# Samudra Manthan rules: Centre bears dry-well losses, recovers aid only from oil finds

URL: https://upsc.help/current-affairs/2026-10-26/samudra-manthan-guidelines-dry-wells/
Date: 26 October 2026 (2026-10-26)
Source: Indian Express, Page 17
UPSC papers: GS3
Publisher: upsc.help (Pratidin), free and open-source UPSC Civil Services current affairs. Not affiliated with UPSC. Every fact was checked against the source reports by a separate review before publishing.

**In one line:** The Samudra Manthan guidelines make the government a partner in the geological risk of deepwater drilling: it pays part of the cost, absorbs the loss on dry wells and recovers its money only from discoveries.

The Ministry of Petroleum and Natural Gas has issued operational guidelines for Samudra Manthan, the ₹84,084 crore National Offshore Exploration Scheme approved by the Union Cabinet on 31 July 2026. The Indian Express reported the details on 26 October 2026. The core rule is risk-sharing. The government will fund up to 50% of the actual cost of 56 deepwater exploratory wells, capped at ₹675 crore per well, and up to 100% of the cost of four stratigraphic wells (drilled to study a basin's rock layers), capped at ₹1,350 crore each. Deepwater means water depth above 400 metres; ultra-deepwater means above 1,500 metres. If a well is dry or its hydrocarbons are not technically or commercially recoverable, the support is not recovered.

If a funded well leads to a commercial discovery, the support must be repaid from the operator's revenue in annual instalments, without inflation indexation. Repayment starts after seven years of commercial production or once the operator has recovered 50% of its exploration and development cost, whichever is earlier. Money is released in two stages: 40% when the well reaches 40% of its sanctioned depth, and 60% after completion and approval of the well report. Costs above the cap fall on the operator, and blowout control, interest, penalties and public relations are excluded. Only blocks under Revenue Sharing Contracts qualify; Production Sharing Contract and coal-bed methane blocks are excluded unless notified otherwise, and development wells are not eligible. Firms that paid damages instead of drilling an obligated well are barred.

Funding runs from 2027-28 to 2030-31, with the current year for preparation. A steering committee chaired by the Cabinet Secretary oversees the scheme, an executive committee under the Petroleum Secretary appraises proposals, a Technical Assessment Board vets wells, and the Directorate General of Hydrocarbons is the nodal agency. A mid-term review follows the first 30 wells. Other components fund new seismic data, shared offshore infrastructure for stranded finds with priority for the Mahanadi basin, and manufacturing zones. The government expects the scheme to add over 600 million tonnes of oil equivalent to reserves. Petroleum Secretary Neeraj Mittal called it 'the most ambitious upstream oil and gas intervention undertaken in recent times'. The test will be whether risk-sharing draws enough drilling into India's largely unexplored deep waters.

## Prelims facts

- Samudra Manthan, the ₹84,084 crore National Offshore Exploration Scheme, was approved by the Cabinet on 31 July 2026; its guidelines came in October 2026.
- The government funds up to 50% of 56 deepwater exploratory wells (cap ₹675 crore each) and up to 100% of four stratigraphic wells (cap ₹1,350 crore each).
- Support for dry or non-commercial wells is not recovered; for commercial finds it is repaid after seven years of production or 50% cost recovery, whichever is earlier.
- Only Revenue Sharing Contract blocks are eligible; deepwater means water deeper than 400 metres, ultra-deepwater deeper than 1,500 metres.
- The Directorate General of Hydrocarbons is the nodal agency; the scheme aims to add over 600 million tonnes of oil equivalent to reserves.

## Quick recall

- **What is the outlay of the Samudra Manthan scheme?** ₹84,084 crore.
- **When did the Cabinet approve Samudra Manthan?** 31 July 2026.
- **Support cap per deepwater exploratory well?** Up to 50% of actual cost, capped at ₹675 crore.
- **Support cap per stratigraphic well?** Up to 100% of cost, capped at ₹1,350 crore.
- **Water depth that defines deepwater and ultra-deepwater in the guidelines?** Above 400 metres and above 1,500 metres respectively.
- **When does repayment begin after a commercial discovery?** After seven years of commercial production or 50% recovery of exploration and development cost, whichever is earlier.
- **Which contract regime's blocks are eligible?** Revenue Sharing Contract blocks only (PSC and CBM blocks excluded unless notified).
- **Nodal agency for Samudra Manthan?** The Directorate General of Hydrocarbons.

## Prelims practice question

Under the Samudra Manthan scheme guidelines, the government's support for a deepwater well becomes recoverable from the operator when:

(a) The well is drilled to its full sanctioned depth
(b) The well results in a commercial discovery
(c) The operator fails to complete the well within the deadline
(d) The well is found dry

Answer: (b) The well results in a commercial discovery. Support becomes recoverable only if the funded well leads to a commercial discovery; repayment starts after seven years of commercial production or 50% cost recovery, whichever is earlier. Support for dry or non-commercial wells is not recovered. Reaching sanctioned depth only triggers disbursement stages.

## UPSC previous-year questions this connects to

- UPSC Mains 2026, GS3: Explain the key challenges for India's energy security. What measures do you suggest for ensuring energy security along with economic growth and sustainability? (https://upsc.help/pyq/q061-key-challenges-india-s-energy-security-measures/)
  How to use this story in the answer: Cite Samudra Manthan as a concrete measure to cut import dependence by sharing the geological risk of deepwater drilling.
- UPSC Mains 2017, GS2: The question of India's Energy Security constitutes the most important part of India's economic progress. Analyze India's energy policy cooperation with West Asian Countries. (https://upsc.help/pyq/q034-question-india-s-energy-security-constitutes-most/)

## Mains practice question

India's deepwater basins remain largely unexplored despite repeated policy reforms. Examine how the Samudra Manthan scheme seeks to change the economics of offshore exploration, and its limitations. (250 words)

### Model answer

India imports most of the crude oil it uses, yet its deep offshore basins are lightly explored because a single deepwater well is costly and often dry. Samudra Manthan, the ₹84,084 crore National Offshore Exploration Scheme (Cabinet, 31 July 2026), tries to share that risk.

## How it changes the economics
- **Risk-sharing:** up to 50% of the cost of 56 exploratory wells (cap ₹675 crore each) and up to 100% of four stratigraphic wells (cap ₹1,350 crore).
- **No recovery for dry wells:** the State absorbs geological failure.
- **Recovery only from success:** repayment after seven years of production or 50% cost recovery, whichever is earlier, without indexation.
- **Data:** government-funded 2D seismic surveys and co-funded 3D surveys.
- **Infrastructure:** shared facilities for stranded finds, with priority for the Mahanadi basin.
- **Governance:** Cabinet Secretary-led steering committee; DGH as nodal agency; mid-term review after 30 wells.

## Limitations
- Only Revenue Sharing Contract blocks qualify; PSC and coal-bed methane blocks are excluded unless notified.
- Cost overruns above caps fall on operators, which may deter ultra-deepwater wells.
- No recovery indexation means a hidden subsidy even on successful wells.
- Results depend on geology, rigs and services that India largely imports.
- Fiscal exposure if most wells are dry.

## Way forward
- Fast single-window clearances, which DGH must set up within six months.
- Transparent well-wise reporting and an independent end-of-phase evaluation.
- Build domestic offshore services through the scheme's manufacturing zones.

Samudra Manthan addresses the central barrier, geological risk, but its success will be measured in discoveries, not disbursements.

## The basics

## Why this matters
India depends on imports for most of its crude oil, which leaves it exposed to price shocks and supply disruptions. Part of the answer lies offshore. India's deep and ultra-deep waters are thought to hold large resources but have seen little drilling, because one deepwater well can cost hundreds of crores and may find nothing. The Samudra Manthan scheme's new guidelines decide who carries that risk.

## How deep is 'deep'
Deepwater exploration in the guidelines means drilling in water deeper than 400 metres; ultra-deepwater means deeper than 1,500 metres. Rigs, vessels and specialised services make costs far higher than on land or in shallow water.

## Who pays
Under Revenue Sharing Contract blocks, a company bids the share of revenue it will give the government and keeps the rest. Samudra Manthan adds public money at the riskiest stage.

## Running the scheme
The Directorate General of Hydrocarbons is the nodal agency. A steering committee under the Cabinet Secretary oversees the scheme, and a mid-term review follows the first 30 wells. Over 600 million tonnes of oil equivalent of reserves are expected to be added.

The takeaway for an answer: link the scheme to India's energy security, and judge it by whether it changes drilling behaviour, not only by its outlay.

## Sources

- https://psuwatch.com/newsupdates/govt-to-not-recover-samudra-manthan-funding-for-dry-deepwater-wells
- https://knnindia.co.in/news/newsdetails/sectors/govt-to-share-deepwater-oil-gas-exploration-costs-under-rs-84084-crore-samudra-manthan-scheme
- https://static.pib.gov.in/WriteReadData/specificdocs/documents/2026/jul/doc2026731939901.pdf
- https://inc.in/congress-sandesh/aicc-diary/scrap-samudra-manthan-scheme-stop-benefitting-adani-strengthen-ongc
- https://superkalam.com/current-affairs/26-10-2026/samudra-manthan-govt-to-bear-losses-on-dry-oil-wells-recover-aid-on-viable-finds-pg17-e1c144f9-7e6f-46c2-b9ed-e2ef9802b067