India’s energy landscape is evolving rapidly due to increasing demand, urbanisation and industrial growth. Given its economic expansion, energy demand is expected to double by 2050, with an average growth of 2.4-2.6 per cent per annum. The key drivers leading India’s energy transition include the government’s commitment to transition to a gas-based economy, increase the share of natural gas to 15 per cent from the existing 6.3 per cent by 2030, and use cleaner fossil fuels, particularly petroleum and coal. In addition, increasing the reliance on domestic sources will drive demand for biofuels, aiming to reach 450 GW of installed capacity through renewable energy sources by 2030. Other drivers include increasing the usage of electricity to decarbonise mobility, transitioning to emerging fuels including hydrogen, and adopting digital innovation across all the energy systems.
Notable steps
The Directorate General of Hydrocarbons (DGH) has facilitated over 170 trillion cubic feet of natural gas, mostly in the upstream industry. The upstream sector has a significant untapped potential of 26 sedimentary basins, covering an area of 3.36 million square km. Of these, seven sedimentary basins with reserves are being produced and exploited, while five basins with contingent resources will be developed and monetised, and 14 basins with only prospective resources are to be explored and discovered. Of the total basin area, 48 per cent is appraised, 45 per cent is unappraised and 7 per cent is under the “no-go zone” category. The appraised area comprises 57 per cent deepwater, 22 per cent onshore and 21 per cent shallow water. Meanwhile, the unappraised area comprises 17 per cent of deepwater, 79 per cent onshore and 4 per cent shallow water. The DGH focuses on asset monetisation, expediting the monetisation of oil and gas discoveries and the pricing regime.
To tap the potential of India’s upstream sector, the DGH has introduced a five-point exploration strategy:
- Aggressive exploration of Category II (basins with contingent resources to be developed and monetised) and Category III (basins with only prospective resources to be explored and discovered).
- Conversion of newly discovered basins into Category I basins (Vindhyan, Kutch Offshore and Bengal).
- Exploration of emerging plays and field growth, focus on deep plays (Mesozoic) and basement.
- Exploration of new geological energy portfolio and the adoption of advanced technologies.
- Focus on efficiency by integrating enhanced oil recovery techniques with carbon capture and storage systems.
Policy moves and key reforms
To accelerate activities in the exploration and production (E&P) sector, the government has introduced several policy initiatives. Notably, approximately 100,000 square km of offshore areas, previously classified as “no-go” zones under defence agency control, have now been opened for E&P operations. Further, the Open Acreage Licensing Programme (OALP), part of India’s Hydrocarbon Exploration and Licensing Policy, enables investors to select oil and gas exploration blocks without waiting for a formal government bid round. Investors must submit an expression of interest, which is evaluated by the government. If approved, the necessary clearances are obtained before inviting competitive bids, and the blocks are then awarded through a formal bidding process. Thus, the OALP accelerates exploration by allowing quick identification of hydrocarbon-rich areas, providing flexibility and relief to hydrocarbon companies while streamlining the E&P process.
The Discovered Small Fields [DSF] Policy, introduced in 2015, aims to boost domestic oil and gas production by monetising small and marginal hydrocarbon fields that were discovered but remained undeveloped. The policy follows a revenue-sharing model, replacing the earlier cost recovery mechanism, ensuring a more transparent and investor-friendly approach. Fields are allocated through a competitive bidding process, with no prior experience required, encouraging participation from both Indian and foreign companies, including new entrants. Currently, 55 contracts under the DSF Policy are active, with five fields already in production and another five expected to commence production by March 2025. The cumulative production till March 2024 stands at approximately 556,000 barrels of oil and 139 million metric standard cubic metres (mmscm) of natural gas. The DSF Policy has also successfully attracted 29 new players into India’s oil and gas sector, fostering competition and enhancing domestic hydrocarbon production.
To strengthen India’s E&P sector, the government has launched several initiatives aimed at improving efficiency, transparency and production output. One major reform is the Production Enhancement Scheme, introduced under the 2019 Exploration and Licensing Policy to enhance the domestic exploration and production of oil and gas. This scheme provides greater operational freedom to national oil companies (NOCs), enabling them to collaborate with the private sector to enhance production from nomination fields.
Another significant step is the integration of the DGH Revenue Management System with BharatKosh, initiated in 2021. This initiative aims to streamline royalty and profit petroleum payments, ensuring hassle-free transactions and improved monitoring. Additionally, efforts have been made to build the capacity of internal and external stakeholders, facilitating a smoother transition to the new system.
In January 2020, the Indian government introduced a key reform to ease environmental clearance requirements for oil and gas companies engaged in exploratory drilling. Previously classified under Category A, such projects required extensive approvals, including an environmental impact assessment (EIA) at the central level. However, with the amendment, exploration activities have been reclassified under Category B2, which means they now require approvals only from state authorities and are exempt from conducting an EIA.
The government introduced the New Domestic Natural Gas Pricing Guidelines, 2014, linking domestic gas prices to international benchmarks, with revisions every six months to balance consumer and producer interests. In June 2020, a gas trading exchange was launched for imported gas, followed by an e-auction system for domestic gas in October 2020, ensuring transparent pricing and competitive allocation.
These reforms aim to boost natural gas consumption, enhance production and attract investments in India’s energy sector.
Status of CBM
There is also growing potential of unconventional resources, particularly coal bed methane (CBM). India could reduce its energy import bill by $2 billion by utilising only 10 per cent of its CBM reserves. The country has an estimated CBM reserve of 2,600 billion cubic metres (bcm) at present.
As of July 2024, India has 15 operational CBM blocks covering 7,009 square km. A total of 1,163 wells have been drilled, with a production rate of 2 mmscm per day. Cumulative production has reached 6.6 bcm as of July 2024. Meanwhile, the total investment as of March 2024 stands at $2.6 billion. Additionally, royalty earnings from CBM production amounted to $127 million as of March 2024.
Key challenges
The E&P sector in India faces several challenges that hinder its growth and efficiency. Inadequate pipeline infrastructure remains a major bottleneck, with the network being underdeveloped compared to the rising demand for natural gas. This issue is particularly pronounced in the north-eastern region, which lacks proper connectivity. Geopolitical risks, including India’s high dependence on imports and uncertainties in global energy markets, further add to supply chain vulnerabilities and price volatility.
Exploration challenges also persist, as mature fields are witnessing declining production, and new reserves are often located in difficult terrains, making extraction both complex and expensive. Price affordability is another concern, especially in the north-eastern region, where NOCs receive a 40 per cent subsidy, leading to market disparities and reduced competitiveness for private players.
Additionally, the regulatory and policy framework continues to be complex, with frequent policy changes and bureaucratic hurdles slowing down approvals and project implementation. Another key issue is gas quality, as some fields fail to comply with Petroleum and Natural Gas Regulatory Board specifications, as seen in examples like the Nagayalanka field and Chinnewala Tibba. Addressing these structural challenges is essential for improving domestic production, reducing import dependence and ensuring energy security in India.
Conclusion
India’s energy landscape is undergoing a significant transformation, driven by rapid economic growth, urbanisation and industrial expansion. With a strong push towards reducing dependence on coal and oil, increasing the share of natural gas, and accelerating renewable energy adoption, the country is strategically positioning itself for a sustainable and secure energy future. The need of the hour is to use advanced technologies, internet of things, artificial intelligence and big data to optimise operations, predict equipment failures and increase efficiency. The implementation of digital twins for the real-time monitoring of assets will help reduce downtime and costs. Government-led initiatives, reforms and investment opportunities in the E&P sector are further enhancing domestic production and reducing import dependency.
Based on a presentation and remarks by Sachiv Kumar, Additional Director General (Development), DGH, at a recent India Infrastructure conference
