production of hydrocarbons.
Operators get to recover all their cost – whether successful or failed wells, from the oil and gas produced and sold from that particular block.
The DGH had previously taken a view that further exploration within this ring-fenced mining lease area is not permitted. It felt the government's profit share, which is triggered when an explorer recovers all his cost, would be adversely impacted if new costs are added.
To overcome this, the ministry has put a condition