Nepal Prepares Second-Phase Petroleum Deal as Dailekh Drilling Reaches a New Turning Point

Nepal is entering a crucial new stage in its petroleum exploration push, with the Department of Mines and Geology preparing a second-phase agreement with the China Geological Survey for commercial extraction work in Dailekh.

The move follows the completion of initial drilling and exploration activities in the Jaljale area of Bhairabi Rural Municipality-1, where the project has been carried out with technical support from China as part of efforts to assess Nepal’s domestic oil and gas potential.

From exploration to the next phase

According to the report, internal preparations are now underway to finalize the terms of the next stage of excavation and development. That matters because the project is shifting from pure exploration toward the more expensive and consequential question of whether the site can support commercial petroleum production.

Earlier reporting on the same project noted that Chinese and Nepali teams had drilled to more than 4,000 meters in Jaljale and extracted rock samples for laboratory testing. Those samples were expected to determine whether the area holds oil and gas reserves that are commercially viable to extract.

Why Dailekh is drawing attention

Dailekh has become one of Nepal’s most closely watched energy prospects because the drilling campaign has already gone deep enough to move beyond speculation and into hard geological evidence. The project has been described as a significant step for Nepal’s long-term energy ambitions, especially as the government looks for ways to reduce dependence on imported petroleum products.

If the next round of studies confirms viable reserves, the government would then have to decide how to proceed with production, investment, and potential commercial development.

The role of Chinese technical assistance

The exploration effort has been carried out with Chinese technical assistance, reflecting a continuing bilateral partnership in Nepal’s petroleum search. Earlier coverage reported that the work was supported by a Chinese grant under a 2019 agreement, and that samples were sent to China for testing in specialized labs.

That technical backing is important because deep drilling, laboratory analysis, and feasibility studies require specialized equipment and expertise that are expensive for a country to develop alone.

What happens next

The upcoming second-phase agreement is expected to define the scope of the next excavation stage, along with the operational and technical terms needed to move forward. In practical terms, it could determine how quickly Nepal can convert the Dailekh findings into a commercial project, or whether further study is still needed before extraction can begin.

For now, the project sits at a high-stakes crossroads: the drilling has been done, the samples have been collected, and the next agreement may decide whether Dailekh becomes a landmark in Nepal’s energy history or remains an ambitious geological experiment.