India’s Petroleum Industry, Challenges and Government Initiatives

Context: Recently the Rajya Sabha passed a bill named Oilfields (Regulation and Development) Amendment Bill in 2024 to ensure policy stability for oil and gas producers, and enable single license for all hydrocarbons.

Formation of Petroleum

• Crude oil, or petroleum, forms over millions of years through the transformation of organic material in sedimentary environments.
• The process begins with the accumulation of microscopic organisms, such as algae and zooplankton, in marine settings where oxygen levels are low, preventing complete decomposition.
• As these organic-rich sediments are buried by additional layers, they undergo compaction and chemical changes, leading to the formation of a waxy substance called kerogen within a type of sedimentary rock known as shale.
• With increased burial depth and temperature, kerogen further breaks down into hydrocarbons, resulting in the generation of crude oil and natural gas.

The primary rock types associated with this process include:

• Source Rocks: Organic-rich shales where kerogen is generated.
• Reservoir Rocks: Porous and permeable rocks, such as sandstones or carbonates, where hydrocarbons migrate and accumulate.
• Cap Rocks: Impermeable rocks, like shales or evaporites, that trap hydrocarbons in the reservoir rocks, preventing them from escaping to the surface.

Petroleum Basins in India

India has 26 sedimentary basins, covering around 3.14 million square kilometres.

Category I

Basins with proven reserves and active commercial production.

• Bombay High Basin (Western Offshore): India’s largest offshore oil field located in the Arabian Sea.
• Krishna-Godavari Basin (Andhra Pradesh): Known for its significant offshore and onshore reserves.
• Cambay Basin (Gujarat): One of the oldest and most productive onshore basins in India.
• Assam-Arakan Basin (North-East India): Produces oil and natural gas; Digboi has India’s first oil refinery.

Category 2

Basins with known hydrocarbon accumulations but currently lacking commercial production.

• Rajasthan Basin (Barmer Region): Produces oil from fields like Mangala, Bhagyam, and Aishwarya.
• Cauvery Basin (Tamil Nadu): Produces both oil and gas.
• Mahanadi Basin (Odisha): Known for its natural gas reserves.

Category 3

Basins with indications of hydrocarbons but requiring further exploration.

• Himalayan Foreland Basin, Ganga Basin, and other regions where exploratory activities are ongoing.

Challenges Associated

• High Import Dependency: India imports over 80% of its crude oil requirements, making it vulnerable to global supply disruptions and price volatility.
• Rising Domestic Demand: With rapid economic growth, India’s oil consumption is projected to increase by 300,000 barrels per day in both 2024 and 2025, intensifying the strain on existing infrastructure and increasing import reliance.
• Infrastructure Constraints: The current infrastructure may struggle to accommodate the surging demand, necessitating significant investments in refining and distribution networks.
• Financial Pressures on Refiners: Companies like Bharat Petroleum Corporation Limited (BPCL) have reported lower-than-expected profits due to reduced marketing margins and losses in the liquefied petroleum gas (LPG) segment.
• Geopolitical Risks: Sanctions and geopolitical tensions can disrupt supply chains. For instance, recent U.S. sanctions on Russia have increased shipping costs, affecting oil trade with India.
• Transition to Renewable Energy: Balancing the growing energy demand with environmental sustainability requires substantial investment in renewable technologies and a strategic shift from conventional fossil fuels.

Government Initiatives To Bolster The Petroleum Sector

• Pradhan Mantri JI-VAN Yojana: Supporting bio-ethanol projects such as second-generation and third-generation plants for sustainable fuel production.
• Strategic Petroleum Reserves: Enhancing energy security through storage facilities.
  • In India, the SPR is primarily located at three underground storage facilities in Visakhapatnam, Mangalore, and Padur (Karnataka).
• Ethanol Blending Program: Promoting biofuels to reduce dependence on fossil fuels and curb emissions.
  • The government has a target of achieving 20% ethanol blending in petrol by 2025-26.
• City Gas Distribution Network Expansion: Expanding piped natural gas (PNG) and compressed natural gas (CNG) infrastructure by covering 733 districts in 34 states/UTs covering almost 100% of the mainland area and almost 100% of the total geographical area of the country.
• Energy Security Initiatives: Investing in overseas exploration and acquisition of oil blocks.

Moving towards Greener Fuels

• SATAT Initiative (Sustainable Alternative Towards Affordable Transportation): Invites potential investors to set up Compressed Biogas (CBG) production plants.
  • The aim is to make better use of agricultural residue, cattle dung, and municipal solid waste, and provide farmers with an additional source of revenue.
• Mission Green Hydrogen: Promoting green hydrogen production to reduce carbon footprint.
  • According to the Ministry of New and Renewable Energy, global demand for over 100 MMT of Green Hydrogen and its derivatives like Green Ammonia is expected to emerge by 2030.
  • Aiming at about 10% of the global market, India can potentially export about 10 MMT of Green Hydrogen/Green Ammonia per annum.
  • The production capacity targeted by 2030 is likely to leverage over ₹8 lakh crore in total investments and create over 6 lakh jobs.
  • Nearly 50 MMT per annum of CO2 emissions are expected to be averted as a result of the various Green Hydrogen initiatives under the Mission.
  • Achievement of Mission targets is expected to contribute to India’s energy security and reduce a cumulative ₹1 lakh crore worth of fossil fuel imports by 2030.
• National Bio-Energy Programme: Focused on bio-energy production and reducing waste.
• Hydrocarbon Exploration and Licensing Policy (HELP): Encouraging private investment in exploration and production.

Way Forward for India’s Petroleum Sector

• Attracting Investments: Collaborate with global companies for joint exploration and production (E&P) of oil and gas assets.
  • Establish a stable tax regime and provide tax breaks to attract private investments in the sector.
• Promoting Industry-Academia Collaboration: Foster partnerships between academic institutions and the petroleum industry to leverage cutting-edge research and bridge the gap between theory and practice.
  • Eg., the MoU between the Directorate General of Hydrocarbons (DGH) and Wadia Institute of Himalayan Geology for AI/ML application in exploration activities in Upper Assam.
• Encouraging Sustainable E&P Practices: Support sustainable oil production initiatives like Oil India Limited’s partnership with the Assam State Biodiversity Board and IUCN.
  • Eg., Conducting studies on the impact of oil production on Dibru Saikhowa National Park and developing an adaptive production plan.
• Strengthening Oil Spill Management: Utilize advanced technologies like oil-zappers for efficient spill control.
  • Train industry personnel on spill prevention and response protocols to minimize environmental damage.
• Mitigating Community Impact: Conduct impact assessments during project planning to understand and address potential effects on local communities’ health, livelihoods, and overall well-being.

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