The oil and gas sector has witnessed significant progress in recent years. A series of initiatives, including supportive policy measures, deeper digital integration and a sharp focus on sustainability, have shaped the sector and are paving the way for future growth. The upstream segment, in particular, has received renewed attention in an effort to reduce import dependence. While demand continues to drive expansion, greater emphasis is now being placed on efficient consumption and aligning operations with national climate commitments. Against this backdrop, industry experts share their insights on the sector’s progress, the key challenges, the role of digitalisation and emerging technologies, and the overall outlook for the sector…
How would you assess the progress of India’s oil and gas sector over the past one year? What have been some of the notable developments?
Anish De
India’s oil and gas demand continues to grow, and is among the fastest growing in the world. As per the Organisation of the Petroleum Exporting Countries (OPEC), it is expected to continue to grow till 2050 at a significant rate. Each energy source has its place in the energy basket. For oil and gas, despite some concerns on the environmental front, even reducing consumption is practically impossible. The focus should, however, be on efficient consumption and creating as little of an environmental impact as possible.
In the upstream segment, imports continue to be a key challenge, with a large part of gas and almost 90 per cent of oil being imported. While the government has been seized of the problem for a while, there has been renewed concern, especially given the current geopolitical situation. The government has announced the Oilfield (Regulatory and Development) Amendment Bill, 2024, which has progressed efforts, but additional efforts are required to reach the desired level. While fiscal and regulatory certainty is not an unreasonable demand of the industry, in a large country like India, any action will have implications down the line.
The downstream segment is witnessing progress, and both public and private sector players have been seen to be pretty mature. However, mega refineries are not seen to be coming in as the business case has not proven to be strong enough. Meanwhile, mid-sized refineries are being proposed – greenfield projects and expansions of current refineries. Greenfield and brownfield petrochemical plants are also being proposed.
“In India, all forms of energy are required. While proportions might change and growth rates might differ, degrowth in any segment is unlikely in the near term.” Anish De
Sanjay Sah and Payal Goel
India’s oil and gas sector is currently undergoing a significant transformation, driven by policy reforms and strategic initiatives. These efforts aim to strengthen demand, supply and infrastructure with policy support and the deployment of digital solutions. The sector is accelerating the adoption of cleaner fuels and aligning with India’s vision of energy independence and net zero growth.
Upstream sector
The upstream segment in India is witnessing a push for resilience and renewal. India’s sedimentary basins hold estimated reserves of 650 mmt of crude oil and 1,100 bcm of natural gas. Yet, with domestic output declining, the country continues to import 85 per cent of its crude oil requirements, underscoring the scale of its energy challenge as well as the need for accelerating exploration, production and alternative fuel adoption.
Crude oil production declined to 28.7 million metric tonnes per annum (mmtpa) in FY 2025, down from 29.4 mmtpa in FY 2024. Domestic gas production reduced by about 0.3 per cent from 35.7 bcm to 35.6 bcm, while liquefied natural gas (LNG) imports surged by 12.3 per cent.
In 2025, Reliance Industries Limited sustained stable output from the KG-D6 MJ field while expanding its portfolio under the Open Acreage Licensing Policy (OALP). In addition, Cairn has secured seven new OALP blocks. The company aims to triple production to 300,000 barrels of oil equivalent per day (boepd) from the current 103,200 boepd, with drilling slated to begin across several projects this year. To support this scale-up, Cairn has announced a $3 billion-$4 billion investment plan over the next five years in exploration and production. Meanwhile, ONGC began producing oil from a new deepwater offshore well located in the KG-D5 block.
Midstream sector
India continues to prioritise the expansion of its natural gas and petroleum product pipeline network to support energy security and reduce transportation costs. The gas pipeline network reached about 25,400 km in FY 2025, with 10,459 km under construction. This includes major projects such as the Mumbai-Nagpur-Jharsuguda pipeline and the Northeast Natural Gas Pipeline Grid.
India’s product pipeline network spans 23,370 km, including 5,225 km dedicated to LPG. Key projects under implementation include the 2,800 km Kandla-Gorakhpur pipeline, the 429 km Kochi-Coimbatore-Salem LPG line, the Mumbai-Nagpur-Jharsuguda trunk line, the Ennore-Tuticorin pipeline and the Northeast Natural Gas Pipeline Grid. These are expected to enhance regional connectivity and strengthen supply chains. Further, there is a need to expand the country’s spur lines to address infrastructural bottlenecks at key gas demand centres.
In a world where oil shocks can impact economies, India has built its own shield against supply shocks through Indian Strategic Petroleum Reserves Limited, which currently holds 5.33 mmt across three sites, with another 6.5 mmt under development. The recent award of the world’s first public-private partnership-based strategic crude oil storage at Padur in Karnataka marks a breakthrough in building India’s energy security.
Downstream sector
India remains the world’s fourth-largest refiner, with an installed capacity of 256 mmtpa across 23 refineries as of FY 2025. Capacity utilisation remains higher, driven by robust domestic demand and healthy export markets. India’s refining capacity is projected to reach 310 mmtpa by 2030, with around 54 mmtpa of new capacity currently under development, led by PSUs. Major projects include Bharat Petroleum Corporation Limited’s 9 mmtpa greenfield refinery at Ramayapatnam, Andhra Pradesh, and ONGC’s proposed refinery-cum-petrochemical complex.
India’s per capita petrochemicals consumption is about one-third of the global average, presenting significant potential for market growth. As a result, India’s petrochemicals output is expected to rise from about 30 mt to 46 mt by 2030, supported by industry commitments of over $50 billion in new investments. In order to lead the next wave of petrochemical growth, there is a need to shift from volume to value addition. A coordinated push across policy, partnerships and capability-building is required to unlock the next frontier in the petrochemicals value chain.
The city gas distribution (CGD) sector remains a key contributor to overall gas demand. Its coverage has expanded ninefold from 33 geographical areas (GAs) in FY 2014 to 307 GAs in FY 2025, reaching nearly 99 per cent of the population. By FY 2025, the CGD network comprised more than 8,200 compressed natural gas (CNG) stations, 20,750 industrial connections, 46,000 commercial connections and 15 million domestic piped natural gas (PNG) users.
“The sector is aligning with government programmes, including accelerating the adoption of pathways for energy transition.”
Sanjay Sah and Payal Goel
Prashant Vashisht
India sources crude oil from several countries, including Russia, Saudi Arabia, Iraq and the UAE. Russia accounted for 36 per cent of India’s crude imports in FY 2025, while Iraq accounted for 20 per cent and Saudi Arabia for 13 per cent. Crude oil imports from Russia have increased due to the discounts offered following the Russia-Ukraine conflict, increasing from about 1.6 per cent in FY 2022. However, these discounts have been reduced significantly in the past one year. The US administration has levied a 25 per cent tariff on Indian exports, on top of the existing 25 per cent, in response to crude oil imports from Russia, taking the total tariff to 50 per cent with effect from August 27, 2025. While discounts on Russian crude oil are now marginal, cutting out Russian oil from the global market would significantly increase oil prices globally, leading to inflationary pressures. For the Indian refining sector, there are ample avenues to purchase crude oil. Even if discounted crude oil is replaced by market-priced crude oil, the impact on India’s crude import bill would be less than 2 per cent.
Another key development over the past year has been the decline in crude oil prices. Uncertainty related to global tariffs and their impact on growth, coupled with the OPEC’s withdrawal of production cuts, has reduced oil prices from about $77 per barrel as of March 31, 2025, to $60-$70 per barrel since April 2025. Oil prices are under pressure due to slowing growth in major economies such as China and Brazil, where demand has weakened. In addition, inflation and trade disruptions are further dampening market sentiment. Additionally, US crude oil production is projected to reach a record 13.6 million barrels per day by December 2025, driven by rising well productivity and efficiency. ICRA expects crude oil prices to average between $65 and $75 per barrel in FY 2026. Even at these prices, profitability remains healthy and capex remains lucrative for upstream companies.
“Global efforts to transition towards lowcarbon energy will gradually lower the demand for petroleum products in the coming decades.” Prashant Vashisht
What have been the most significant policy or regulatory changes/initiatives? What has been their impact?
Anish De
Reforms on the downstream side have largely been completed. While the pricing is coordinated or controlled, people have made peace with it. Policy reforms are majorly concentrated in the upstream segment. The government initiated upstream reforms several months ago and the Oilfield (Regulatory and Development) Amendment Bill, 2024 was passed by the Lok Sabha in March 2025. The key final measure that is required is fiscal stability. This would especially be desirable for the supermajors and international players.
Sanjay Sah and Payal Goel
In the upstream sector, the Oil Fields Amendment Bill was cleared in March 2025. This will help streamline leases, reform legal frameworks, and enable resource and infrastructure sharing. The natural gas pipeline tariff structure has been revised from three zones to two zones, with Zone 1 tariffs extended to CNG and PNG consumers to enhance affordability. Further, earnings beyond 75 per cent pipeline utilisation will be shared on a 50:50 basis between entities and customers, with 50 per cent proceeds for future tariff calculations and the remaining 50 per cent for infrastructure development. Additionally, petroleum product pipeline tariffs have been reformed by delinking them from railway freight
Prashant Vashisht
On July 1, 2022, the government had levied a cess/windfall tax on crude oil production by upstream oil and gas producers as well as on exports of aviation turbine fuel (ATF), high speed diesel (HSD) and motor spirit. The government withdrew the windfall tax on December 2, 2024, following the decline in international oil prices.
Notably, the Oilfields (Regulation and Development) Amendment Act, 2025 came into effect in April 2025 to update the legal framework for the upstream oil and gas sector. The act introduces a single permit system, namely, petroleum leases, which will replace the current system, requiring contractors to obtain multiple licences for carrying out different types of activities across various hydrocarbons. The act facilitates the development of comprehensive energy projects and the adoption of new technologies such as carbon capture, utilisation and sequestration, and green hydrogen.
Additionally, the allocation of administered price mechanism (APM) gas for the CGD sector has been cut repeatedly by the government since October 2024. While domestic demand for PNG is met entirely through APM gas, demand for CNG is met through a mix of APM gas, new well gas, high pressure high temperature gas and imported LNG. Thus, overall costs in the CNG segment have increased, which have been only partially passed on to consumers. Going forward, the share of APM gas in the CNG segment is expected to decline further, which is likely to put additional pressure on profitability.
GST has been increased on exploration, development and production of oil and gas from 12 per cent to 18 per cent, which will lead to an increase in the cost of production of crude oil and natural gas. As crude oil and natural gas are outside the purview of GST, an increase in the cost of production without an offset available on the sale of these products will lead to stranded taxes. As oil and gas prices have moderated significantly since April 2025 on account of global economic headwinds and the unwinding of production cuts by OPEC+, the realisations of upstream companies have decreased. Accordingly, moderating realisations and the increase in the cost of production would be a double whammy for the upstream industry and would depress returns for the sector.
How is the sector faring amid the increasing focus on renewables and climate targets?
Anish De
India’s energy choices depend on how to cater to the growth and on keeping energy affordable and sustainable, with the overarching theme of security. In terms of catering to the growth in India, all forms of energy are required. While proportions might change and growth rates might differ, de-growth in any segment is unlikely in the near term. Overall, hydrocarbons, electricity, clean energy and coal are expected to be a part of the mix, and likely in increasing numbers.
While renewables are expected to see disproportionate growth, there are certain challenges associated with them. Sizeable renewable energy capacity is ready, but it faces challenges in being absorbed, as grids/systems are not ready, or system management costs are too high. It is not about the unit cost of production, but the marginal cost of consumption of renewables. Moreover, as solar grows, challenges associated with the seasonal characteristics necessitate storage systems to be tuned and coordinated. The growth of renewables is hence not solely based on production, but on system-wide costs, system-wide management and consumption costs.
Sanjay Sah and Payal Goel
The sector is aligning with government programmes, including accelerating the adoption of pathways for energy transition. In response to carbon emission reduction commitments, the industry is pivoting towards decarbonisation by implementing either low-carbon emission solutions or adopting low-carbon capture technologies. Moreover, midstream players are working to maintain their assets efficiently while reducing emissions and integrating alternative sources to align with India’s low-carbon goals.
India achieved the 20 per cent ethanol (E-20) blending target in 2025, five years ahead of the original 2030 timeline, positioning itself as a global leader, and will now progress to E25-E30 in a calibrated manner. The sector is also targeting 5 per cent compressed biogas (CBG) blending in CNG and PNG by FY 2029. Streamlining feedstock sourcing through technology and local participation, enhancing financial incentives such as subsidies and low-interest loans, and accelerating infrastructure development, particularly the gas grid, can help address challenges, and boost CBG adoption and consumption. On the gas demand side, the unutilised gas-based power plants need to be leveraged. These plants can play a crucial role in integrating renewables and meeting peak demand. On the green hydrogen side, while policy measures and support are being announced, the segment is still at a pilot stage owing to higher production costs and infrastructure constraints.
Prashant Vashisht
Currently, two-wheelers and buses are the primary focus for electrification. Wider penetration of electric vehicles (EVs) remains contingent on addressing battery costs, charging infrastructure availability, range anxiety and resale value. Some technical challenges must be overcome and costs reduced for the meaningful penetration of alternative fuels/EVs in developing countries, including India. These technologies are likely to have a substantial impact towards the end of this decade. Many fuels are expected to coexist, such as gas, LNG, hydrogen and liquid fuels alongside EVs; however, growth patterns would be disrupted for traditional fuels. Global efforts to transition towards low-carbon energy will gradually lower the demand for petroleum products in the coming decades. Accordingly, the carbon transition risk for the domestic oil and gas industry is expected to unfold over the years.
How are digital tools/technologies being integrated into project execution and O&M?
Anish De
The oil and gas industry is a highly digitally enabled sector. A massive amount of digital enablement is already in place, including process controls and state-of-the-art digital assets across production and transportation.
There is a great amount of openness towards artificial intelligence (AI), but the challenge is in how quickly it can be embraced. Moreover, with the sector having fairly critical assets, experimenting in this regard would be possible only with a significant level of confidence. Apart from this, such adoption brings about notable changes, resulting in a varied pace of adoption. Positively, India is currently taking a methodical approach for implementation. We see a lot of initiative from the public sector.
Execution at the implementation level sometimes remains patchy. While the vision is strong at the top-level management, the middle level or business owners are probably not moving fast enough. Perhaps there is an element of self-preservation in this as well.
Sanjay Sah and Payal Goel
Digital technologies are being deployed to automate contract creation and tracking, optimise scheduling, digitise approval processes, and streamline workflows across the procurement cycle, creating a unified vendor database. These solutions will enable efficient and reliable project execution and operations and maintenance (O&M). Some of its benefits are:
Project execution: Digital technologies will automate critical workflows such as logistics, procurement, compliance, maintenance scheduling and incident reporting. This will help reduce manual errors, accelerate approvals and enable a real-time overview of project execution and O&M tasks.
O&M efficiency: AI-based predictive maintenance and digital twin technology will lower operational costs, enhance asset uptime and extend equipment life.
What are some of the key issues facing the sector?
Anish De
In the downstream segment, there is an almost implied price control. Apart from that, there are no major hindrances, only certain microissues.
The upstream segment, on the other hand, is characterised by high risk, and oil finds may sometimes require a lot of drilling or multiple exploration wells. This, further, makes it a very capital-intensive process. With prospective basins such as the Andaman basin being completely opened up for exploration, infrastructure and certainty of capital being returned need to fall into place.
In terms of adopting new technologies, data and readiness for end-to-end application are the key challenges. In the new age of digitalisation, various processes are aimed to be integrated, which requires data to be well organised. Moreover, modern AI tools need to see end-to-end execution. Further, these technologies bring about more autonomy in comparison to earlier manual processes. This leads to a loss of control or ownership, a change that people would need to adjust to. Risks also exist on the cybersecurity front. While these risks are inevitable, there is a need to take caution and adopt safeguards, and adapt to the same.
Sanjay Sah and Payal Goel
The upstream sector is facing challenges such as declining domestic production, import dependence and rising operational costs. The midstream sector continues to face challenges around right of use and the need for multiple clearances, which delay infrastructure creation. Rising global LNG price volatility and underutilisation of regasification terminals also strain operator economics. In the downstream sector, the refining sub sector faces challenges such as crude oil sourcing amid volatile tariff situations; environmental, social and governance-driven pressure to decarbonise; and disruption in fuel demand owing to increasing EV penetration. Further, the petrochemicals sector is facing margin pressures due to global oversupply.
Prashant Vashisht
Historically, India has not been able to attract large global oil companies owing to issues such as inadequate data on geological prospects and red tape. Some of the key issues hindering the development of the upstream sector include the high cess of 20 per cent ad valorem; slow pace of approvals; stalled progress in several blocks due to the absence of requisite approvals from the Ministry of Defence and/or the Ministry of Environment, Forest and Climate Change; delays in decision-making by the Directorate General of Hydrocarbons; and a growing number of arbitration cases involving the administration of production-sharing contracts, etc.
Key issues hindering the development of the gas sector in the country include the lack of pipeline connectivity across the country, especially in the eastern and southern parts; regulated realisations/product prices of natural gas-consuming industries; absence of uniform taxation, with various states having different value added tax (VAT) rates; separation of pipeline ownership and marketing; and slow pace of approvals. Additionally, competition from EVs, especially in the state transport bus segment, and hydrogen will increase going forward.
Natural gas, crude oil and other petroleum products, including motor spirit, HSD and ATF, are currently outside the GST purview. They are subject to the central government’s excise duty and the state governments’ VAT. There has been a long-standing demand from the industry to include these products under the GST regime to enable the free flow of input tax credits and avoid stranded taxes.
What is the outlook for the oil and gas sector in the next two to three years? What are the key segments that are expected to drive sector growth?
Anish De
De-bottlenecking of various aspects is expected to continue. These range from outdated safety regulations to tangled legacy issues and the need to create an environment for change.
Looking ahead, many more initiatives are set to come up in the upstream segment. India has become far more import-dependent than we can ever be comfortable with, and there is a need to look into this given the current geopolitical scenario. Secondly, there is a need to secure supply chains, given the current dependence on international supply chains. The lack of energy security and material security, and disruption in supply chains could be detrimental, and in the next two to three years, government and the industry have to make very deliberate efforts towards addressing these.
Sanjay Sah and Payal Goel
Upstream companies are working to reduce imports, control production costs and diversify into new areas. Midstream companies are prioritising efficient asset maintenance and exploring alternatives to minimise infrastructure requirements, such as the use of trucking for fuel supply. Downstream players are focusing on customer loyalty, cross-selling, non-fuel revenue streams and digital marketing.
The role of LNG is expanding rapidly in India’s midstream sector. National regasification capacity currently stands at 52.7 mmtpa across eight terminals, and is projected to increase by 27 per cent (about 67 mmtpa) by 2030 with the commissioning of two new terminals. To improve accessibility, operators are deploying liquefied CNG and small-scale LNG for last-mile connectivity, while the government is actively promoting LNG retail to drive the adoption of LNG-fuelled heavy-duty vehicles.
In the downstream sector, refinery-petrochemical integration is expected to improve margins by leveraging the synergy between the refining and petrochemicals sectors. Moreover, a strong policy push for local manufacturing under various production-linked incentive initiatives and private investments are expected to drive the demand for petrochemicals.
In addition, digital initiatives can generate a multiplier impact on both market share and internal efficiencies. On the market front, these initiatives include multilingual chatbots, unified loyalty programmes with cross-selling, digital marketing, and deepening customer engagement through customer relationship management, which help in addressing cyber issues and streamlining data silos.
Prashant Vashisht
Currently, only 11 per cent of the country’s crude oil requirement is met domestically, while 89 per cent is met through imports, entailing a significant import bill. Domestic crude oil production growth is expected to be limited, keeping dependence on imports high. The demand for crude oil is expected to increase by 2-3 per cent in FY 2026 and will continue to increase over the next several years.
Domestic gas consumption has increased from 187.9 million standard cubic metres per day (mmscmd) in FY 2024 to 194.8 mmscmd in FY 2025, whereas domestic production has declined marginally from 97.6 mmscmd to 97.5 mmscmd over the same period. While domestic gas production is expected to increase to 98-99 mmscmd in FY 2026 and 103 mmscmd in FY 2027, dependence on LNG import is expected to remain high. Most of the incremental gas production is expected to come from the KG basin fields of the Oil and Natural Gas Corporation.
Gas consumption in the country is expected to grow 3-4 per cent year on year in FY 2026 (compared to 3.7 per cent in FY 2025), driven by a strong uptick in offtake by refineries, industries and the CGD sector. The fertiliser sector remains the anchor consumer, accounting for nearly 29 per cent of total gas consumption in FY 2025. The CGD sector is expected to witness the strongest growth of around 8-10 per cent year on year in FY 2026, supported by favourable gas allocation policies, rising CNG vehicle sales and network expansion.
The domestic refining capacity is expected to increase from 258.1 million tonnes (mt) as of March 31, 2025 to 306 mt over the next three years. Hindustan Petroleum Corporation Limited, in a 74:26 joint venture (JV) with the Rajasthan government, is setting up a 9 mmtpa greenfield refinery-cum-petrochemical complex at Barmer, Rajasthan, which is expected to be commissioned by FY 2026. Chennai Petroleum Corporation Limited and Indian Oil Corporation Limited have also formed a JV to set up a 9 mmtpa greenfield refinery at Nagapattinam, Tamil Nadu. In addition, Bharat Petroleum Corporation Limited (BPCL) is considering a greenfield refinery-cum-petrochemical complex in Andhra Pradesh.
In addition to increasing the refining capacity, the downstream industry is setting up petrochemical projects to diversify revenues and de-risk from lower fuel sales over the long term. HPCL Rajasthan Refinery Limited plans to add around 416 kilotonnes per annum of capacity. BPCL is setting up a 1.2 mmtpa ethylene cracker, while increasing the capacity of its Bina refinery from 7.8 mmtpa to 12 mmtpa. Reliance Industries Limited is adding around 1.5 mmtpa, and Mundra Petrochem Limited is setting up a 2 mmtpa polyvinyl chloride plant.
Due to the closure of about 4 million barrels per day of refining capacity globally during calendar years 2020 and 2021, the refining sector saw strong margins during FY 2022-FY 2024. However, as new refining capacities have been commissioned, Singapore gross refining margins (GRMs) moderated from $6.6 per barrel in FY 2024 to $3.8 per barrel in FY 2025. As per ICRA estimates, Singapore GRMs are likely to remain moderate at $3.5-$4.5 per barrel in FY 2026.
