Oil companies, constrained by the practice of having to obtain regulatory consent for “commerciality” of their discoveries surrounding existing fields, have reason to rejoice. The oil ministry has said that operators can start production from all wells in an existing development area without a declaration of commerciality (DoC).
The decision could take the wind out of the Directorate General of Hydrocarbons’ (DGH) directive to India’s largest private-sector oil explorer Reliance Industries to relinquish three of its prized discoveries in the KG-D6 block and also benefit other players like Cairn India and public sector ONGC.
Currently, operators cannot begin production in new finds within a development area without seeking separate DoCs for each discovery. The new decision, analysts said, would sharply cut down the time lag between discovery and production.
The move comes close on the heels of the oil ministry’s February decision to allow ‘continuous exploration’, which had obviated the need for separate approvals for different phases of production and exploration.
The oil ministry’s latest move was prompted by Cairn India’s integrated block development plan (IBDP) proposal submitted to it to speed up the production of oil and gas. According to the IBDP, for pursuing further discoveries in development areas the process of DoC is redundant.
According to a DGH official, the logic of the move is that these new fields can be developed as combined or integrated units. “So, even if individual wells might be unviable, when they are integrated they can become a viable cluster,” the official said.
After the first commercially viable discovery is made in a field, geological studies will indicate the extent to which the oil and gas resources in the field is spread across. These boundaries determine the field development area.
Cairn India has forwarded to the government its plans to invest Rs 5,000 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 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