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The origin of the Indian oil & gas industry can be traced back to the late 19th century, when oil was first struck at Digboi in Assam in 1889. At independence, oil exploration and production activities were largely confined to the North-Eastern region, particularly Assam and the daily crude oil production averaged just 5,000 barrels per day. In the downstream sector, the first refinery was set up at Digboi in 1901. In view of the significance of the oil & gas sector for overall economic growth, the Government of India, under the Industrial Policy Resolution of 1954, announced that petroleum would be the core sector industry. In pursuance of the Industrial Policy Resolution, 1954, petroleum exploration & production activity was controlled by the government-owned National Oil Companies (NOCs), namely Oil & Natural Gas Corporation (ONGC) and Oil India Private Ltd (OIL).

With the discovery of the Cambay onshore basin (in 1958) and the Bombay offshore basin (in 1974), the domestic oil production increased considerably. As a result, in the early 70s, almost 70% of the country’s oil requirement was met domestically. However, by the end of the 1980s, some of the existing oil & gas fields were experiencing a decline in their production since they had already been in production for several years and were past their 3 plateau phase. At the same time, there was a steady increase in consumption of oil & gas, leading the two NOCs to meet only about 35% of the domestic oil requirement.

After the oil shock of 1970s, the nationalisation of both the upstream & downstream sectors was initiated and was completed on October 14, 1981. This resulted into the exit of the international oil companies from the Indian oil & gas industry. Moreover, the resource crunch in the beginning of the 1990s that held up the NOCs from developing some of the then newly discovered oil & gas fields (such as Gandhar, Heera Phase-II & III, Neelam, Ravva, Panna, Mukta, Tapti, Lakwa Phase-II, Geleki and Bombay High Final Development scheme), had adversely impacted domestic oil production. Apart from this, controls were imposed by the Government on the pricing and distribution of crude oil and petroleum products in India. Factors like the administered oil prices and non-availability of appropriate technology logistics augmented the problem.

Upto 1990s, there were three rounds of exploration bidding with no success in finding new oil/gas deposits by the foreign companies who only were allowed to participate in the bidding process. This led the government to initiate Petroleum Sector Reforms (PSR) in 1990, under which the fourth, fifth, sixth, seventh and eighth rounds of exploration bidding were announced during 1991-94. For the first time, Indian companies with or without prior experience in exploration & production activities were allowed to participate in the bidding process during these rounds. In 1995, the Government announced the Joint Venture Exploration Programme. However, this was viewed as a deterrent by major private sector oil companies. This led the government to announce New Exploration Licensing Policy (NELP) in 1997 (operationalised in 1999) as part of its Hydrocarbon Vision 20251, a landmark 25-year planning document. Under NELP, licenses for exploration are being awarded only through a competitive bidding system and NOCs are required to compete on an equal footing with Indian and foreign companies to secure Petroleum Exploration Licenses. In addition to NELP, other efforts were made to address the need for achieving energy security. These include:

  1. Acquisition of Oil and Gas assets abroad;
  2. Developing strategic storage facilities at identified locations;
  3. Exploring alternate sources of Energy, including Coal Bed Methane, gas hydrates, etc;
  4. Improving the recovery of oil and gas from existing fields through methods such as Enhanced Oil Recovery (EOR and Increased Oil Recovery (IOR).

Consequent to the various initiatives taken by the government, currently the area under exploration has increased four fold. Prior to implementation of NELP, 11% of Indian sedimentary basins area was under exploration. With the conclusion of seven rounds of NELP, the area under exploration has increased to about 50%. One of the world’s largest gas discoveries was made by Reliance Industries Ltd in 2002, in Jamnagar (about 5 trillion cubic metres). Besides, the entry of international companies like Hardy Oil & Gas, Santo, GeoGlobal Resources Inc, Newbury, Petronas, Niko Resources and Cairn Energy into India has helped boost the growth of the industry.

 

1 The Hydrocarbon Vision, 2025 lays down the framework, which would guide the policies relating to the hydrocarbons sector for the next 25 years. The Hydrocarbon Vision, 2025 statement is as follows:

  1. To assure energy security by achieving self-reliance through increased indigenous production and investment in equity oil abroad.
  2. To enhance quality of life by progressively improving product standards to ensure a cleaner and greener India.
  3. To develop hydrocarbons sector as a globally competitive industry, which could be benchmarked against the best in the world through technology
    upgradation and capacity building in all facets of the industry.
  4. To have a free market and promote healthy competition among players and improve the customer service.
  5. To ensure oil security for the country keeping in view strategic and defence considerations.
    Source: Ministry of Petroleum & Natural Gas