India’s oil and gas (O&G) sector is at a critical juncture, navigating the dual imperatives of energy security and sustainable growth. As one of the world’s fastest growing economies and the third-largest oil consumer, India’s energy demand continues to surge, driven by rapid industrialisation, urban expansion and mobility growth. However, this rising demand has exposed the persistent gap between consumption and domestic production, heightening reliance on imports and increasing vulnerability to global price shocks. In response, the government is implementing wide-ranging reforms, ramping up exploration and incentivising investments, as it strives to build a resilient, self-reliant and future-ready energy ecosystem.
High imports and low output
In 2024-25, India’s crude oil production stood at approximately 29 million metric tonnes (mmt), whereas its consumption exceeded 240 mmt. This huge disparity has forced the country to rely heavily on imports, which has become a major concern for energy security. Around 88 per cent of India’s crude oil needs are met through imports, making the country highly vulnerable to global price fluctuations, geopolitical tensions and market volatility. The crude oil import bill for 2024-25 alone stood at approximately $158 billion, driven by factors such as Organization of the Petroleum Exporting Countries+ production cuts and conflict-related supply disruptions.
Natural gas has shown a more optimistic trajectory. The primary contributors to this are deep-water projects in the Krishna-Godavari basin and onshore projects in the Assam-Arakan basin. As a result, domestic production reached an estimated 36 billion cubic metres (bcm) in 2024-25. This increase is helping support a range of industrial applications, power generation and the city gas distribution (CGD) network. Still, India imports around 50 per cent of its natural gas, mainly in the form of liquefied natural gas.
Policy intervention
Acknowledging the strategic imperative of reducing import dependence and enhancing domestic production, the government has introduced a series of policy reforms in recent years. A major milestone has been reached in July 2025, when the government unveiled the Draft Petroleum and Natural Gas Rules, 2025. These new rules aim to replace outdated regulations from 1948 and 1959, modernising the upstream O&G framework to facilitate exploration and production (E&P) activities. Among the most noteworthy reforms is the introduction of a stabilisation clause to protect lessees from adverse future changes in taxation, royalties or other levies. This investor-friendly provision is expected to boost confidence in long-term projects. Additionally, the rules encourage efficient use of infrastructure by mandating disclosure of underutilised capacities and requiring lessees to provide third-party access on fair and transparent terms. To align with India’s environmental goals, the new framework permits integrated renewable and low-carbon projects, such as solar, wind, hydrogen and geothermal, within oilfield blocks, provided they meet safety and operational standards. It also establishes a regulatory framework for carbon capture and storage, and mandates greenhouse gas emission reporting and site restoration post-closure.
These reforms come ahead of India’s largest-ever exploration bidding round, open acreage licensing policy (OALP) Round 10, and are complemented by the release of a revised model revenue sharing contract and a new petroleum lease format that clarifies terms related to lease relinquishment, reservoir extension and unitisation.
The government has also continued to promote policies such as the Hydrocarbon Exploration and Licensing Policy (HELP) and the discovered small fields (DSF) initiative. These frameworks have led to the awarding of new O&G blocks, unlocking previously untapped or uneconomical resources and attracting domestic and foreign investors.
Transitioning to cleaner fuels is also a priority. The government aims to increase the share of natural gas in the energy mix from ~7 per cent to 15 per cent by 2030. To support this, the central government has announced plans to expand its CGD networks and increase piped natural gas connections to the targeted 126 million by 2034. The number of CNG stations is also expected to grow to around 18,300 during the same period.
Boosting production
Recent months have seen an uptick in exploration activity. In June 2025, Oil India Limited (OIL) began drilling at the Debtamura-1 well in the Baramura-Debtamura reserve forest in Tripura under the second DSF auction round. The project was initiated in May 2025, as its maiden hydrocarbon exploration project in Tripura, under HELP. Further, in June 2025, Hindustan Oil Exploration Company Limited (HOECL) completed the drilling of the KSG-71 well in the Kharsang oilfield in Arunachal Pradesh, with initial production estimated at 250 barrels per day. HOECL also commenced drilling another well, KSG-72, with plans to drill a total of nine development wells in the block.
Meanwhile, the OALP’s 10th round was launched in March 2025 by the Ministry of Petroleum and Natural Gas, offering 25 blocks across 13 sedimentary basins, including previously restricted no-go zones. These included six onland blocks, six in shallow water, one in deep water and 12 in ultra-deep water, covering nearly 192,000 square km.
Additionally, the fourth DSF auction round and the special coal bed methane (CBM) bid round launched in April 2025 included 55 discovered fields with estimated in-place reserves of 260 mmt of oil equivalent. The CBM blocks in West Bengal and Gujarat added a further 34 bcm of potential gas resources.
Challenges and recommendations
Despite this momentum, India’s O&G sector continues to face significant challenges. Exploration is a capital-intensive endeavour with uncertain returns. ONGC alone drilled 578 wells in 2024-25, its highest in 35 years, and invested Rs 620 billion in capital expenditure. However, the lack of broader investment remains a barrier, particularly for riskier or smaller fields. To counter this, India is forging international partnerships. For example, in February 2025, OIL signed an agreement with Brazil’s Petrobras to jointly bid for exploration blocks in India, reflecting a strategy to bring in global expertise and capital.
Another significant challenge is the underutilisation and lack of coordination in infrastructure development, particularly pipelines and evacuation facilities, which hampers production scalability. For instance, although OIL commenced exploration in the Debtamura block in Tripura in May 2025, logistical hurdles and limited evacuation infrastructure in the Northeast region continue to constrain production efficiency. While the Northeast natural gas pipeline grid aims to address this, timely completion and operational integration are crucial. To mitigate such issues, the government should mandate infrastructure sharing among operators and accelerate last-mile connectivity, supported by digital monitoring tools for real-time infrastructure utilisation.
While recent policy updates such as the Draft Petroleum and Natural Gas Rules, 2025 aim to improve investor confidence by introducing stabilisation clauses and easing infrastructure sharing, implementation at the state and local levels remains inconsistent. Additionally, delays in environmental clearances, especially for projects in ecologically sensitive areas such as the Northeast or offshore zones such as the Andaman Sea, further slow down progress. To address these challenges, the government should fast-track single-window clearances, expand data availability for sedimentary basins, incentivise seismic surveys and strengthen partnerships with global E&P players.
Decarbonisation remains another growing challenge for India’s O&G sector, as it must reduce emissions while sustaining energy output. This transition requires substantial investments in cleaner technologies and compliance with stricter environmental norms. A key solution lies in integrating green fuels such as compressed biogas (CBG) into the energy mix. Under the CBG-CGD Synchronisation Scheme, several agreements have been signed recently to promote CBG use. These include a partnership among Think Gas, Gas Authority of India Limited (GAIL), Reliance Chemicals and the Sandhu Group; the partnership of GAIL, Gujarat Gas and Baba Deep Singh Green Power; and another one among Indian Oil-Adani Gas Private Limited, GPS Renewables and GAIL.
Expanding exploration frontiers
India’s pursuit of self-reliance in energy is entering a transformative phase. In June 2025, the government hinted at a potentially game-changing discovery in the Andaman Sea, comparable to Guyana’s 11.6 billion barrel find. If confirmed, this could reshape the country’s energy landscape and significantly expand its economic base from the current $3.7 trillion to $20 trillion.
Currently, oil production is concentrated in established regions such as Assam, Gujarat, Rajasthan, Mumbai High and the Krishna-Godavari basin. However, exploration activities are now extending to the Andaman & Nicobar Islands, with ONGC and OIL undertaking surveys and drilling operations. Strategic petroleum reserves are also being expanded, with existing sites at Visakhapatnam, Mangaluru and Padur, and new sites planned in Odisha and Rajasthan.
Furthermore, private sector players are expanding their presence. Cairn India announced plans to increase its oil production to 0.5 million barrels per day from the current 0.1 million within six to seven years, supported by new deep-water exploration and shale O&G opportunities in Rajasthan. In the offshore domain, BP has entered into a 10-year long-term partnership with ONGC to increase production from the Mumbai High field. The collaboration is expected to lift oil output by 44 per cent and gas production by 89 per cent, generating substantial economic benefits and additional revenues of up to $10.3 billion.
