Faced with a global shortage of offshore drilling rigs, the government may this month decide on giving a three-year drilling holiday or moratorium to firms such as state-owned Oil and Natural Gas Corporation and Reliance Industries [Get Quote].

"An empowered committee of secretaries last week cleared the proposal and it is likely to be put before the Cabinet now," a petroleum ministry official said.

Companies such as ONGC [Get Quote] and Reliance have not been able to meet their work commitments for the blocks they had won under the New Exploration Licensing Policy rounds because of a crunch in availability of deep-sea drilling rigs.

The official said oil ministry is moving a note for the consideration of Cabinet Committee on Economic Affairs for giving a drilling holiday from January 1, 2008, to December 31, 2010, for 33 blocks awarded in the fifth round of NELP.

Of the blocks, where the drilling moratorium would apply, 15 are with ONGC, 17 with Reliance and one with ENI of Italy.

Globally, oil and gas explorers are faced with huge shortage of drilling rigs as countries stepped up oil and gas hunt in the wake of the surge in crude oil prices. Day-hire charges for a deep-sea drill rig have shot up 250 per cent during the past two years.

But for the drilling holiday, the companies faced huge penalties for not fulfilling their work commitments that included drilling of a certain number of wells.

The official said, though a drilling holiday was earlier being considered even for NELP-VI, the same is not being included in the Cabinet note as the first phase of exploration for these areas is up to 2010.

In August, the petroleum ministry had first moved the Cabinet for the three-day drilling holiday or moratorium but the proposal was withdrawn after the finance ministry wanted a system of incentives and disincentives introduced to reward and punish companies performance during the period.

A graded system of incentives and disincentives will differentiate between companies who have completed the drilling work programme in deepwater acreages, which are being considered for a rig moratorium within the proposed three-year exploration holiday period or earlier and those which fail to complete the work, the official said.

The ESC has proposed penalties for those not completing their work commitments and would be considered by the Cabinet soon, he said.