[7th April, 2017]

No. O-19025/07/2014-ONG-D-V.

Policy for the Grant of Extension to the Production Sharing Contracts signed by Government of India awarding Pre-New Exploration Licensing Policy (Pre-NELP) Exploration Blocks.


The Government of India has approved a policy for granting extension to the Production Sharing Contracts (PSCs) signed by Government of India awarding Pre-New Exploration Licensing Policy (Pre-NELP) Exploration Blocks, to have a transparent and defined framework for granting extension. This will help the operators in planning their investments and operations in these fields  which will help in optimal exploitation of the reserves.  The salient features of the policy are as follows:-

1. Submission, Consideration and Approval of request for extension of Contract: The Contractor should submit the application duly approved by the Operating Committee for extension of Contract to Ministry of Petroleum & Natural Gas (MoPNG) at least 2 years in advance of the expiry date of Contract, but not more than 6 years in advance, with a copy to Directorate General of Hydrocarbons (DGH). DGH will make a recommendation to MoPNG within 6 months of submission of application by the contractor. The Government will take a decision on the request for extension within 3 months of receipt of the proposal from DGH.

2. Fiscal Parameters for Extension:

2.1 Government Share: The Government share of Profit Petroleum during the extended period of contract shall be 10% higher for these blocks, than the share as calculated using the normal PSC provisions in any year during the extended period and hence will vary from year to year based on Investment Multiple (IM) /Post Tax Rate of Return (PTRR).

2.2  Royalty and Cess: During the extended period of Contract, the royalty and cess shall be payable at prevailing rates of nomination regime.  Royalty and cess will be payable by all the contractors in proportion to their participating interest. 

3. Prerequisites for Evaluation:

3.1 The proposal for extension can be considered for the following area having valid mining lease on the date of application,  to be estimated as under:

a) Fields already under Production

b) The area of extension of PSC will be determined prior to the expiry of  current PSC period.  The Contract Area for extension will be determined in simple geometric shape based on the area covered by wells which are on production/injection as part of existing development plans and wells in new development plans submitted to Management Committee (MC) by the Contractor. 

c) Contractor may submit firm exploration work programme, if required, backed by a Bank Guarantee (BG) with specific time schedule for completion, for consideration of area which are not covered as above, but within the existing contract area which will be reviewed and finalized by DGH.

3.2 The application of extension of contract should fulfill the following conditions for consideration:

a) Contractor should be able to demonstrate the availability of balance recoverable Reserves through a Third Party Reserves Audit report, to be submitted along with the application for extension. The definition of ‘Reserves’ for the purpose would be as per Petroleum Resource Management System (PRMS) guidelines.

b) If the remaining 2P/P50 (2P/50 reserves implies proven plus probable reserves having a 50% certainty of being produced) recoverable reserves [Oil+ Oil Equivalent of Gas (O+OEG)] of any development area requested for extension are more than 5 MMBBL, the Third Party Reserves Audit needs to be done by a consultant of international repute as per the empanelled list maintained by DGH and as amended from time to time.

c) Contractor would submit Field Development Plan/ Revised Field Development Plan (RFDP) for the proposed extension period at the time of submission of application, for exploitation of the remaining reserves.  This will include, but not be limited to, the following:

(i) In place-Oil Initially in Place (OIIP) and Gas Initially in Place (GIIP)

(ii) Balance 2P/P50 Recoverable Reserves

(iii) Future Production Profile based on Reservoir Simulation Studies

(iv) Proposed Work Programme and the estimated expenditure for the   proposed extension period.

d) Such RFDP will be considered by the Management Committee (MC) and where thought fit, the MC will grant conditional approval for such development plan (including the period beyond the current PSC), subject to the condition of extension of PSC being granted by the Government under this policy. Such conditional approval by MC will not confer any right on the Contractor for extension in PSC period.

e) While submitting the application, the operator should submit proof of technical expertise.

f) Contractor while submitting the application should submit cumulative achievement of drilled wells and production (planned vs actual) since inception.

g)  All the statutory dues and payment due to Government should have been cleared and the contractor should not be a defaulter to the Government on any account.

4 Criteria for Evaluation of Request:

4.1 The past performance of the contractor should be satisfactory for the request of extension to be favourably considered. The past performance would be judged on the basis of following criteria:

a) Contractor should have drilled at least 70% of the development wells of development plan approved by the Management Committee (MC) due for drilling as on date of application for last 10 years, or, must have achieved 70% of the committed production as on date with reference to the earlier approved FDP or approved Work Programme for the last 10 years.

b) Contractor should have complied with the provisions of creation of Site Restoration Fund (SRF) and Site Restoration Plan (SRP) as per PSC. Wherever PSC does not provide for SRF and SRP, the Contractor should propose SRF and SRP as a part of extended Contract.

5. In the event of failure to comply with any of the above conditions, mentioned in clauses 3 and 4 above, Government shall have the option to invite fresh bids for further development of the area and to award the field to the most competitive bid. Government would also take into account pending arbitration while considering extension requests.

6. Seat of Arbitration:

The seat of arbitration will be at Delhi, India, for Production Sharing Contracts during extension period, notwithstanding any other provision in the existing PSC and will be subject to the Indian Arbitration & Conciliation Act, 1996, as amended from time to time.

7. Duration of Extension:

The extension for these PSCs would be considered for 10 years both for oil and gas fields or economic life of the Field, whichever is earlier. Subsequent extensions, if any, and the terms and conditions for the same would be worked out in due course.

8. Submission of Bank Guarantee:

Contractor shall provide Bank Guarantee (BG) equal to 10% of the total estimated annual expenditure in respect of the Work Programme approved by the Management Committee for being undertaken by the Contractor in the contract area. In case the contractor fails to complete the approved work program, grace period up to one year can be granted by MC to complete the activity, subject to the contractor extending the validity of the Bank Guarantee for the duration of grace period and not hampering the next year’s work program.  In addition, the Contractor will have to submit another fresh Bank Guarantee for the forthcoming year against the annual work programme and budget of that year.

9. Other conditions:

a) Government shall have the right to stipulate any further conditions specific to any particular Production Sharing Contract.

b) Government shall reserve the right not to extend PSC without assigning any reason thereof.

c) The condition stipulated in this policy will override the existing provision of the PSC.

d) In case any contractor is not agreeable to this policy then the field will be considered   for rebidding, on as is where is basis. Government would also have the right to assign the same to National Oil Companies (NOCs) i.e. ONGC or OIL.

10. The list of 10 Pre-NELP Exploration Blocks is placed at Annexure.


Sl. No.

Block Name

Block Location





Gulf-A (CB-OS/1)









Dirok AAP-ON-94/1



Tarapur (CB-ON/2)



Palej-Pramoda (CB-ON/7)












Amendment Date: 
Friday, April 7, 2017 (All day)