Govt sets rules for ₹84,084 cr offshore oil hunt, to share drilling risks | Economy & Policy News

The government will share the cost of high-risk deepwater oil and gas exploration with energy companies under the ₹84,084-crore Samudra Manthan scheme, offering to pay part of the cost of risky exploration wells, fund seismic mapping of offshore basins and help build shared production facilities.

The Ministry of Petroleum and Natural Gas issued operational guidelines for the Samudra Manthan programme, which aims to improve the economics of exploring India’s deepwater and ultra-deepwater basins, where high drilling costs and uncertain geological prospects have constrained investment.

The scheme aims to cut India’s heavy reliance on imported hydrocarbons. The guidelines say it will run through FY2030-31, with FY2026-27 as a preparatory year and spending in FY2027-28 to FY2030-31 as Phase I.

Petroleum Secretary Neeraj Mittal, in the preface to the guidelines, called the scheme “the most ambitious upstream oil and gas intervention undertaken in recent times” and said it could add “more than 600 million tonnes of oil equivalent” to India’s reserves.

Under the scheme’s central component, the government will provide financial support for 56 exploratory wells and four stratigraphic wells in deepwater and ultra-deepwater areas. The guidelines define the two categories as waters deeper than 400 metres and 1,500 metres, respectively.

For the 56 exploratory wells, government funding will cover up to 50 per cent of actual costs, subject to a ceiling of ₹675 crore per well.

The four stratigraphic wells, which are drilled primarily to study subsurface rock formations and geological structures, will be eligible for support covering up to 100 per cent of costs, capped at ₹1,350 crore per well. Only state-owned companies, or consortia led by them, can apply for funding for these wells.

At the maximum permitted amounts, support for the 60 wells could total ₹43,200 crore, more than half the scheme’s overall outlay. The guidelines do not provide a component-wise allocation of the total budget.

Payments will be linked to drilling milestones. Operators will receive 40 per cent of the approved support when drilling reaches 40 per cent of the sanctioned depth, with the remaining 60 per cent payable after completion of the well and approval of the well report.

Eligibility is restricted to blocks awarded under the Revenue Sharing Contract regime. Production-sharing and coal-bed methane blocks are excluded unless the government specifies otherwise. Development wells will not qualify, and there is no automatic increase in support if costs exceed the approved limits.

Recovery will begin after seven years of commercial production or when the operator has recovered 50 per cent of its exploration and development costs, whichever comes first. The amount recovered will not be adjusted for inflation.

The structure is intended to reduce the upfront burden of exploration while allowing the state to recoup its investment when a project succeeds. Operators will still bear costs above the support caps and face the risk of losing eligibility if they fail to meet work commitments or pay penalties instead of completing committed drilling.

A second track offers viability gap funding for shared infrastructure that can tie several small or stranded discoveries into one production system. Eligible items include subsea manifolds, trunk pipelines, central processing platforms and shared floating production units.

Support is initially planned for the Mahanadi basin, with token funding for Kutch. Proposals go through the Public Investment Board before the minister sanctions spending.

A third track funds one or more oil and gas manufacturing and services zones with common utilities, testing and certification facilities. The guidelines allow these to be built alongside a separate industrial infrastructure scheme run by the Commerce Ministry’s trade promotion department, known as BHAVYA. They say a shortfall in that scheme’s money will not create extra liability for Samudra Manthan.

The Cabinet Secretary chairs an empowered steering committee, and the petroleum secretary chairs an executive committee that makes the final appraisal, according to the guidelines. A programme unit under a joint secretary handles day-to-day monitoring. DGH acts as the implementing and nodal agency and will track progress through a digital monitoring system.