India's Oil and Gas Sector Investment, Incentives and Schemes

India's oil and gas sector is experiencing rapid growth and provides substantial investment potential; fueled by government emphasis on energy security, efforts to universal energy access and rising energy demand with a strong focus on sustainability.

About Oil and Gas Sector

The oil and gas sector is one of India's eight core industries and plays a major role in influencing the decision-making across other important sectors of the economy.India’s economic growth is closely tied to its energy demand, which is expected to rise for oil and gas, making the sector attractive for investment. As of 2023, India remained the world's third-largest oil consumer.

The Government has implemented several policies to meet the growing demand in the sector. The government has permitted 100% foreign direct investment (FDI) in several segments, such as natural gas, petroleum products, and refineries. Moreover, the FDI limit for public sector refining projects has been raised to 49%, ensuring that there is no disinvestment or reduction in domestic equity in existing PSUs.Currently, the sector attracts both domestic and foreign investment, highlighting the presence of major companies such as Reliance Industries Ltd (RIL) and Cairn India. It is expected to attract around US$25 billion in exploration and production activities.With 23 refineries, India has established itself as an important refining hub and further expansion is planned to expand further by foreign investment in export-centric infrastructure, including product pipelines and export terminals.

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India's Oil & Gas Sector Overview

India's oil & natural Gas Products are part of its eight core industries. In the fiscal year 2023-24, India produced approx 29.4 million metric tons (MMT) of crude oil and 36.4 billion cubic meters (BCM) of natural gas, while relying on imports of 234.3 MMT of crude oil, 31.7 BCM of liquified natural gas (LNG) to fulfill its growing energy demand.

To strengthen India's exploration and production (E & P) sector and optimize several initiatives have been introduced. These include the Hydrocarbon Exploration and Licensing Policy (HELP), a 99% reduction in 'No-Go' areas in offshore zones, and the launch of the Urja Pragati Platform, which streamlines approvals and easier compliance through self-certification. The creation of the National Data Repository (NDR), further improves transparency and accessibility to critical energy sector data. India’s energy sector is transforming rapidly, with its sedimentary basins estimated to hold 651.8 million metric tons of recoverable crude oil and 1,138.6 billion cubic meters of recoverable natural gas. By 2030 India's E&P sector is projected to expect $100 billion.

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Why Invest in Oil & Gas

Increasing Domestic Demand : India is expected to contribute approx 25% of the global energy demand between 2020 and 2040, which is fueled by its expanding economy and demographic advantage.Currently, India is 3 biggest oil consumers, India is expected to drive global oil demand growth from 2023 to 2030.

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Augmenting refining capacity : India plans to increase its refining capacity from the current 256.8 MMTPA to 310 MMTPA by 2030, supporting growing demand as well as export needs.

Sustainable energy mix : India provides an investment opportunity of $67 billion, as it works to raise the share of natural gas in its energy mix from 6.7% to 15% by 2030.

Increasing biofuel consumption : The government has implemented measures such as introducing a biofuel blending target to boost domestic production and consumption of biofuels.

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India's Oil and Gas Sector Incentives and Schemes

India's oil and gas sector incentives and schemes from various incentives and schemes aimed at enhancing energy security, encouraging clean fuel adoption, and supporting infrastructure development.  Policies like the Hydrocarbon Exploration and Licensing Policy (HELP) and the National Data Repository (NDR) support exploration operations processes.Additional measures focus on expanding the City Gas Distribution (CGD) network, investing in Strategic Petroleum Reserves (SPR), and developing pipeline infrastructure for Compressed Biogas (CBG).

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Conclusion

Rapid economic growth is driving higher production outputs, which is increasing the demand for both manufacturing and transportation. Crude oil consumption is projected to grow at a CAGR of 4.59%, reaching 500 million tonnes by FY40 from 223.0 million tonnes in FY23. In barrels terms, India’s oil consumption is expected to increase from 4.05 MBPD in FY22 to 7.2 MBPD in 2030 and 9.2 MBPD by 2050. Diesel demand is expected to double to 163 million tonnes by 2029-30, with diesel and petrol together accounting for 58% of India’s oil demand by 2045. Given strong economic growth and rising urbanisation, this demand shows no signs of slowing down .

Indian refiners are expected to add 56 million tonnes per annum (MTPA) by 2028, growing domestic refining capacity to 310 MTPA.Furthermore, India aims to double its oil refining capacity to 450-500 MTPA by 2030. The country's energy demand is projected to grow faster than any of major economies globally, driven by continuous robust economic growth. Additionally, India's share of global primary energy consumption is expected to increase nearly 2x by 2035.

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