India has unveiled a new set of policies for its oil and gas sector, under which it aims to offer a cushion to upstream investors from fiscal policy changes as well as make its revenue-sharing model more attractive to attract investors into the segment.

The petroleum ministry recently invited feedback on the proposed Petroleum and Natural Gas Rules for 2025, after which New Delhi can move forward to implement those rules as official policy, either with or without amendments. The latest proposed reforms will replace the Petroleum Concession Rules of 1949 and Petroleum and Natural Gas Rules of 1959.

“India is in the midst of one of the most ambitious plans to strengthen and expand its hydrocarbons infrastructure, boosting domestic production, forging global partnerships, and ensuring a sustainable and resilient future,” Petroleum Minister Hardeep Singh Puri said July 13.

The draft rules aim to modernize India’s upstream oil and gas framework with several major reforms. Key among them is the introduction of an investor-friendly stabilization clause, designed to protect lessees from adverse impacts of future legal or fiscal changes, such as increases in taxes, royalties or other levies, by allowing compensation or deductions.

To reduce infrastructure duplication and encourage smaller players, the draft mandates that lessees can declare underutilized capacity in pipelines and other facilities, and provide third-party access on fair terms, subject to government oversight.

“The declaration of underutilized infrastructure sharing is a positive step. This could help some of the new field developments by smaller private players, without spending more in midstream infrastructure, and having a lower emissions footprint,” said Kallol Saha, research and analysis director at S&P Global Commodity Insights, adding that some of the changes to data ownership rules will also aid in exploration activity and improve success rate.

Broader energy landscape

The draft rules also permit operators to undertake integrated renewable and low-carbon projects — including solar, wind, hydrogen, and geothermal energy — within the oilfield blocks, provided they meet safety standards and do not interfere with oil and gas production.

“Strengthening environmental stewardship, the draft introduces detailed requirements for monitoring and reporting greenhouse gas emissions, establishes a regulatory framework for carbon capture and storage, and mandates site restoration funds with post-closure monitoring for a minimum of five years,” the draft said.

In terms of data governance, all operational data and physical samples generated during exploration and production will belong to the government. “Lessees can use this data internally, but any export or external use requires government approval, with confidentiality protections lasting up to seven years,” it said.

The draft rules also have also proposed the creation of a dedicated adjudicating authority, which would be empowered to enforce compliance, resolve disputes, and impose penalties. Additional provisions of the draft rules include clearer processes for lease mergers, extensions, and unitization of reservoirs spanning multiple blocks, aimed at improving operational flexibility.

The latest proposed reforms come immediately after the amendment of the Oilfields (Regulation and Development) Act, 1948 and ahead of the Open Acreage Licensing Policy, or OALP X, which would be India’s largest-ever exploration and production bidding round.

The tenth round offers 25 blocks with an area of 191,986 square kilometers and spans 13 sedimentary basins. Of the 25 blocks, six blocks are in shallow water, six blocks are on land, one is in deep water and the remainder are in ultra-deep-water areas. The ninth round, announced in early 2024, had featured 28 blocks covering around 136,000 sq km, spanning eight sedimentary basins.

Under OALP, upstream companies can now carve out areas for oil and gas exploration. Explorers can submit an expression of interest for any area throughout the year, and the designated areas are then subsequently auctioned.

Revenue sharing model

The petroleum ministry has also proposed a revised model for revenue sharing contract that would align with the new policies, particularly regarding unitization, merged lease areas, and infrastructure sharing obligations. The revised petroleum lease format clarifies processes on lease relinquishment, reservoir extension and cancellation triggers, in an effort to provide greater operational certainty.

“The government’s efforts aim to create a transparent, efficient, and sustainable exploration and production environment, aligned with India’s broader energy transition goals,” Puri said.

According to Commodity Insights analysts, India’s upstream output has been declining at an average annual rate of 1.1% over the past decade due to the natural depletion of mature fields operated by state-run producers, delays in monetizing existing discoveries and a reduced number of new discoveries. Overseas interest in exploration bidding rounds has largely remained elusive.

Earlier this year, BP signed a contract for a new exploration license under the consortium consisting of ONGC, holding a 40% stake, Reliance with a 30% stake and BP with the remaining 30% stake for block GS-OSHP-2022/2 in the Saurashtra Basin, as part of OALP IX.
Source: Platts