The petroleum secretary, Vivek Raje, will hold a meeting on Friday with oil industry officials, aiming at make exploration easier in future. The immediate reason for the meeting is to discuss Cairn India’s proposed Integrated Block Development Plan (IBDP) ? Cairn claims that the the IBDP can reduce the lead time between discovery of an oil and gas block to production from the current 36 months to about 18 months.
Cairn India has forwarded to the government its plans to invest R5,000 crore in the Barmer, Rajasthan oil fields in three years to 2016 under a new IBDP. Cairn CEO P Elango on April 12 wrote to the oil ministry seeking approval for an over-arching integrated block development plan to replace the current practice of government approving capital expenditure only for discoveries that are commerically viable for production.
Cairn’s proposal seeks to replace the current practice of the government approving capital spending only for discoveries that are proved to be commercially viable for production with an over-arching IBDP. It seeks blanket investment approvals for the entire acreage in an oil and gas field as opposed to giving approvals for investments only upon the establishment of a discovery as commercially viable. The company has therefore sought to do away with the system of seeking individual approvals for declaring a discovery as commercially viable, called declaration of commerciality.
This would help companies avoid seeking multiple approvals before starting production each time a discovery is made. The entire approval process takes anywhere around three years from the time that a company declares a commercially viable oil or gas strike.
Since the government needs to ensure firms do not over-spend, the integrated clearance will allow firms to develop the block as they deem fit. The actual costs for the exploration will, however, be cleared as they are at present, by a management committee comprising ministry and DGH officials along with those of the operator. So while the firms will get flexibility to operate, the government will not lose any revenues.