The Cabinet Committee on Economic Affairs, which is chaired by the Prime Minister of India, has approved a definitive policy on testing requirements for discoveries made under the New Exploration and Licensing Policy (NELP) Blocks. The policy has now been put in place for settling the long pending issue with regards to certain discoveries and also for establishing a clear and definitive policy for the future which will also make the decision making process more transparent and uniform as against the case by case approach. The new policy as approved by the Cabinet Committee on Economic Affairs shall allow the contractors to choose one of the three options as set out below with regard to the discoveries which are stuck on account of testing requirements:
1. Relinquish the blocks;
2. Develop the discoveries after conducting drill stem test with 50 percent cost of the drill stem test being disallowed as penalty for not conducting the drill stem test on time. The cost recovery for carrying out the drill stem test shall be capped at US$ 15 million; or
3. Develop the discoveries without conducting drill stem test in a ring fenced manner.
The new policy also states that in the event the contractor fails to opt for any one of the aforesaid options within 60 days of the approval accorded by the Cabinet Committee on Economic Affairs then the area encompassing these discoveries shall automatically be relinquished.
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