India’s exploration and production (E&P) segment, a cornerstone of the oil and gas industry, plays a critical role in the country’s energy security and economic growth. India’s economic growth is closely linked to its energy consumption and production, as evidenced by its significant rankings: third largest energy consumer, third largest oil consumer, third largest liquefied petroleum gas consumer, fourth largest liquid natural gas importer, fourth largest refiner and fourth largest automobile market globally.
Current trends
India’s total consumption of crude oil or petroleum products rose 4.6 per cent in 2023-24 to 233.3 million tonnes (mt), while domestic production of crude oil rose marginally at 0.6 per cent. Domestic crude oil production was almost unchanged at 29.4 mt in 2023-24, compared to 29.2 mt during 2022-23. According to ICRA Limited, domestic gas production increased from 91 million metric standard cubic metres per day (mmscmd) during 2022-23 to 94 mmscmd during 2023-24 with increasing supplies from the Krishna-Godavari Basin (KG Basin). Furthermore, the significant discoveries and developments in the KG Basin, such as those by Oil and Natural Gas Corporation Limited (ONGC), are expected to substantially contribute to the increase in gas production in the coming years.
India remains heavily reliant on imports to meet its energy needs. According to the Petroleum Planning and Analysis Cell, India’s import dependence on crude oil soared to 87.7 per cent during 2023-24, underscoring the critical need to boost domestic production. As the world’s third largest oil importer and consumer, India paid $132.4 billion for imports during 2023-24, compared to $157.5 billion during 2022-23. Despite similar import volumes in both years, the crude oil bill dropped by 16 per cent in 2023-24.
Crude oil production increased by 2 per cent in March 2024 over March 2023. Its cumulative index increased by 0.6 per cent during 2023-24 over the corresponding period of 2022-23. Natural gas production also increased by 6.3 per cent in March 2024 over March 2023. Its cumulative index increased by 6.1 per cent during 2023-24 over the corresponding period of 2022-23.
The demand for natural gas is also on the rise, driven by the government’s push for cleaner energy sources. The consumption of natural gas is expected to reach 80 billion cubic metres by 2025, necessitating substantial investments in E&P. However, currently, India is still dependent on imports to meet over 85 per cent of its crude oil requirements and around 50 per cent of its natural gas requirements.
Government initiatives
The government has initiated various policies to boost domestic E&P in the sector, aiming to reduce import dependency in line with Atmanirbhar Bharat. The introduction of the Hydrocarbon Exploration and Licensing Policy (HELP) in 2016 marked a significant shift in India’s approach to E&P. This led to a more investor-friendly regime, which includes a uniform licensing system, revenue-sharing model, and marketing and pricing freedom for natural gas.
To unlock the potential of small and marginal fields, the government also launched the Discovered Small Fields Policy, which offers simplified contractual terms and fiscal incentives to encourage the development of these fields, which were previously considered economically unviable. Since its inception, three rounds have been held, leading to the allocation of numerous fields to private players.
The Open Acreage Licensing Policy (OALP), introduced in 2017, allows companies to bid for exploration blocks throughout the year instead of waiting for specific bidding rounds. This policy has significantly expedited the allocation process and provided greater flexibility to operators.
In January 2024, the Ministry of Petroleum and Natural Gas (MoPNG) signed contracts for 10 blocks awarded under OALP Bid Round VIII and launched the ninth bidding round. The latest round offers 28 hydrocarbon blocks across eight sedimentary basins, covering an area of approximately 0.13 million square km, as part of efforts to ramp up domestic oil and gas production. The estimated investment in awarded blocks for the committed exploration work programme is $233 million.
Technological advancements
One of the pivotal factors driving growth in India’s E&P segment is the adoption of cutting-edge technologies. Companies are increasingly leveraging advanced seismic imaging, horizontal drilling and hydraulic fracturing to explore and develop unconventional hydrocarbon resources such as shale gas and tight oil.
For instance, Reliance Industries Limited (RIL) has been at the forefront of employing 3D seismic technology and enhanced oil recovery techniques to boost production from its existing fields. Similarly, to overcome challenges in the E&P sector, the government has promoted the use of enhanced oil recovery (EOR) techniques. These advanced methods help in extracting additional crude oil from existing fields, thereby boosting production.
In 2023, ONGC successfully implemented these EOR techniques in its western offshore fields, which significantly increased the output. Significant international collaborations have been initiated to leverage global expertise. In June 2024, for western offshore, ONGC floated a tender to select an international technology partner with annual revenues exceeding $75 billion. This move is expected to significantly enhance production capacities, particularly in the western offshore regions.
Recent developments
In June 2024, the MoPNG announced that oil production from the 98/2 well is projected to increase to 45,000 barrels per day, with gas production commencing soon. This marks a significant milestone in India’s E&P activities, indicating a positive growth trajectory.
The first seven OALP bid rounds resulted in the award of 134 blocks, covering an area of about 0.2 million square km, to leading E&P companies. With the award of 10 additional blocks under Round VIII in January 2024, a total of 144 exploratory blocks have been awarded under HELP programme, covering an area of 0.24 million square km. As of January 2024, the “no go” areas in exclusive economic zones (EEZs) have been reduced by almost 99 per cent, freeing up a 1 million square km area for E&P activities. The total operational area (active) under nomination is now 0.32 million square km.
In January 2024, ONGC discovered a significant reserve of crude oil and natural gas in the KG Basin, estimated to hold over 100 million barrels of oil equivalent. During the same month, India and Guyana signed an MoU for cooperation in the hydrocarbon sector. This agreement aims to strengthen bilateral trade, foster investment between the two countries and help diversify sources of crude oil, thus augmenting the energy supply security of countries. Additionally, Cairn Oil and Gas announced plans to double production capacity by developing the Jaya oil and gas discovery in its onshore OALP block in Bharuch district of Gujarat. This will be the first field development plan submitted under the OALP regime, among the 144 blocks awarded under eight OALP rounds by the government to various companies.
Similarly, ONGC and Oil India Limited are in discussions with Japan Petroleum Exploration Company Limited, Mitsui and the Bahrain Petroleum Company to enhance domestic E&P activities. This initiative aims to double the geographical area under exploration, reduce restricted zones in EEZ and actively participate in multiple production-sharing contracts.
The way forward
India has set ambitious targets to expand its exploration acreage to 0.5 million square. km by 2025 and 1 million sq. km by 2030. These expansions are crucial for discovering new reserves, reducing import dependency and attracting global giants. On similar lines, ONGC has set up an ambitious target to bring 0.5 million sq. km area under active exploration by acquiring 0.1 million square km every year, spending Rs 100 billion annually on exploration by 2025.
The government has also been successful in establishing the National Data Repository (NDR) in this segment and plans are under way for a cloud-based and artificial intelligence/machine learning-powered NDR 2.0. India’s ambitious energy transformation targets, including achieving net zero carbon by 2070, highlight the need for efficient production and cost management in a volatile oil price environment.
India’s escalating oil demand, driven by robust economic growth, projects an increase to 6.7 million barrels per day by 2030, reinforcing its position as a key player in global oil markets. Collaboration among stakeholders is crucial for optimising development and production solutions and creating a more supportive ecosystem for E&P activities.
