India’s oil and gas sector remains a cornerstone of the country’s economic development, serving as a critical component in meeting the energy demands of a rapidly expanding economy. With increasing consumption, policy interventions, and a push toward energy security, the sector has seen significant transformations. The Economic Survey 2024-25 highlights key trends, government policies, and the challenges that lie ahead for India’s hydrocarbon industry.
Rising energy demand and domestic production trends
India is the third-largest consumer of oil in the world, with demand steadily increasing due to industrial growth, urbanisation, and rising vehicle ownership. Domestic crude oil production, however, has remained relatively stagnant, creating a widening gap between supply and demand. In FY25, India’s crude oil production was approximately 30 million metric tonnes (MMT), while consumption surpassed 240 MMT, necessitating high imports.
Natural gas production has shown a more promising trend, with an increase in domestic output driven by deepwater projects in the Krishna-Godavari basin and the North-East. India’s natural gas production in FY25 was estimated at 35 billion cubic meters (BCM), supporting industrial applications, city gas distribution (CGD), and power generation.
Dependence on imports and rising energy bills
India’s oil import dependency remains a significant concern. The country imports over 85% of its crude oil requirements, making it vulnerable to global price fluctuations. In FY25, India’s crude oil import bill was estimated at over $150 billion, influenced by geopolitical tensions, OPEC+ production cuts, and the volatility of global oil markets.
The natural gas sector also faces similar import dependence. Liquefied natural gas (LNG) imports have risen to meet demand in industrial and city gas distribution sectors. India imports around 55% of its natural gas requirements, with Qatar being the largest supplier.
Policy interventions to boost domestic E&P
To reduce import dependence, the Indian government has taken several initiatives to enhance domestic oil and gas production. The Hydrocarbon Exploration and Licensing Policy (HELP) and the Open Acreage Licensing Policy (OALP) have been instrumental in encouraging exploration activity. In the latest bidding rounds, 29 oil and gas blocks were awarded to private and public sector companies, expanding India’s exploration footprint.
Additionally, the Discovered Small Fields (DSF) policy has led to the monetisation of smaller oil and gas fields, unlocking resources that were previously considered uneconomical. The government has also eased revenue-sharing models and extended tax benefits to encourage foreign and domestic investment in exploration.
Expansion of refining capacity and export potential
India has one of the largest refining capacities in Asia, with a total capacity exceeding 250 MMT per annum. The country continues to expand its refining infrastructure to meet growing domestic demand and increase exports. Key refining projects, such as the expansion of the Paradip and Bina refineries, aim to enhance capacity and improve efficiency.
The proposed West Coast Refinery Project, a mega joint venture between Indian and foreign oil companies, is expected to be one of the largest refining complexes in the world, further cementing India’s role as a major refining hub. Indian refineries have also been upgrading their facilities to produce cleaner fuels in line with Bharat Stage VI (BS-VI) emission norms.
Natural Gas and the push for a gas based economy
The government aims to increase the share of natural gas in India’s energy mix from 6% to 15% by 2030. To achieve this, significant investments have been made in pipeline infrastructure, LNG terminals, and city gas distribution networks.
The Pradhan Mantri Urja Ganga project, which extends gas pipeline connectivity across eastern India, has been a major boost to the sector. New LNG import terminals in Gujarat, Tamil Nadu, and Odisha have also increased the country’s capacity to handle imported gas.
City gas distribution (CGD) is another growth area, with over 400 districts now covered under the CGD network. The expansion of piped natural gas (PNG) for households and compressed natural gas (CNG) for transportation is expected to reduce reliance on conventional fuels and lower pollution levels.
Renewable Energy and Green Hydrogen: A new focus
While oil and gas remain dominant, the transition to cleaner energy is gaining momentum. The Indian government has launched the National Green Hydrogen Mission, aiming to produce 5 million metric tonnes (MMT) of green hydrogen annually by 2030.
State-run companies like Indian Oil Corporation (IOC) and ONGC are investing in hydrogen production, biofuels, and carbon capture technologies. Hydrogen blending with natural gas in pipelines is also being explored to decarbonise industrial processes.
Future outlook
India’s oil and gas sector is at a crucial juncture, balancing energy security with the transition to cleaner fuels. With growing energy demand, the country will continue to rely on hydrocarbons while simultaneously investing in renewables, hydrogen, and electric mobility.
Government policies, infrastructure investments, and technological advancements will play a key role in shaping the future of India’s oil and gas industry. By reducing import dependence, enhancing domestic production, and adopting sustainable practices, India aims to achieve a self-reliant and energy-secure future.
