Samudra Manthan rules: Centre bears dry-well losses, recovers aid only from oil finds
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.
Published 26 October 2026. Written by Pratidin from the reports linked at the end; every fact checked by a separate review before publishing. How we work
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:
- The well is drilled to its full sanctioned depth
- The well results in a commercial discovery
- The operator fails to complete the well within the deadline
- The well is found dry
Show answer
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.
Use this in UPSC Mains: previous-year questions
Recurring theme: Energy security and upstream oil and gas policy
- How to use this
Cite Samudra Manthan as a concrete measure to cut import dependence by sharing the geological risk of deepwater drilling.
- Samudra Manthan (₹84,084 crore, Cabinet 31 July 2026) funds up to 50% of 56 deepwater exploratory wells, capped at ₹675 crore each.
- Dry-well support is not recovered; commercial finds repay after seven years of production or 50% cost recovery.
- It aims to add over 600 MTOE of reserves, with shared infrastructure for stranded finds, Mahanadi basin first.
Domestic offshore exploration complements, but cannot replace, energy cooperation with West Asian suppliers.
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.
- 1Seismic surveySound waves map rock layers under the sea floor
- 2Stratigraphic wellDrilled to understand a basin's rocks, not to produce
- 3Exploratory wellTests whether oil or gas is present
- 4AppraisalMeasures the size of a discovery
- 5Development and productionWells and facilities to bring oil and gas ashore
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.
- Up to 50% of actual cost
- Cap of ₹675 crore per well
- Recovered only if a commercial discovery is made
- Up to 100% of cost
- Cap of ₹1,350 crore per well
- Meant to improve knowledge of basins
- 1Lower expected loss for the operator
- 260 deepwater wells targeted
- 3Dry wells cost the State; commercial finds repay
- 4Each well improves the geological picture for the next bids
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.
Go deeper
Why it matters for UPSC
Energy security is a recurring GS3 theme, and the 2026 Mains paper asked directly about it. This scheme is the biggest recent upstream intervention and gives specific numbers, institutions and design choices for Prelims and Mains.
The core idea
Deepwater exploration is expensive and uncertain, so companies drill few wells. Samudra Manthan funds up to half of exploratory wells and all of a few stratigraphic wells, but only in Revenue Sharing Contract blocks. The Directorate General of Hydrocarbons runs the scheme day to day. The aim is to raise domestic reserves and strengthen India's energy security.
Numbers and dates to remember
- Outlay ₹84,084 crore; Cabinet approval 31 July 2026.
- 56 exploratory wells: up to 50%, cap ₹675 crore each.
- 4 stratigraphic wells: up to 100%, cap ₹1,350 crore each.
- Deepwater above 400 m; ultra-deepwater above 1,500 m.
- Disbursal 40% at 40% depth, 60% on completion.
- Funding 2027-28 to 2030-31; mid-term review after 30 wells.
- Expected reserve addition: over 600 MTOE.
Where to go next
- Deepwater exploration: why the deep sea is hard and costly.
- Revenue Sharing Contract: the contract model that decides eligibility.
- Directorate General of Hydrocarbons: the agency running the scheme.
- India's energy security: the bigger picture.
Go deeper: is public risk-sharing the right fix?
The case for the scheme starts from a market failure. Geological information is a public good: a dry well teaches every future explorer something, but its cost falls on one company. That is why the government funds the four stratigraphic wells fully, and why it accepts losses on dry exploratory wells. Policy reforms such as the shift to the Revenue Sharing Contract model improved fiscal terms but, as the Petroleum Secretary's preface puts it, could not by themselves resolve the economics of Deepwater exploration.
The design has safeguards. Support is capped per well, overruns fall on the operator, blowout costs and penalties are excluded, and companies that paid damages instead of drilling are barred. Money flows in stages tied to drilling progress. Recovery from successful wells, after seven years of production or 50% cost recovery, returns some of the public money, and a mid-term review after 30 wells allows correction.
The critiques are also real. Recovery without inflation indexation means even successful wells receive a subsidy in real terms. Excluding Production Sharing Contract blocks leaves out some older acreage. The Congress party, through spokesperson Shaktisinh Gohil, has alleged that the scheme would mainly benefit a private group and asked why private exploration should be de-risked with public money, demanding that the funds go to ONGC instead. And public money cannot change geology: if the basins disappoint, the fiscal cost is sunk.
For India's energy security, the scheme matters alongside diversification of import sources, strategic reserves and the energy transition. The Directorate General of Hydrocarbons must also deliver the promised single-window clearance portal within six months, because delays in environment, coastal and defence clearances have long slowed offshore work.
Deepwater exploration
Why the deep sea is hard and costly to explore.
In one line: Deepwater exploration is the search for oil and gas beneath seas more than 400 metres deep; beyond 1,500 metres it is called ultra-deepwater.
Why it is hard
Drilling in deep water needs specialised rigs and vessels, advanced seismic imaging and complex well designs, and a single well can cost hundreds of crores. Many wells find nothing commercially useful. Even a discovery may be 'stranded' if it is too small or remote to justify its own production facilities.
Why it is in the news
Samudra Manthan targets 60 deepwater wells. It will also part-fund shared offshore infrastructure so that stranded discoveries can connect to common production systems, with priority for the Mahanadi basin and token funding for Kutch.
Where to go next
- Revenue Sharing Contract
- India's energy security
Revenue Sharing Contract
The contract model that decides who can get support.
In one line: Under a Revenue Sharing Contract (RSC), an oil and gas company shares a part of its gross revenue with the government, instead of first recovering its costs as under the older Production Sharing Contract (PSC).
PSC versus RSC
Under PSCs, used in earlier licensing rounds, companies recovered costs before sharing profit petroleum, which required the government to scrutinise costs and led to disputes. RSCs, introduced with the Hydrocarbon Exploration and Licensing Policy (HELP) in 2016, avoid this: the government takes a bid share of revenue and does not need to audit costs closely.
Why it is in the news
Samudra Manthan support is available only for RSC blocks. PSC and coal-bed methane blocks are excluded unless the government notifies otherwise.
Where to go next
Directorate General of Hydrocarbons
The technical agency that runs the scheme.
In one line: The Directorate General of Hydrocarbons (DGH) is the technical arm of the Ministry of Petroleum and Natural Gas for upstream oil and gas, overseeing exploration and production contracts.
Role in Samudra Manthan
The DGH is the nodal and implementing agency. It will track progress through a digital monitoring system and must set up a single-window portal for environment, coastal, defence and security clearances within six months. Under the guidelines, the national hydrocarbon data function moves from the DGH to a separate organisation.
The governance chain
A Technical Assessment Board vets well proposals, an executive committee under the Petroleum Secretary appraises them, the Petroleum Minister sanctions funding, and a steering committee under the Cabinet Secretary oversees the programme.
Where to go next
- Revenue Sharing Contract
- India's energy security
India's energy security
Why domestic oil and gas still matter.
In one line: Energy security means reliable access to energy at affordable prices; for India, heavy dependence on imported crude oil is its main weak point.
The challenge
India imports most of the crude oil it refines, so global price spikes and disruptions in supply routes hit its trade balance, inflation and fiscal position. Raising domestic production, diversifying suppliers, building strategic reserves and shifting to cleaner energy are the main responses.
Why it is in the news
The Cabinet's 31 July 2026 decision said Samudra Manthan could add over 600 MTOE of reserves and incremental production of 10 to 15 MTOE a year, with a peak potential of 20 MTOE. The guidelines issued in October 2026 now set out how the money will be spent.
Where to go next
Take the 26 October 2026 quiz: 30 Prelims-style questions with answers