The oil and gas sector plays a key role in meeting the country’s energy needs. However, India, one of the largest consumers of crude oil, is heavily dependent on imports, which exposes the economy to price volatility and supply chain risks. Recognising this challenge, the government has in recent years intensified efforts to promote domestic exploration and production (E&P). Policies such as the Hydrocarbon Exploration and Licensing Policy and the Open Acreage Licensing Policy (OALP), and reforms in gas pricing and marketing have been instrumental in increasing investment inflows. At the same time, India is focusing strongly on a transition to a low-carbon future and has set ambitious targets to achieve this, including a commitment to net zero emissions by 2070. The oil and gas sector is expected to play a central role in this transition, with initiatives to increase the share of natural gas in the energy mix, promote biofuels and adopt cleaner technologies. With progressive reforms, a sharper focus on exploration, and strong climate commitments, the sector is poised for transformation, aiming to achieve sustainable growth and contribute to India’s energy security. At recent industry events, Hardeep Singh Puri, Union Minister of Petroleum and Natural Gas, highlighted the sector’s progress, the potential in the E&P segment, and efforts towards meeting the country’s net zero targets. Edited excerpts…
India consumes 5.6 million barrels of crude oil per day. Based on estimates, over the next two decades, 25 per cent of the increase in global energy demand will come from India, and by 2045, crude oil consumption is expected to reach 11 million barrels per day in India. The country, with a large population base, is growing at 6.5 per cent. Energy consumption is a reasonably good indicator of how the economy is faring overall. The country supplies clean cooking gas – both liquefied petroleum gas (LPG) for cylinders produced at refineries and natural gas from pipelines – to around 330 million households. These LPG cylinders are among the most reasonably priced clean cooking fuels supplied by any country.
E&P making headway
India’s untapped energy potential is estimated at 42 billion tonnes of oil and oil equivalent of gas. However, the dependence on crude imports remains high at 80-85 per cent while natural gas imports stand at about 50 per cent. An ambitious target has been set to increase the share of natural gas in the overall energy mix, from 6 per cent to 15 per cent. While investments are taking place, there is significant scope for growth. Notably, 76 per cent of the total area under exploration today has commenced operations only since 2014. While the sector is slow-moving by nature, it is also steady and strong. The decisions taken today may take time to mature, but will lead to tangible outcomes over the next three to five years.
India has 3.5 million square km of sedimentary basins, of which 1 million square km was previously regarded as a no-go area. However, this rule has changed in recent years, in addition to the implementation of other reforms in the sector. In 2016, the sector shifted from production-sharing contracts to revenue-sharing contracts. Moreover, 1 million square km of sedimentary basin was opened up. In OALP Round IX, 38 per cent of the awarded bids were located in this 1 million square km basin. Of the over 250,000 square km of bids opened in the 10th round, around 80 per cent of bids are expected to come from this zone.
India’s coal bed methane (CBM) resources are estimated at 2,600 billion cubic metres (bcm). There are currently 15 active CBM blocks, of which eight are from earlier bidding rounds, four from the Special CBM 2021 and three are from 2022. The launch of the Special CBM 2025 is expected to unlock opportunities in around 34 bcm of unconventional hydrocarbon resources in three blocks – two located in West Bengal and one in Gujarat.
The government has also made notable efforts, including progressive legislative changes, to remove uncertainty and doubts. The new Oilfield (Regulatory and Development) Amendment Bill, 2024highlights the government’s efforts to address industry concerns.
India’s E&P story is also gaining attention, with partners increasingly willing to participate as technology providers and service providers. Scientific, data-driven exploration is being promoted, with Rs 75 billion worth of investment in seismic data, including exclusive economic zones, stratigraphic wells and aerial surveys. Offshore well digging is not an inexpensive exercise, with one well costing up to $100 million. Digging has to be carried out multiple times before a discovery is made. Therefore, a new approach has been adopted. Companies providing technical assistance are now compensated for their services, even if they choose not to remain partners in the long journey. They are granted the first right of refusal if discoveries are made. This new approach is already showing positive results, with Brazil-based Petrobras collaborating on seismic surveys in the Andaman seas.
Climate commitments and net zero targets
India’s climate and sustainability concerns are well placed in the overall discussion on energy availability. India has set a national target of achieving net zero emissions by 2070. Oil companies are targeting timelines between 2035 and 2045, implying that all major fossil fuel players are expected to achieve net zero well before the 2070 target. On the green transition front, India is one of the few countries that has met their Paris commitments.
Looking ahead, the country aims to increase the share of natural gas in the overall energy mix from the current 6 per cent to 15 per cent. It has already achieved 20 per cent biofuel blending, six years ahead of schedule. This is well above the 1.4 per cent in 2014, and plans are under way to reach 25 per cent and beyond.
Further, notable efforts are being made in the compressed biogas segment. India has, moreover, emerged as one of the pioneers in green hydrogen, and has been able to successfully bring down prices to below $4 per kg, compared to international price levels of $5-$5.5 per kg.
In sum
India is among the largest importers of oil and gas but also has a fair amount of domestic production. It is also one of the world’s largest refiners, with a total refining capacity of around 300 million metric tonnes per annum (mmtpa), which is planned to be raised to 400 mmtpa.
Looking ahead, the E&P sector has an investment potential of over $100 billion by 2030. A renewed emphasis on E&P is driving this change, with the Oil and Natural Gas Corporation alone drilling over 500 wells in the past year, the highest in the past 37 years.
Moreover, the focus is now on obtaining results within fixed time frames. In terms of investment potential, assurances are needed in the form of a supportive government environment, regulatory provisions and safeguards. That said, the Indian energy sector is currently attracting a lot of positive and encouraging attention.
