Backed by government support and enabling policy interventions, India will more than double the area under exploration and production (E&P) of oil and gas to 0.5 million square km by 2025 and 1 million square km by 2030 with the aim of raising domestic output and cutting the dependence on imported fuel. In order to bridge the gap between energy supply and demand, it is imperative to accelerate E&P activities in the county.
Crude oil production was registered at around 30.5 million tonnes (mt) in 2020-21. Nearly 76 per cent of the crude oil was produced by the Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) under the nomination regime (excluding joint venture [JV] share) and the remaining 24 per cent of crude oil was produced by private/JV companies under the production sharing contract (PSC) regime. Further, in 2020-21 (up to December 2020), the share of offshore crude oil production stood at about 50.7 per cent. The remaining crude oil production was from six states – Andhra Pradesh (0.6 per cent), Arunachal Pradesh (0.2 per cent), Assam (12.8 per cent), Gujarat (15.2 per cent), Rajasthan (19.2 per cent) and Tamil Nadu (1.3 per cent). As per latest updates, indigenous crude oil and condensate production during January 2022 declined by 2.4 per cent as compared to January 2021. OIL registered a growth of 5.3 per cent and ONGC registered a degrowth of 3.1 per cent during January 2022 as compared to January 2021. PSC registered a de-growth of 3.5 per cent during January 2022 over the previous year. Further, a degrowth of 2.6 per cent was registered in the total crude oil and condensate production during the April-January 2022 period over the corresponding period in 2021.
Natural gas production in 2020-21 (up to December 2020) stood at 21.1 billion cubic metres (bcm). Nearly 87 per cent of natural gas production was undertaken by ONGC and OIL from the nomination regime (excluding JV share) and 13 per cent by private/JV companies from the PSC regime. The share of offshore natural gas production in 2020-21 (up to December 2020) stood at about 63.7 per cent. The remaining natural gas production including coal bed methane (CBM) came from 10 states – Andhra Pradesh (2.9 per cent), Arunachal Pradesh (0.2 per cent), Assam (10.7 per cent), Gujarat (4.0 per cent), Rajasthan (6.9 per cent), Tamil Nadu (3.3 per cent), Tripura (5.8 per cent), and Jharkhand, Madhya Pradesh and West Bengal (2.3 per cent).
As per the latest updates, the gross production of natural gas for the month of January 2022 stood at 2,861 mmscm, a 12.2 per cent increase from January 2021. Further, the cumulative gross production of natural gas stood at 28,535 mmscm for the current financial year up to January 2022, 20.5 per cent higher than that in the corresponding period of the previous year.
Policy trends and initiatives
The reforms in the E&P sector were initiated with the participation of private and foreign companies in the oil and gas sector in 1991, when 28 discovered fields (pre-NELP discovered field) were auctioned during 1991-93. During the 1990-97 period, 28 exploration blocks were awarded, known as the pre-NELP exploration blocks. Subsequently, after the implementation of the NELP and CBM Policy in 1997-99, a level playing field was created for private investors by providing the same fiscal and contract terms as applicable to the national oil companies for the offered exploration acreage.
In a major policy drive, to give an impetus to the petroleum and hydrocarbon sector and enhance the production of crude oil and gas, the government launched a series of initiatives. The first step in this regard was the access to geoscientific data. The National Data Repository was set up in 2017, which allowed access to the seismic and well data of the country. Another development came in the form of the National Seismic Programme, through which a lot of underground seismic data acquisition was undertaken, especially in Category 2 and 3 basins. Based on the data acquisition programmes, a resource reassessment study on hydrocarbons was also undertaken in 2017, which led to a more accurate understanding of the geology of the country, particularly in respect hydrocarbons. This also helped in the categorisation of Indian sediment basins into three categories.
With the enablement of access to geoscientific data, the government then moved other policy reforms such as the Hydrocarbon Exploration and Licencing Policy (HELP) coupled with operationalisation of the Open Acreage Licencing Programme (OALP) and the Discovered Small Fields (DSF) Policy. HELP is the governing policy for oil E&P in the country. Seven rounds of auction of acreage under the new OALP in the past five years have doubled the area under exploration for oil and gas to 0.2 million square km. On August 6, 2021, India launched the sixth oil and gas exploration bid round to attract $300 million-$400 million investment in discovering hydrocarbon reserves in the country. As many as 21 blocks or areas were offered in the OALP bid Round VI, which was closed for bidding on October 6, 2021. Meanwhile, DSF aimed at monetising hydrocarbon resources locked in for years in a time-bound manner to boost the domestic production of oil and gas. Under DSF bidding Round II, 59 discovered small fields/unmonetised discoveries were offered for bidding. A total of 23 contracts comprising 57 discoveries were signed in March 2019 and one contract comprising one discovery was signed in January 2021.
Apart from this, the government has taken several measures to overhaul the hydrocarbon policy framework to ensure energy security for the country while pursuing the green path to progress. In June 2020, the MoPNG came up with the Guidelines for Early Monetisation of Hydrocarbon Discoveries, which focused on the monetisation of discovery at an early stage within prescribed contractual timelines, in public interest as a step towards energy security of the country. Meanwhile, in July 2021, the Directorate General of Hydrocarbons modified the procedures relating to oil and gas exploration and activities in India. It reduced the requirement of statutory approvals to only extension of contracts, sale of stake and annual accounts while permitting self-certification and deemed approval for the other factors.
The way forward
Oil and gas E&P is a capital intensive and high-risk activity requiring the use of expensive state-of-the-art technologies and best management practices. Accordingly, the government is encouraging the participation of the private sector, including foreign companies, in exploration, production and transportation of petroleum and natural gas in order to supplement the domestic investment as well as the efforts of the national oil companies in meeting the rising demand for oil and gas and reducing import dependence.
With the central government allowing 100 per cent FDI under the automatic route in state-run oil and gas companies, the outlook for the sector is quite optimistic. So far, India has allowed 49 per cent FDI in state-run oil and gas companies. In addition to this, the government has launched the Exploration & Production Action Plan 2023-24, under which specific production targets have been mentioned. With the help of this action plan, oil and gas E&P operators and national oil companies are expecting to achieve a production level of 50 bcm of gas and 40 mt of crude oil by 2023-24.