Oil & Gas

India’s petroleum industry is a comprehensive sector encompassing exploration, production, refining, distribution, and marketing of petroleum and its by-products.

As per a recent report, the oil and gas industry in India is anticipated to be worth US$ 139,814.7 million by 2015. With India’s economic growth closely linked to energy demand, the need for oil and gas is projected to grow further, rendering the sector a fertile ground for investment.

To cater to the increasing demand, the Government of India has adopted several policies, including allowing 100 per cent foreign direct investment (FDI) in many segments of the sector, such as natural gas, petroleum products, and refineries, among others. The government’s participation has made the oil and gas sector in the country a better target of investment. Today, it attracts both domestic and foreign investment, as attested by the presence of Reliance Industries Ltd (RIL) and Cairn India.

Market size

India is the fourth-largest consumer of oil and petroleum products in the world. Its energy demand is projected to touch 1,464 million tonnes of oil equivalent (Mtoe) by 2035 from 559 Mtoe in 2011. Furthermore, the country’s share in global primary energy consumption is anticipated to double by 2035. Oil consumption is estimated to reach 4 million barrels per day (MMbpd) by FY16, expanding at a compound annual growth rate (CAGR) of 3.2 per cent during FY08-16.

Investments

According to data released by the Department of Industrial Policy and Promotion (DIPP), the petroleum and natural gas sector attracted foreign direct investment (FDI) worth Rs 31,501.55 crore (US$ 5.13 billion) between April 2000 and July 2014.

Reliance Industries Ltd (RIL) plans to invest US$ 2 billion in its three shale assets in the US. The company also, along with its partner British Petroleum (BP), plans to invest about Rs 800 crore (US$ 130.35 million) for exploratory drilling in an offshore block in the Bay of Bengal.

ONGC Videsh Ltd (OVL) has signed Production Sharing Contracts (PSCs) for two blocks in Myanmar. ONGC will also invest over Rs 5,700 crore (US$ 928.73 million) to push up production by 6.9 MT of crude oil and 5 billion cubic metres (bcm) of gas by 2030 from its Mumbai High (North) oil and gas field.

Indian Oil Corporation Ltd (IOCL) through its wholly owned affiliate IndOil Montney Ltd, Canada, has signed transaction agreements with Progress Energy Canada Ltd and PETRONAS Carigali Canada BV for acquiring a 10 per cent interest in Progress Energy Canada’s LNG-destined natural gas reserves in northeast British Columbia and the proposed Pacific NorthWest LNG Ltd (PNW LNG) export facility in Canada’s West Coast.

GAIL (India) Ltd has entered into an agreement with Japan-based Chubu Electric Power Co for collaboration in the area of joint LNG procurement.

Road Ahead

By 2015-16, India’s demand for gas is set to touch 124 MTPA against a domestic supply of 33 MTPA and higher imports of 47.2 MTPA, leaving a shortage of 44 MTPA, as per projections by the Petroleum and Natural Gas Ministry of India. Moreover, Business Monitor International (BMI) predicts that India will account for 12.4 per cent of Asia-Pacific regional oil demand by 2015, while satisfying 11.2 per cent of the supply. This is not to say that the gap cannot be met.

The oil and gas sector is one of India’s eight core industries and plays a pivotal role in shaping decisions across other major economic sectors. With the country’s Economic Growth closely linked to energy demand, the need for oil and gas is expected to rise, making the sector highly attractive for investment. As on date, India remained the third-largest consumer of oil globally.

To meet growing demand, the government has implemented supportive policies, including allowing 100% FDI in key segments such as natural gas, petroleum products, and refineries. The FDI limit for public sector refining projects has been increased to 49% without requiring disinvestment or reducing domestic equity in existing PSUs. This policy environment has encouraged both domestic and foreign investment, evidenced by the presence of major companies. India has established itself as a global refining hub with 23 refineries, and further expansion is planned to leverage foreign investment for export-oriented infrastructure, including product pipelines and export terminals.

Natural gas’s share in the energy mix is targeted to rise from 6% to 15% by 2030, further strengthening India’s energy security and sustainability.

Some of the major initiatives taken by the Government of India to promote the oil and gas sector are:

The Union Budget FY26 has allocated Rs. 5,597 crore (US$ 640.46 million) to the petroleum and natural gas (PNG) ministry for phase II of the Indian Strategic Petroleum Reserves Ltd (ISPRL) project, aimed at turning two vast underground caverns into petroleum storage facilities.
The Ministry of Petroleum and Natural Gas launched India is enhancing energy security with upstream reforms, wider crude sourcing, and Rs. 30,00,000-35,00,000 crore (US$ 348-406 billion) planned investments by 2035, Union Minister Mr. Hardeep Singh Puri said at Urja Varta 2025. the 10th OALP round in February 2025, offering 25 oil and gas blocks covering 1,91,986 sq. km.
India is enhancing energy security with upstream reforms, wider crude sourcing, and Rs. 30,00,000-35,00,000 crore (US$ 348-406 billion) planned investments by 2035, Union Minister Mr. Hardeep Singh Puri said at Urja Varta 2025.
In the budget 2024-25, Rs. 497.25 crore (US$ 59.75 million) allocated to scheme for Development of Pipeline infrastructure for injection of Compressed Biogas (CBG) in City Gas Distribution (CGD) Network.
Recently, Prime Minister, Mr. Narendra Modi unveiled a strategic investment plan of US$ 67 billion for the Indian gas sector over next 5-6 years.

In parallel, India has made significant strides in biofuels, achieving a 10% ethanol blending in gasoline target in June 2022, ahead of its schedule. This success has encouraged the country to advance the 20% ethanol blending target to 2025-26 from 2030. The government has also introduced blending mandates for other biofuels in compressed natural gas (5% blending obligation in CNG (transport) & PNG (Domestic) by 2029), biodiesel – (indicative target of 5% blending by 2030), and sustainable aviation fuel – (indicative blending of 2% for international flights by 2028), supporting their growth and investments.