The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister Narendra Modi, today approved a clear policy on testing requirements for discoveries made under New Exploration and Licensing Policy (NELP) Blocks.

The policy will settle the long pending issue with regards to 12 discoveries in five blocks pertaining to ONGC (six discoveries) and Reliance Industries (six discoveries) but will also establish a clear policy for the future, the government said. "The policy will also help in bringing out transparency and uniformity in decision making as against case by case approach in the past."

The approval given by CCEA would provide a way forward for development of these 12 discoveries with associated gas reserves of around 90 billion Cubic Meter (BCM) which would be valued at over Rs 1 trillion at the current gas price of USD 4.66 / million British Thermal Unit (mmbtu) on Gross Calorific Value (GCV), it added.

The policy approved by CCEA allows the contractors to choose one of the following three options with regards to discoveries which are stuck on account of testing requirement:

> Relinquish the blocks

> Develop the discoveries after conducting Drill Stem Test (DST) with 50% cost of DST being disallowed as penalty for not conducting the test on time. The cost recovery for carrying out DST would be capped at USD 15 million.

> Develop the discoveries without conducting DST in a ring fenced manner.

If the contractor does not opt for any one of these options suggested above within 60 days of the CCEA approval then the area encompassing these discoveries shall automatically be relinquished, the government said.