Directorate General of Hydrocarbon (DGH) opined that recovery of cost incurred by companies on exploration activity in the producing oil and gas fields must be allowed only under certain conditions.
The upstream oil regulator recommended that the exploration firm must submit a feasible investment plan for producing from the discovery in order to be eligible for cost recovery.
Further, DGH wants the cost recovery to be subject to proven commerciality as well as techno-economic viability of the discovery at the time of formulating a Field Development Plan (FDP).
It may be recalled that the petroleum ministry had last month issued formal orders permitting exploration in already producing oil and gas fields to help companies augment existing production. The ministry imposed a condition that the cost of such exploration would be allowed to be recovered only on establishment of commerciality of an oil or gas find.
But DGH suggested the ministry to add the above conditions as well. Sources said DGH is of the view that a mere establishment of the commercial discovery should not trigger cost recovery.
Media reports indicate that the petroleum ministry asked DGH to explain if the condition it has proposed is in consonance with the provisions of the Production Sharing Contract (PSC).