India today approved the grant of drilling moratorium of three years to all deepwater block Production Sharing Contracts (PSCs) signed under various rounds of exploration till the NELP- V rounds where drilling commitments are pending as on 1st January, 2009. It is hoped that it may lead to new discoveries of oil & gas.

To be implemented implemented immediately, the contractors would be asked to complete the drilling commitments during the moratorium period of three years. There is no financial expenditure involved on behalf of the Indian Government. The drilling moratorium dispensation would apply to 30 PSCs involving three contractors. The measures had to be taken on account of world-wide shortage in availability of deepwater rigs since 2007 due to the then prevailing high crude oil prices.

A drilling moratorium of three years starting from 1st January, 2008 to 31st December 2010 is granted to deepwater block PSCs signed upto NELP-V, where drilling commitments are existing as on 1st January, 2009 ( total of 30 exploration blocks). This policy will apply to all types of drilling, viz. exploratory and appraisal drilling where commitments are pending as on 1st January, 2009 except for development drilling commitments.

In the deepwater blocks where exploration phase has already expired with unfulfilled drilling commitments, the provisions of PSC or the extension policy will apply and contractors will be required to regularize the intervening period, if any, by seeking normal extensions under the PSC or the extension policy till the effective date of the proposed relaxation.

In case a contractor fails to complete the drilling commitment at the end of the said moratorium period, the contractor would be required to deposit with the Government the cost of un-finished work programme along with interest as per the SBI PLR (Prime Lending Rate) plus 2% from the start of the drilling moratorium till the date of payment by the Contractor, in case the relevant exploration phase duration and maximum extension as per extension policy has already been availed.

India also granted ex-post-facto approval for withdrawal of ONGC Videsh Limited (OVL) (as co-venturer in OMEL) from North Coast Marine Area 2 (NCMA 2) project in Trinidad & Tobago after incurring an expenditure of about USD 1 Million. Mittal Investment Saral (MIS) had expressed their intention to withdraw from the block in view of the global economic meltdown and the ability to finalize the carry agreement. This necessitated OVL to have a relook on the previous evaluation to assess whether OVL can take the entire available stake.