India’s government is introducing a risk-sharing model for offshore oil and gas exploration under the ₹84,084-crore Samudra Manthan scheme. Under newly issued operational guidelines, the government will pay up to half the eligible cost of selected deepwater exploration wells and recover the financial support if drilling leads to commercially viable oil or gas production. If a funded well is dry or its hydrocarbons cannot be recovered commercially or technically, the support will not be recovered.
The policy aims to encourage exploration in offshore areas where drilling is expensive, technically difficult and uncertain. By sharing part of the initial geological risk, the government hopes to encourage companies to investigate India’s deepwater and ultra-deepwater basins, strengthen domestic hydrocarbon production and reduce reliance on imported oil and gas. The scheme also includes seismic surveys, shared offshore infrastructure and manufacturing and services zones to support the wider exploration industry.
Key Takeaways
- Total scheme outlay: ₹84,084 crore under the National Offshore Exploration Scheme, known as Samudra Manthan.
- Exploration support: Up to 50% of eligible costs for 56 exploratory wells, capped at ₹675 crore per well.
- Stratigraphic wells: Four wells can receive up to 100% funding, capped at ₹1,350 crore each; only state-owned companies or consortia they lead can apply.
- Repayment conditions: Support for commercially successful wells becomes recoverable after seven years of commercial production or when the operator recovers 50% of exploration and development costs, whichever comes first.
- Dry wells: Support for unsuccessful wells is not recoverable under the guidelines.
- Implementation period: Preparatory work is planned for FY2026-27, with Phase I spending from FY2027-28 through FY2030-31.
What Is the Samudra Manthan Scheme?
Samudra Manthan is India’s National Offshore Exploration Scheme, designed to expand oil and gas exploration in offshore areas. The Union Cabinet approved the programme in August 2026 with an overall outlay of ₹84,084 crore through FY2030-31.
The programme responds to a major obstacle in offshore exploration: companies must spend substantial sums drilling wells before knowing whether a commercially recoverable resource exists. A failed well can leave an operator with large costs and no revenue.
Under the new approach, the government shares part of the eligible cost while the operator retains responsibility for drilling and operational execution. The government does not simply provide an unconditional grant: when a funded well produces a commercial discovery, the support becomes recoverable under the scheme’s repayment rules.
The programme also supports activities beyond drilling, including seismic data acquisition, shared offshore infrastructure and facilities for manufacturing and servicing oil and gas equipment.
How Much Will the Government Pay for Each Well?
The operational guidelines divide the well-support component into two categories.
| Well category | Number of wells | Maximum government support | Maximum support per well |
|---|---|---|---|
| Exploratory wells | 56 | Up to 50% of eligible actual costs | ₹675 crore |
| Stratigraphic wells | 4 | Up to 100% of eligible costs | ₹1,350 crore |
| Total | 60 | Up to ₹43,200 crore at the stated caps | — |
Source: Business Standard, reporting on the scheme’s operational guidelines.
Exploratory wells are drilled to investigate whether oil or gas resources exist. Stratigraphic wells are primarily used to examine underground rock layers and geological structures, helping researchers understand a basin’s potential.
The maximum amounts imply possible support of ₹37,800 crore for the 56 exploratory wells and ₹5,400 crore for the four stratigraphic wells. Together, these caps total ₹43,200 crore. Actual spending will depend on eligible proposals and approved costs; the maximum is not a guarantee that all funding will be used.
The government will release exploratory-well support in stages. Forty per cent of the approved support becomes payable when drilling reaches 40% of the approved depth. The remaining 60% is payable after the well is completed and the well report is approved.
When Must Companies Repay the Government?
The repayment provision is central to the scheme. It allows the government to share the risk of unsuccessful exploration while recovering support when a funded well leads to commercial production.
Under the guidelines, recovery begins at the earlier of two milestones:
- Seven years after commercial production begins.
- The point at which the operator has recovered 50% of its exploration and development costs.
Repayment is made in annual instalments without inflation indexation. In other words, the amount is not adjusted for inflation over the repayment period.
The treatment differs depending on the outcome of drilling.
| Project outcome | Treatment of government support |
|---|---|
| Commercially successful well | Support becomes recoverable under the scheme’s rules |
| Dry well | Support is not recoverable |
| Hydrocarbons that cannot be technically or commercially recovered | Support is not recoverable |
| Costs above the approved cap | The operator bears the excess |
This arrangement means the government shares some of the geological risk but retains a financial claim when exploration succeeds. Companies still face financial exposure, particularly when costs exceed the approved limits.
Which Companies and Wells Are Eligible?
Eligibility depends on the type of well, the licence or contractual regime governing the block, and compliance with existing drilling commitments.
The guidelines restrict funding to eligible blocks awarded under the Revenue Sharing Contract regime. Production-sharing and coal-bed methane blocks are excluded unless the government specifies otherwise. Development wells, which are drilled to produce resources that have already been discovered, are not covered by the exploratory-well grant.
The rules also prevent companies from automatically transferring cost overruns to the government. Spending above the approved cap remains the operator’s responsibility.
For the four stratigraphic wells, applications are restricted to state-owned companies or consortia led by them. The Technical Assessment Board will assess proposals, while the scheme’s approval process includes further review and ministerial sanction.
These conditions are intended to link public funding to exploration needs rather than provide a general subsidy for all offshore drilling activity.
Why India Is Supporting Deepwater Exploration
India is one of the world’s largest oil consumers and relies heavily on imported crude oil. Increasing domestic production could help reduce exposure to international supply disruptions, price volatility and foreign-exchange pressures, although exploration funding alone cannot guarantee that outcome.
Deepwater and ultra-deepwater exploration requires specialised equipment, vessels, subsea systems and technical expertise. A single well can cost hundreds of millions of dollars, and the geological outcome remains uncertain even after extensive research.
The scheme is intended to improve the economics of exploring frontier basins such as Krishna-Godavari, Cauvery, Mahanadi and the Andaman region. Petroleum Ministry materials say the programme could add more than 600 million tonnes of oil equivalent to India’s reserves, but this is a target or potential estimate rather than a confirmed discovery.
Commercial success will depend on what the drilling actually finds, whether the resources can be extracted economically and how quickly production infrastructure can be developed.
The Scheme Goes Beyond Drilling
Samudra Manthan has four broad components, extending beyond direct support for individual wells.
| Component | Planned outlay | Purpose |
|---|---|---|
| Offshore seismic data acquisition and processing | ₹28,534 crore | Improve geological understanding of offshore basins |
| Support for 60 exploration wells | ₹43,200 crore | Share eligible drilling costs |
| Common offshore infrastructure hubs | ₹10,000 crore | Help connect and commercialise discoveries |
| Oil and gas manufacturing and services zones | ₹2,000 crore | Encourage domestic equipment manufacturing and industry services |
| Total | ₹84,084 crore | — |
The infrastructure component is intended to help smaller or stranded discoveries that might not justify the cost of an independent production system. Shared pipelines, subsea manifolds, processing platforms and floating production units can allow multiple developments to use common facilities.
The programme also seeks to strengthen India’s domestic supply chain for offshore equipment and services. Building local capabilities could help support future exploration, although the scale of the benefits will depend on project execution and industry participation.
The Bigger Picture
Samudra Manthan represents a shift toward sharing some of the financial risk involved in India’s offshore exploration. Instead of requiring operators to carry the entire cost of uncertain drilling, the government will support eligible wells and seek repayment when the resulting discovery becomes commercially successful. This can make some high-risk exploration projects more financially feasible, while the recovery provisions help protect public funds from becoming unconditional subsidies for successful projects.
The broader test will be whether the scheme generates commercially recoverable discoveries and encourages sustained private investment. The government will need to monitor drilling progress, costs, safety and the use of public support. Even if exploration increases, any reduction in import dependence will take time and will depend on the size of discoveries, production costs, infrastructure availability and the pace at which new fields begin operating.
FAQs
1. What is the Samudra Manthan scheme?
Samudra Manthan is India’s National Offshore Exploration Scheme, with an outlay of ₹84,084 crore through FY2030-31. It supports offshore seismic surveys, eligible deepwater exploration wells, shared infrastructure and oil and gas manufacturing and services zones.
2. How much will the government fund for deepwater wells?
For 56 exploratory wells, the government will provide up to 50% of eligible actual costs, capped at ₹675 crore per well. Four stratigraphic wells can receive up to 100% support, capped at ₹1,350 crore per well, subject to the scheme’s eligibility rules.
3. Will companies have to repay the government?
Yes, when a funded well leads to commercial production. Recovery begins after seven years of commercial production or once the operator has recovered 50% of exploration and development costs, whichever comes first. Repayments are made in annual instalments without inflation indexation.
4. What happens if a funded well finds no commercially recoverable oil or gas?
The government will not recover the support for a dry well or one where the hydrocarbons are not technically or commercially recoverable, according to the operational guidelines.
5. Will the scheme immediately reduce India’s oil imports?
No immediate reduction is guaranteed. Exploration must first identify commercially viable resources, after which companies need to develop fields and infrastructure before production can begin. The scheme is intended to improve the prospects for domestic supply over time.
Looking Ahead
The next phase will focus on evaluating well proposals, carrying out seismic surveys and beginning implementation under the scheme’s timeline. Actual drilling results, cost discipline and the pace of infrastructure development will determine whether the programme achieves its objectives. The guidelines also provide for a mid-term evaluation after 30 deepwater wells have been drilled, creating a checkpoint for reviewing progress.
For India, the policy offers a way to encourage exploration in technically challenging offshore areas while retaining a repayment mechanism for successful projects. Its longer-term value will depend not just on how much public funding is disbursed, but on whether the programme delivers viable discoveries, supports domestic industry and adds reliable new sources of energy.
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