Oilex (ASX:OEX, LON:OEX) has achieved a critical milestone...

Oilex (ASX:OEX, LON:OEX) has achieved a critical milestone towards restarting production from the Bhandut field, with the receipt of government endorsement for the sale of gas from the Bhandut-3 well in India.

It will allow gas to be sold to the local market, generating positive cash flow for Oilex.

The Bhandut joint venture partners will now establish appropriate production facilities at the field, including a compressed natural gas (CNG) loading facility to enable the transport of gas via CNG ‘bullet’ trucks.

"We are very pleased to receive the endorsement from the Government of India to sell gas from Bhandut-3 and restart production from the field to provide gas to the local market,” said managing director Ron Miller.

“The contracted price was determined by a competitive bidding process and remains Commercial-in-Confidence.

“Oilex continues towards generating additional cash flow through increasing production from its assets in India."

Bhandut-3, a conventional well, last year produced at a maximum rate of 6.5mln cubic feet per day during a test. It is anticipated that the well will yield between 0.5-1mln cubic feet per day. Payback on the investment for production facilities is expected to take seven months.