Samudra Manthan: Govt to bankroll half the cost of deepwater wells, but wants its money back from winners

The government will pay up to half the cost of risky deepwater exploration wells under its ₹84,084-crore Samudra Manthan scheme, but expects to be repaid out of revenue if a well finds oil or gas. If it finds nothing, the state absorbs the loss.

That recovery clause, set out in newly issued operational guidelines, is the scheme's central bargain: the government carries early geological risk and keeps a claim on any upside.

The guidelines say recovery starts after seven years of commercial production, or once the operator has recouped 50 per cent of its exploration and development costs, whichever comes first. Repayment comes in annual instalments, with no inflation indexation.

The scheme will support 60 wells in deepwater (deeper than 400 metres) and ultra-deepwater (deeper than 1,500 metres) areas. Of these, 56 exploratory wells get up to 50 per cent of actual cost, capped at Rs 675 crore per well, the guidelines said, adding that four stratigraphic wells, drilled to study rock layers, get up to 100 per cent, capped at Rs 1,350 crore each. Only state-run firms or consortia they lead can apply.

Payment is milestone-based: 40 per cent when drilling reaches 40 per cent of the approved depth and 60 per cent on completion and approval of the well report.

By these caps, well support alone could reach Rs 43,200 crore, about half the total outlay. The guidelines did not give a component-wise budget split.

The guidelines also lay out a strict eligibility test. Only blocks or areas awarded under the Revenue Sharing Contract regime qualify.

These are the blocks awarded in bid rounds since 2016. Production-sharing and coal-bed methane blocks, awarded prior to that, are excluded unless the government notifies otherwise.

Importantly, only exploration wells or wells drilled to find new resources qualify for the grant. Development wells, which are drilled to bring to production an already discovered resource, are not covered. Sidetrack well costs are also not covered.

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 FY 2027-28 to FY2030-31 as Phase I.

Prime Minister Narendra Modi announced the scheme in his August 15, 2025 Independence Day speech, saying India wants "to work in a mission mode towards finding oil and gas reserves under the sea".

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.

The government financial support 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 of the scheme 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.

Discoveries in basins such as Mahanadi and Kutch "remain stranded or commercially unviable on a standalone basis", the guidelines say, because none alone can justify the cost of pipelines and processing facilities.

Viability gap funding would support shared infrastructure for two or more field developments, including subsea manifolds, trunk pipelines, central processing platforms and shared floating production units.

A joint venture or special-purpose vehicle of participating operators would own and build the hub. Rivals must agree on equity, ownership and capacity commitments before construction starts. The hub must operate on "fair and non-discriminatory access" under the PNG Rules, with unused capacity offered to others.

Funding comes in four equal 25 per cent tranches tied to physical progress of 25 per cent, 50 per cent and 75 per cent and then commissioning. The first tranche requires financial closure, executed construction contracts and operator commitment agreements. Receiving the money does not reduce operators' safety, environmental or decommissioning obligations.

As with the wells, there is no automatic increase for cost escalation or delay, and the executive committee can suspend payments and recover money already released if milestones are persistently missed or funds are misused.

Proposals go through the Public Investment Board before the minister sanctions spending.

A third track would fund one or more oil and gas manufacturing and services zones with utilities, berthing and load-out jetties, warehouses, and testing and certification laboratories. The guidelines say the aim is to make India "a key global manufacturing-fabrication yard" as deepwater activity grows.

A developer, which could be a company, consortium or joint venture, must secure land and clearances and then market the zone to tenants. States are invited to help with land, approvals and utilities. The Infrastructure Appraisal Board is to shortlist locations within 60 days of its first meeting. The scheme can be combined with BHAVYA, a separate industrial-infrastructure scheme run by the Commerce Ministry's trade promotion department, but the guidelines say any shortfall there "shall not automatically create additional liability" for Samudra Manthan.

Funding is paid in tranches of 25 per cent, 25 per cent and 50 per cent on a reimbursement basis. Assets built with scheme money cannot be sold or mortgaged without approval, and developers must report occupancy, investment and jobs annually for five years after commissioning.

Underpinning all of it is a seismic data programme run by the Directorate General of Hydrocarbons (DGH). Two-dimensional surveys will be fully government-funded, with the contractor getting no resale rights.

Three-dimensional surveys will use a multi-client model in which the contractor co-invests, keeps licensing revenue and carries the sales risk.

Published on October 25, 2026