Summary
The Ministry of Petroleum and Natural Gas has issued operational guidelines for Samudra Manthan, an ₹84,084 crore scheme to de-risk deepwater and ultra-deepwater oil and gas exploration. The Centre will fund up to 50% of the actual drilling cost of an exploratory well, capped at ₹675 crore per well.
If the well is dry or non-commercial, the government will not recover its contribution. If a commercial discovery is made, the company repays in annual instalments from revenue, starting after seven years of production or once it has recovered half its exploration and development costs, whichever comes first, with no adjustment for inflation.
The aim is to unlock frontier basins and reduce India's 88.7% crude import dependence.
WHY IT MATTERS FOR UPSC & STATE PCS
The Ministry of Petroleum and Natural Gas issued operational guidelines for the ₹84,084 crore Samudra Manthan scheme, reported on 25 October 2026. The guidelines set out how the Centre will share the cost of deepwater exploratory drilling and recover support from successful discoveries.
Standard News
Half the Risk, Interest-Free: How Samudra Manthan Rewires the Economics of a Deep-Sea Well
India imported 88.7% of its crude oil in FY 2025-26. The obvious answer is to find more oil at home and the obvious place to look is deep water. Yet the obvious answer has stalled for years, despite reform after reform. The reason is not the rules. It is the arithmetic of a single well.
The problem in one well An ultra-deepwater exploratory well can cost up to about ₹1,000 crore and there is no guarantee anything commercial lies beneath it.
For a company, that is a bet where the downside is large and certain and the upside is uncertain and years away. Earlier reforms improved the terms of the bet: HELP in 2016, open acreage rounds under OALP, the Oilfields (Regulation and Development) Amendment Act, 2025 and the release of over a million sq km of previously restricted offshore area.
None of them changed its size. Petroleum Secretary Neeraj Mittal has described Samudra Manthan as a structural break precisely because it targets that financial difficulty directly.
The mechanism The new guidelines change the bet in three steps:
- Share the cost up front. The Centre pays up to 50% of the actual drilling cost of an exploratory well, capped at ₹675 crore. The company still runs the operation and pays the rest.
- Absorb failure. If the well is dry or the find is not commercial, the government's share is written off.
- Claw back from success, gently. If the find is commercial, the company repays from revenue in annual instalments. Repayment begins after seven years of production or once it has recovered half its exploration and development costs, whichever comes first. That third step contains the subsidy hidden inside the scheme. Because the repayment carries no adjustment for inflation or the time value of money, the state recovers the same rupees, worth less. As an illustration only, if inflation averaged 5% a year over a seven-year gap, a rupee repaid would be worth roughly 30% less than the rupee lent. For a successful explorer, the support works like an interest-free loan. For a failed one, it is a grant.
Who gains, who pays - Explorers, from ONGC to private and foreign firms, see their expected loss per well roughly halved.
That is the point: more wells get drilled.
- The exchequer carries the dry-hole risk across up to 56 exploratory wells and accepts a real-terms discount on what it recovers.
- Consumers and the economy gain only if discoveries follow. The target is to lift India's resource base from 1.6 to 2.2 billion tonnes of oil equivalent. The design mirrors Norway's 2005 exploration tax refund, which returned up to 78% of exploration costs to companies without taxable income and drew new entrants onto its shelf.
Quick Facts
Key numbers & takeaways — revise these first
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Samudra Manthan (National Offshore Exploration Scheme) has a Phase-I outlay of ₹84,084 crore.
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It was approved by the Cabinet on 31 July 2026 and announced by PIB on 3 August 2026.
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The scheme runs till FY 2030-31 and targets 60 deepwater and ultra-deepwater wells, 56 exploratory and 4 stratigraphic.
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The Centre funds up to 50% of an exploratory well's actual drilling cost, capped at ₹675 crore per well.
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The four stratigraphic wells receive up to 100% funding, capped at ₹1,350 crore each.
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₹28,534 crore is earmarked for 2D and 3D seismic surveys.
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Repayment from successful discoveries starts after seven years of commercial production or 50% recovery of exploration and development costs, whichever is earlier.
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Repayment is in annual instalments with no inflation or time-value adjustment.
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India's crude oil import dependence reached 88.7% in FY 2025-26.
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India has 26 sedimentary basins covering about 3.36 million sq km.
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The scheme aims to raise India's hydrocarbon resource base from 1.6 billion to 2.2 billion tonnes of oil equivalent.
Connect the dots for your UPSC preparation.
Standard news covers the event. Log in to read our comprehensive analysis and uncover the hidden constitutional, structural, and ethical dimensions of this topic:
The full expected-value logic of a deepwater well and why halving the downside changes investment decisions more than any licensing reform.
The hidden subsidy in the unindexed clawback and who captures it.
The Norway exploration-refund case study: what it achieved and where the parallel with India breaks down.
Safeguards to protect public money, from geological data sharing to transparent well selection.
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