Oil Sector In India: History, Production, Producing Regions & Policy

The oil sector in India plays a crucial role in the country’s economic growth and energy security. India is the third-largest consumer of oil in the world, after the United States and China.

The country’s oil sector is characterized by a mix of state-owned and private companies, with the government playing a significant role in the regulation and management of the industry.

History

The oil sector in India has a long history, dating back to the late 19th century when the first oil well was drilled in Assam in 1866. However, significant progress in the sector was made only after India’s independence in 1947.

In 1956, the Indian government established the Oil and Natural Gas Corporation (ONGC) to explore and produce oil and gas resources in the country.

Production and Consumption

India’s oil production has been steadily increasing over the years, but it still falls short of the country’s growing demand. In the fiscal year 2020-21, India produced around 30.5 million metric tonnes (MMT) of crude oil, while the consumption stood at about 221.6 MMT. India’s crude oil production in 2023 was about 29.2 million metric tons.

The country heavily relies on imports to meet its oil requirements, with around 85% of its crude oil needs being met through imports.

Oil Basket of India

The oil basket of India refers to the weighted average price of crude oil that the country imports. It is a mix of different types of crude oil, including sweet crude and sour crude, from various sources. The composition of the Indian oil basket changes based on the country’s import patterns and global market conditions.

As of 2024, the Indian oil basket primarily consists of crude oil from the Middle East, with significant contributions from Saudi Arabia, Iraq, and the United Arab Emirates. Other major sources include Nigeria, the United States, and Venezuela.

Oil Producing Regions in India

Although India heavily relies on imports to meet its oil requirements, the country does have some domestic oil production. The major oil-producing regions in India are:

• Bombay High: Located off the coast of Maharashtra in the Arabian Sea, Bombay High is India’s largest offshore oil field. It is operated by the state-owned Oil and Natural Gas Corporation (ONGC) and accounts for a significant portion of the country’s domestic oil production.
• Assam: The northeastern state of Assam is one of the oldest oil-producing regions in India. The first oil well in the country was drilled in Digboi, Assam, in 1866. The region continues to be a significant contributor to India’s domestic oil production.
• Gujarat: The western state of Gujarat is another important oil-producing region in India. The state is home to the Cambay Basin, which has both onshore and offshore oil reserves. Gujarat also hosts India’s largest refining complex, operated by Reliance Industries Limited in Jamnagar.
• Rajasthan: The northwestern state of Rajasthan has emerged as a significant oil-producing region in recent years. The Barmer Basin, located in the Thar Desert, is home to several oil and gas fields operated by both state-owned and private companies.
• Krishna-Godavari Basin: Located off the coast of Andhra Pradesh in the Bay of Bengal, the Krishna-Godavari Basin is a promising oil and gas production region. It is estimated to hold significant hydrocarbon reserves and has attracted investments from both domestic and international companies.

Despite these domestic oil-producing regions, India’s oil production remains insufficient to meet the country’s growing energy demand. As a result, the country continues to rely heavily on oil imports to bridge the gap between domestic production and consumption.

Major Players

The Indian oil sector is dominated by state-owned companies, such as the Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL).

These companies are involved in various aspects of the oil industry, including exploration, production, refining, and marketing. Private companies, such as Reliance Industries Limited (RIL) and Essar Oil, also play a significant role in the sector. RIL operates the world’s largest refining complex in Jamnagar, Gujarat, with a capacity of 1.24 million barrels per day.

Refining Capacity

India has a robust refining capacity, with 23 refineries having a combined capacity of around 249.9 MMT per annum (as of 2022).

The country’s refining capacity has been growing steadily, with the aim of meeting the increasing domestic demand and also to cater to the export market.

Policy and Regulation

The Indian government has been implementing various policies and regulations to promote the growth of the oil sector while ensuring energy security and environmental sustainability.

The New Exploration Licensing Policy (NELP), introduced in 1999, opened up the sector to private and foreign investment.  It was later replaced by Hydrocarbon Exploration and Licensing Policy (HELP) in 2016. The government has also been promoting the use of alternative fuels, such as biofuels and compressed natural gas (CNG), to reduce the country’s dependence on oil imports.

Challenges and Future Outlook

The Indian oil sector faces several challenges, including the need to reduce import dependence, increasing domestic production, and ensuring environmental sustainability. The government has set a target of reducing oil import dependence by 10% by 2022 and increasing the use of renewable energy sources. The future outlook for the Indian oil sector is mixed, with the increasing demand for energy being offset by the need to transition to cleaner fuels. The government’s focus on promoting renewable energy and electric vehicles is expected to have a significant impact on the sector in the long run.