India is the world’s fastest growing energy market. An expanding economy and a growing population have resulted in increased consumption of primary energy resources such as coal, crude oil and natural gas in India. However, as Russia – key supplier of natural gas to a host of nations– faced several sanctions following its war with Ukraine, global oil prices saw a steep increase. Pursuant to the imposition of these sanctions, most of the exports from Russia were redirected to Asian countries, including India. India, having not imposed sanctions, continues to import oil from Russia, which is now available at lower prices. Taking advantage of discounted prices, India raised its imports of Russian crude from 950,000 b/d in June 2022 to around 1.96 million b/d in May 2023.
Since 85% of India’s crude oil requirement is met through imports, it becomes important to explore sources that are not only available but also affordable. At present, Russia offers that avenue which is a far affordable option than importing crude from Saudi Arabia, UAE, Qatar or Quwait. As per a government report, India plans to increase its crude oil refining capacity by 77% to 438.65 million tons. The increase would happen gradually over the next 12 years as India seeks to meet its growing demand for fuel. India’s oil demand is expected to increase by 40% to 6.7 mb/day by 2030 and further to 8.3 mb/day in 2050 from 4.7 mb/day in 2021. India’s gas demand is expected to almost double in future, reaching 115 BCM by 2030 and 170 BCM by 2050.
However, India, with its surplus refining capacity, has the advantage of being a net exporter of petroleum products. Over the past few years, multiple companies have expanded their refining capacities, driven by the rising domestic consumption of petroleum products and incentives granted by the Government of India. Currently, the major portion of petroleum products of public sector undertaking refineries are sold in the domestic market, while private companies mainly cater to export demands. India’s oil and natural gas sector predominantly relies on its national oil companies (NOCs). Oil and Natural Gas Corporation (“ONGC”) holds the largest share of crude oil and natural gas production facilities. Oil India Limited (“OIL”), Bharat Petroleum, Hindustan Oil Exploration Company, Sunpetro, Joshi Technologies, Niko, Vedanta Limited and Reliance Industries Limited (“RIL”) are other major oil and gas-producing companies in the country. As on April 2022, estimated reserves of crude oil in India stood at 651.77 mn tonnes, and natural gas stood at 1138.67 bn cubic meters.
The Government of India has taken various measures and initiatives to enhance the investment attractiveness of the oil and gas sector.
The Government had initially mandated that the Exploration & Production Companies had to first sell crude oil to the nominees of the Government. The crude oil that was not lifted by the nominees could then be sold by Exploration & Production Companies to other buyers in India. This was usually done under government-mandated contract terms to give state- owned Oil and Gas Companies a preferential buying option. This regime has changed. The new regime will now allow Exploration & Production Companies to sell crude oil domestically to other Oil and Gas Companies, including private Oil and Gas Companies. The Ministry of Petroleum and Natural Gas (“MoPNG”) has vide notification dated July 11, 2022 (“Deregulation Notification”), deregulated the sale of crude oil, enabling Exploration & Production Companies to offer domestically-produced crude oil to private Oil and Gas Companies, without the requirement to extend the offer to Government-owned Oil and Gas Companies first. Under the new regime, Exploration & Production Companies would have the freedom to market and sell crude oil domestically on such commercial terms as may have been agreed contractually.
Further, under the proposed Hydrocarbon Vision 2025, the government seeks to increase appraisal of the sedimentary basinal areas of the country to 100% as opposed to less than 50% currently. To facilitate this, a series of reforms in the hydrocarbon sector have been undertaken, with the guiding principles of increasing domestic oil and gas production and enhancing investment, among others. This includes several policies undertaken by the government to revolutionise the Exploration & Production sector. The Hydrocarbon Exploration and Licensing Policy (HELP) brings in a single licence for production and exploration of all types of hydrocarbons, i.e., conventional oil and gas, coal-bed methane, shale-oil, gas hydrates, etc. It also has an easy Revenue Sharing Model allowing potential investors to carve out areas they would want to explore, submitting Expression of Interests throughout the year on which bi-annual formal bidding processes would take place. Further, it reduces and grades royalty rates as per exploration areas, exempts cess on crude oil and custom duty on equipment/services for Exploration and Production activities.
In order to enhance the ease of doing business, the Government has also allowed 100% FDI under the automatic route for the following activities: Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG Regasification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government on private participation in exploration of oil and the discovered fields of national oil companies. Further, a 49% cap under FDI is allowed in petroleum refining by the PSUs, without any disinvestment or dilution of domestic equity in the existing PSUs.
Presently, only 48% of India’s basinal areas has been appraised and nearly 4% of the sedimentary basinal area has been declared a ‘NO GO area’. With India’s hydrocarbon vision 2025 aiming for appraisal of 100% of the Indian sedimentary area, around 50% of the Indian sedimentary areas have the undiscovered potential of hydrocarbons. This, in addition to the Government’s policies to boost the petroleum and hydrocarbon sector, provides increased investment opportunities while revolutionising the Exploration & Production sector in India.
As India looks to reduce import dependency in the petroleum and hydrocarbon sector, policies with easier licensing requirements, revenue sharing models, FDI policy permitting 100% investment under the automatic route as well as the National Data Repository providing seamless access to data for interpretation and analysis have been implemented. This provides for a great scope for major players to invest in this sector with business-friendly policies and a substantial scope for growth.
 MoPNG is concerned with exploration and production of Oil & Natural Gas, refining, distribution and marketing, import, export and conservation of petroleum products. Oil and Gas being the important import for our economy, many initiatives have been taken by the Ministry for increasing production and exploitation of all domestic petroleum resources to address the priorities like Energy Access, Energy Efficiency, Energy Sustainability and Energy Security.
 F. No. Expl-15019 (25)/161/2019-ONG-D-V (E-34367).