Even as the country actively seeks to wean itself off its addiction to imported fossil fuels, the government has moved to make the local extraction and production of petroleum products easier for companies.
The Lower house of parliament passed the Oilfield (Regulatory and Development) Amendment Bill, 2024, which aims to simplify regulations, attract investments, and enhance exploration and production capabilities in the country. The bill amends the Oilfields (Regulation and Development) Act of 1948 and was approved by the Rajya Sabha in December.
The bill aims at reducing the friction in the exploration and production of petroleum, for which the country depends mostly on imports currently.
With the bill, the government said, it aims to shift away from a regime that focuses on licensing, regulation, and royalty collection to one that prioritizes ease of doing business and government-contractor collaboration.
Some of the key highlights of the amendment include updating the definition of Mineral Oil to include all types of hydrocarbons, greater stability of lease terms, decriminalization and enhancing penalties in case of non-compliance and enabling the sharing of infrastructure by two or more lessees.
“The present global energy scenario and the hydrocarbon landscape has dramatically changed. Hence, there was a need to amend the Act to reflect current realities and national priorities, promote Ease of Doing Business, decriminalize provisions, and align India’s Exploration and Production framework with practices of competing geographies,” said Minister for Petroleum and Natural Gas Hardeep Singh Puri.
The move comes at a time when India is actively promoting cleaner transportation by supporting electric vehicles, domestic production of batteries and green hydrogen, and by pushing biofuels.
However, said Puri, it is not time to completely shift our attention away from petroleum.
“By virtue of the fact that we are going to rely on conventional energy for some time we need to step up our exploration and production activities,” he said.
The government believes that traditional fuels will remain integral to the country’s energy mix for a long time.
The country today consumes around 5.5 million barrels of crude oil in a day, which is projected to grow up to 6.5-7.0 million barrels. India net imports around 220 million tonnes of crude oil at a cost of $108 billion — making it the country’s biggest item of import and exposing the country to supply disruptions and price volatility.
The relaxation of norms was also necessitated by a change in the apettite for oil blocks. Investor sentiment has weakened in the oil and gas sector due to uncertainty in energy forecasts and the ongoing debate around energy transition.
Puri indicated that the government was taking note, and promised a simple, stable and predictable legal framework, which also gives a swift resolution mechanism.
“Earlier one million sq-km area of our sedimentary basin used to be a ‘No Go’ area. As a result our import dependence was on a rise. We opened up that one million sqkm out of the 3.5 million sq-km of sedimentary basin to encourage and enhance domestic crude production. This has sent positive signals to prospective investors,” he said.
Oil demand in India remains robust, driven particularly by the transportation sector’s reliance on gasoline and diesel. India is expected to be the largest contributor to global oil demand in the second half of this decade, defying the global trend in the demand for transport fuels with sharp growth.
A recent report by the International Energy Agency (IEA) highlighted that India’s oil demand is expected to grow by more than that of any other country except China between 2023 and 2030. Transport fuel demand remains buoyant on the back of increase in vehicles on Indian roads.
India has surpassed Japan to become the third-largest passenger vehicle market in the world. The agency noted that there has been an eightfold increase in the number of cars on Indian roads between 2000 and 2023, and holds potential for further growth.
While the global oil demand is seen tempering towards the end of the decade with the acceleration in the use of electric vehicles, emerging clean energy technologies and more expansive efficiency policies, India’s demand growth for diesel and gasoline is set to be far more than in any other country.
The government has rolled out various schemes and programs to promote the use of vehicles powered by battery and hydrogen as well as the mandatory blending of ethanol and compressed biogas in fuel to reduce emission and the dependence on the import of crude oil.
Puri has said that he believes energy transition involves strategically using existing fossil fuels while expanding renewable energy sources, rather than immediately phasing out hydrocarbons.
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