Decades of incremental policy reforms by India to attract investments by Big Oil haven’t yielded the intended outcome. National hydrocarbon production has stagnated over recent decades, and import dependence for oil has remained the most obvious macroeconomic vulnerability for the country.
Thankfully, this has of late led to a subtle policy shift. As many of once-prolific oil fields have matured, and are depleting fast, state-run oil companies as well as private players are giving a renewed emphasis on assimilating cutting-edge technology for production enhancement as well as exploration. This is being done both by augmenting indigenous R&D and through tech partnerships with foreign oil companies.
Policy bottlenecks stalling technology and investment
Experts say advanced oil recovery technologies could unlock billions of barrels from India’s aging oil fields. While they recognise a change in policy where tech capital is preferred over the elusive external finance, a few policy bottlenecks are being highlighted. Fiscal uncertainties too are holding back the investments needed to deploy new technologies, industry players feel.
More importantly, contractual hurdles continue to stall entry of foreign players as technology suppliers.
“Global majors or tech companies can be hired as a service provider to provide a specific service (e.g., enhancing production from a mature field) for a fee. The fee can be a share of the incremental revenue generated or a fixed per-barrel fee,” said Sanjay Sah, partner, Deloitte India. He added that while such arrangements have been initiated by the national oil companies, as in ONGC’s tie-up with bp, these can be scaled up significantly.
India’s upstream companies, particularly state-run firms, have successfully worked on techniques like water and gas injection, side-tracking , re-perforation, and well stimulation to revive aging wells. The advanced recovery techniques like chemical EOR have also been initiated.
However, there is a room for using real-time data monitoring and analytics to optimise production. “Ultra-deepwater is a different ballgame, and we need to ramp-up on technology and expertise in this area as the companies have faced technical and commercial challenges,” said Sah.
Contract extension and the shift to revenue sharing
The industry also suggests extending oil and gas contracts until the end of life of the field. Large producing fields under production sharing contracts (PSCs) are nearing expiry of their terms.
“While these still have considerable untapped reserves, fresh investments necessary to enhance recovery from these blocks have not come through due to uncertainty on contract extension. Extending these contracts for the economic life of the field can unlock additional production and draw in private capital through reinvestment in maturing blocks,” said an industry player who did not wish to be identified.
The introduction of the revenue sharing model made the exploration in Indian basins much more efficient and easier, amounting to lesser disputes, analysts say.
Revenue sharing contracts offer greater transparency and the much needed operational freedom, experts say. The framework of PSCs has often triggered disputes and delayed approvals.
Sah pointed out that joint ventures (JVs) for specific fields will enable state-run companies to tap the global majors to bring cutting-edge technology for enhanced oil recovery (EOR), and reservoir management. Once the technology is acquired, the Indian companies can learn and adopt them for their other fields. This model involves Indian firms carving a portfolio of mature fields and sharing the risks and rewards.
“Mature fields require investments in deploying EOR techniques. To incentivise operators, offer revised fiscal incentives for old and matured fields under improved/enhanced recovery techniques, unconventional hydrocarbons, and further boost investments,” said an industry player.
Moreover, as global economies move towards more green energy sources, oil and gas majors are becoming more selective of the geographies with higher prospects for returns.
“Foreign companies are not just looking for any oil and gas geography, they are looking for large, scalable, and profitable resources. Their capital is global, and they will deploy it in the most attractive basins worldwide. This has got more accentuated given that there is a long-term global shift towards renewables which is making oil companies more selective about geographies,” Sah said.
The industry says that while the Petroleum and Natural Gas rules and the formation of the Joint Working Group are welcome steps by the government, the implementation of the recommendations are yet to be seen on ground.
For blocks under PSCs, the issue had been mainly on “allowable costs” for recovery. However this has been resolved in the new regime of Hydrocarbon Exploration and Licensing Policy. The other clauses that need changes are on force majeure, termination, and relinquishment for better traction in the market, noted Sah.
Experts say that the exclusion of petroleum products from the Goods and Service Tax regime continues to create inefficiencies and cost burden across the value chain. Upstream operations pay GST on inputs and capital goods but cannot avail input tax credit due to the sector’s exemption from GST.
The government aims to increase exploration acreage to 1 million sq. km by 2030. Indian upstream companies have also charted out plans to drill in the deep and ultra-deep water areas. The new OALP (open acreage) round is expected to put ultradeep water blocks under the hammer.
The government, from 2016 has brought in several changes to enhance exploration of oil and gas blocks in the country and auction it by launching Hydrocarbon Exploration and Licensing Policy (HELP). Under HELP, OALP Programme has been launched which provides investors the freedom to carve out blocks of their choice through submission of Expression of Interest (EoI).
The oil ministry has also amended the Oilfields (Regulation and Development) Act, 1948 broadening the definition of mineral oils, which previously included only petroleum and natural gas. This is a step closer in bringing in global investment in the exploration and production of oil & gas in India, experts say.
The country’s oil production stood at 28.7 million tonnes in FY25 compared to 29.4 million tonnes in FY24, as per data from petroleum planning and analysis cell. During the first five months of FY26, India has produced 11.9 MT of oil against 12.1 MT in the same period of last fiscal.