As the world’s third-largest oil consumer, India’s reliance on imports has deepened over the last few decades. This has raised serious concerns about energy security and economic stability of India as the country competes in the international energy league with developed and developing nations alike. The concerns have been so alarming that today India’s energy landscape is at a pivotal juncture with domestic oil production facing significant challenges amid rising demand.
In 2023, India’s crude oil production averaged just around 7,00,000 barrels per day (bpd), contributing just 13 percent of the country’s fossil fuel needs. This decline has resulted in increased import dependency, which has gone up from 87.8 percent in the first four months of FY24 to 88.3 percent in the same period of FY25. Forecast by the International Energy Agency (IEA) indicates a continued drop in domestic production to 5,40,000 bpd by 2030. Thus, India’s domestic oil production has been on a declining trajectory. This strengthens the case for escalated domestic exploration and fast-tracked production endeavours.
Complex regulations and bureaucratic red tape have deterred investment and slowed exploration activities
To overcome these challenges in domestic oil production, the Indian government has implemented several policy reforms. To encourage aggressive exploration and production of hydrocarbons in the country, New Exploration Licensing Policy (NELP) was implemented in the year 1997-98, which provided a level playing field for both public and private sector companies. It allowed 100 percent Foreign Direct Investment (FDI) and followed a competitive bidding process for exploration blocks. Further reforms in exploration policy were made in March 2016 and Hydrocarbon Exploration and Licensing Policy (HELP) was launched. HELP replaced NELP with the objective of increasing domestic production and reducing import dependency. It introduced the Open Acreage Licensing Policy (OALP) to enable companies to select exploration blocks without waiting for formal bid rounds, and provided access to the National Data Repository (NDR) for informed decision-making.
But even after these policy reform initiatives for exploration, several challenges still persist, hampering smooth and timely execution of the planned exploration activities. Complex regulations and bureaucratic red tape have deterred investment and slowed exploration activities. Sudden changes in the tax regime and delay in dispute resolution have made investors further cautious about their investment in exploration. The challenges faced by domestic production can be attributed to the following: ageing fields, discoveries of subtle nature, policy constraints, near field exploration and technological constraints.
Firstly, exploration is a relatively mid-to-long term activity till it reaches the production stage; and, secondly, the main contributors to domestic production are ageing oil fields, majority of which have crossed their plateau stage and are in declining phase. Under this condition, a drop in domestic production is evident. Thus, the need of the hour for such fields is to adopt suitable Enhanced Oil Recovery (EOR) techniques to maximise the recovery. However, these techniques require significant investment and are advanced technologies.
Focused policy reform for attracting investments towards activities in the unexplored part of the Category-I basins is a must
Additionally, the lack of significant new oil discoveries has impeded efforts to boost domestic production. Despite policy reforms aimed at attracting investment towards expedited exploration, activities have not yielded substantial results. Complex regulatory frameworks and bureaucratic delays have historically deterred investment in the oil and gas sector. While recent reforms aim to streamline processes, challenges remain in creating an investor-friendly environment. Near-field exploration in PML (Petroleum Mining Lease) areas for deeper horizons as well as surrounding areas in Category-I basins are the low hanging fruits waiting to be discovered, needing proper incentives as majority of these avenues are challenging either for want of suitable fit-for-purpose technology or are logistically inaccessible. Thus, focused policy reform for attracting investments towards activities in the unexplored part of the Category-I basins is a must. Lastly, advanced technologies required for deep-water and ultra-deep-water exploration are not widely available domestically, necessitating collaboration with international agencies.
In response to these post policy reform challenges, the Indian government has initiated several measures. Some of the remarkable breakthroughs are opening new areas for exploration. Previously restricted areas, including parts of the Bay of Bengal and Andamans, are being opened for exploration to attract investment for exploration. Additionally, amendments to the Oilfields Act will definitely provide greater protection to investors, including stable tax regimes and improved dispute resolution mechanisms. The government is also offering incentives for companies to undertake exploration activities without substantial upfront investments, thereby paving the avenue for participation from major International Oil Companies (IOCs) in addition to reaching out to these companies, encouraging international investments for explorations in the country.
While India’s efforts to boost domestic oil production are commendable, addressing the multi-faceted challenges associated with it requires a holistic approach
India is actively seeking participation from IOCs. Collaborations, such as those between Public Sector Undertakings (PSUs) and global majors like Chevron, ExxonMobil, PTTP, British Petroleum, are some of the steps towards leveraging advanced technologies and expertise to enhance domestic production. The government is also offering incentives to companies for undertaking exploration activities without substantial upfront investments, aiming to attract major international oil companies.
Investments in refining capacity are underway to meet domestic needs and maintain India’s position as a key exporter of transportation fuels. Energy companies targeting an additional 1 million bpd of refinery capacity to accommodate the growing demand is an encouraging development. In light of the global geopolitical dynamics, India is diversifying its crude oil import sources. For example, Bharat Petroleum Corporation Limited (BPCL) has been purchasing crude from the Middle East to offset reduced availability from traditional suppliers.
India is enhancing its Strategic Petroleum Reserves’ (SPR) capacity to strengthen energy security. Currently, the country holds oil stock equivalent to meet 66 days of requirement, including seven days’ worth stored in underground strategic reserves. Plans are in place to expand this capacity further.
In conclusion, while India’s efforts to boost domestic oil production are commendable, addressing the multi-faceted challenges associated with it requires a holistic approach. Streamlining regulatory processes, investing in advanced extraction technologies, and ensuring policy stability are crucial steps towards achieving energy security. Additionally, balancing the focus on oil production with the development of renewable energy sources will be essential in navigating the global energy transition and ensuring a sustainable growth. Out of 3.36 million sq km of sedimentary basins, 1.73 million sq km area is offshore and 1.32 sq km of that falls in deepwater offshore with sporadic exploration activities. With 29.796 MMTOE of yet-to-find resources and 39 percent of unexplored and under-explored deepwater part of the sedimentary basins, exhaustive exploration is the need of the hour, till India tastes the success of discovering a mega oil or gas field. However, one needs meticulous planning and sequencing in carrying out these cost-intensive exploration and production endeavours for relatively longer duration. Nevertheless, the exploration agencies involved in wildcat explorations should be given all necessary comfort to continue a sustained exploration regime in ultra-deep waters and inaccessible logistically challenging part of the Category-I basin, like Assam-Arakan Basin, along with incentives towards near-field exploration to tap the reservoirs in deeper horizons.
The global shift towards renewable energy sources adds urgency to India’s efforts to boost domestic oil production before a potential decline in global oil demand. In addition to expedited exploration and hydrocarbon production, selected measures for popularising and adding renewable energy supplement to the energy basket of the country appears to be the most-feasible solution to reduce import dependency of India.
