Oil and natural gas biggies such as Oil & Natural Gas Corporation (ONGC), Reliance Industries Ltd (RIL), GAIL India, Essar and others may be in for a tough time, with the government chalking out stricter policy for proposals seeking extension in exploration phases under coal bed methane (CBM) contracts. The new policy will be implemented on extension proposals either pending with the government or may be received in future.
This is in a bid to adopt a transparent and consistent framework.
The government has so far signed contracts for 26 blocks, covering an area of 13,600 sq km. The total commitment in these blocks is of the order of Rs 675 crore. During the 11th Plan, CBM gas production is envisaged as 3.78 billion cubic metres.
?The policy would act as deterrent for seeking unnecessary extension or holding on acreages without doing any or little exploration activities or activity at slow pace. The policy envisages a system of penalty by way of submission of bank guarantee and pre-estimated agreed liquidated damages (in some cases/situations) in lieu of un-finished or additional work programme. While proposing the amount of bank guarantee, situations/factors such as whether extension is for completing minimum work programme (MWP) or additional work programme, whether commerciality has been established in the contract area, whether contractor wants to retain the area for further exploration have been kept in mind up to 6 months extension may be given by the steering committee or the government on merit in terms of the provisions of the respective contracts. Demonstrable delays on account of getting government approvals/ permits/ clearances which are not attributable to the contractors would be counted as excusable delays and such delays shall be condoned,? sources told FE.
In this regard, if some extensions have already been granted on account of excusable delays, which took place from effective date of the contract, including delays prior to the extension policy coming in force, the same would be regulated as per this CBM extension policy. In case, the contractor does not fulfill the work programme within the stipulated period or extended period he would be required to pay money for the unfinished work.
Moreover, the extension in phases under CBM contracts, in terms of these policy guidelines, would be considered within the validity of the exploration period of 8 years. ?The broad objective of the extension policy is to maintain the integrity of the bidding process and the spirit of the contract to explore and produce CBM gas early, to grant reasonable extension of time so as to enable contractors to complete MWP or additional exploration work programme, not to delay the execution of development plan or production or the life cycle of the entire project and payment of Royalty, taxes and contractual payments,? sources noted.