The government has begun efforts to put in place guidelines for costs to be imposed on oil block operators for not implementing the minimum work programme. The production sharing contracts (PSCs) provide for commitment on the part of the contractor to carry out the minimum work programme as specified in various exploration phases.
“For determination of the amount to be paid by the contractor, available relevant information, including the budget and modern oil field and petroleum practices, may be taken into account,” the draft policy for determination of cost of unfinished minimum work programme states.
There have been instances where contractors have relinquished exploration blocks and deposited money for the unfinished minimum work programme with the government. However, contractors have been using different methodologies for computing the cost of the unfinished work programme.
The guidelines state that the cost of unfinished work programme relating to an exploratory well will be considered on dry well principle. The well depth committed by companies in the minimum work programme will be considered for the purpose of computing the cost of unfinished well, as this has been the criteria for evaluating bids and award of the blocks.
The PSCs till the fifth round of the New Exploration Licensing Policy (NELP V) envisaged three exploration phases and the NELP VI consists of two exploration phases. The work programme bid by firms is stipulated as the minimum work programme in each exploration phases of the respective PSCs.