Faced with global shortage of offshore drilling rigs, the government today decided to give a three-year drilling holiday or moratorium to firms such as state-run Oil and Natural Gas Corporation and Reliance Industries.
The Cabinet Committee on Economic Affairs (CCEA) meeting chaired by Prime Minister Manmohan Singh approved a drilling moratorium from January 1, 2008, on 30 exploration blocks --16 of ONGC, 13 of Reliance Industries (RIL) and one of Italy's Eni, official sources said.
Companies such as ONGC and RIL have not been able to meet their work commitments for the blocks they had won under the New Exploration Licensing Policy (NELP) rounds because of a crunch in availability of deep-sea drilling rigs.
Sources said the CCEA approved a drilling holiday from January 1, 2008, to December 31, 2010, for 30 blocks awarded in the fifth round of NELP.
Globally, oil and gas explorers are faced with huge shortage of drilling rigs as countries stepped up oil and gas hunt in the wake of the surge in crude oil prices in 2008. Day-hire charges for a deep-sea drill rig had shot up 250 per cent between 2007 and 2008.
But for the drilling holiday, the companies faced huge penalties for not fulfilling their work commitments that included drilling of a certain number of wells.
The petroleum ministry had first moved the Cabinet for the three-year drilling holiday or moratorium in 2008-end but the proposal was withdrawn after the finance ministry wanted a system of incentives and disincentives introduced to reward and punish companies based on performance during the period.
A grade system of incentives and disincentives will differentiate between companies which have completed the drilling work programme in deepwater acreages, which are being considered for a rig moratorium within the proposed three-year exploration holiday period or earlier and those which fail to complete the work, sources said.