India’s first oil well was drilled in 1889. In 2026, the government approved a scheme worth more than most ministries’ annual budgets to find more. This article covers India’s petroleum and natural gas sector: its major companies, its exploration policy, and its newest mega-scheme.
Timeline
- 1889: India’s first oil discovery is made at Digboi, Assam.
- 1956: The Oil and Natural Gas Corporation (ONGC) is founded.
- 1999: The New Exploration Licensing Policy (NELP) takes effect, opening blocks to private and foreign firms.
- 2026: The Union Cabinet approves Samudra Manthan, a ₹84,084 crore offshore exploration scheme.
Must Know
ONGC, OIL, and Their Status
- ONGC The Oil and Natural Gas Corporation, founded in 1956, is India’s largest oil and gas company. It is administered by the Ministry of Petroleum and Natural Gas.
- ONGC’s Share Accounts for about 70% of India’s crude oil production and about 84% of its natural gas production.
- OIL Oil India Limited, founded in 1959, is India’s second-largest national oil and gas company. It is headquartered in Duliajan, Assam.
- First Discovery India’s first oil discovery was made at Digboi, Assam, in 1889.
- PSU Status ONGC holds Maharatna status. Oil India Limited holds Navratna status, the two highest tiers of financial autonomy for a public sector company.
Good to Know
NELP, OALP, and the PNGRB’s Real Scope
- NELP The New Exploration Licensing Policy, effective from 1999, let private and foreign companies bid for exploration blocks. They competed with ONGC and OIL on equal terms, under a production-sharing model.
- NELP’s Record NELP ran from 1999 to 2010. It led to 177 oil and gas discoveries across India.
- OALP The Open Acreage Licensing Policy, introduced in 2016, replaced NELP’s cyclic bidding rounds. Companies can now offer any block for exploration at any time of year.
- PNGRB The Petroleum and Natural Gas Regulatory Board regulates only the downstream sector: refining, storage, transportation, distribution, marketing, and sale. It does not regulate upstream production of crude oil or natural gas — a common exam trap.
- Import Dependence India still imports most of the crude oil it consumes. This leaves the country exposed to global price swings, a central challenge for the sector.
Previous Year Questions
Mains PYQ UPSC Mains 2017, GS Paper I, Q15: Why Petroleum Refineries Aren’t Located Near Crude Fields.
Asked as: “Consider the following activities. How many of the above activities are regulated by the Petroleum and Natural Gas Regulatory Board in our country?” (UPSC CSP 2025, GS Paper I). View this question.
Asked as: “Consider the following statements. 1. PNGRB is the first regulatory body set up by the Government of India. 2. One of PNGRB’s tasks is to ensure competitive markets for gas. 3. Appeals against PNGRB’s decisions go before the Appellate Tribunal for Electricity. Which of the statements given above are correct?” (UPSC CSP 2019, GS Paper I). Answer: (b) 2 and 3 only. Statement 1 is false — TRAI (1997) and SEBI (1992) both predate PNGRB, which was set up in 2006.
Test Yourself
Great to Know
Market orientation, not field orientation
- Modern refineries increasingly locate near major demand centres rather than crude oil fields. Refined products are far more numerous and harder to transport efficiently than crude oil itself, so it makes more sense to move crude to the market and refine it there.
Pipelines decouple refineries from fields
- Cross-country crude oil pipelines let refineries draw crude from distant fields cheaply. This severs the old need to build a refinery right next to the well.
Coastal refineries serve import-dependent economies
- India imports roughly 85% of its crude oil. Major refineries like Jamnagar and Mumbai sit on the coast to receive imported crude by tanker efficiently, not near India’s own, much smaller, domestic oil fields.
Jamnagar as the extreme example
- Reliance’s Jamnagar complex in Gujarat, the world’s largest single refining complex, is nowhere near a major Indian crude field. It is built for imported crude and export-oriented refined product trade.
Digboi is the historic exception
- Digboi in Assam, Asia’s oldest refinery, was built directly beside the region’s own oil fields. It remains a rare Indian example of the traditional field-adjacent refinery model.
Government policy also drives siting
- Refineries like those at Barauni, Panipat, and Mathura were sited partly for regional development goals, not just logistics, spreading industrial investment to specific states rather than clustering purely near supply or demand.
Implication: import and strategic dependency
- Locating refineries near ports rather than crude fields deepens a country’s dependence on imported crude and the shipping routes that carry it, a strategic vulnerability distinct from simply lacking domestic oil.
Implication: shifted environmental burden
- Coastal, market-oriented refinery siting shifts pollution and environmental risk to consumption regions and port cities, rather than concentrating it in the, often more remote, crude-producing areas.
From Private Capital Back to State-Led Exploration
- Two Mechanisms NELP and OALP both tried to bring private capital into a sector long dominated by ONGC and OIL. Each used a different mechanism: NELP’s periodic bidding rounds, versus OALP’s year-round acreage offers.
- Samudra Manthan Its ₹84,084 crore outlay signals a return to large, direct government-funded exploration. This comes even as OALP still keeps the door open for private players.
- Manufacturing Tie-In Tying exploration funding to indigenous manufacturing, under Make in India and Atmanirbhar Bharat, marks a real break from past schemes. Those schemes generally funded exploration alone, without a manufacturing component attached.
Current Affairs
Latest Developments
- 31 July 2026 The Union Cabinet approved Samudra Manthan, formally the National Offshore Exploration Scheme, as a Central Sector Scheme run by the Ministry of Petroleum and Natural Gas. Its approved outlay is ₹84,084 crore, and it runs up to FY 2030-31. The scheme covers seismic data acquisition, plus deepwater and ultra-deepwater drilling. It also funds shared offshore production infrastructure, and a new integrated Oil & Gas Manufacturing and Services Zone is planned too. Samudra Manthan targets reserve accretion of over 600 million metric tons of oil equivalent (MMTOE). Its stated goals include strengthening India’s energy security, cutting import dependence, and building indigenous manufacturing under Make in India and Atmanirbhar Bharat. The scheme’s name references the mythological Samudra Manthan, the churning of the cosmic ocean, framing offshore exploration as a modern search for wealth hidden beneath the sea. (Source: PIB)
- 25 July 2026 A week earlier, drilling began on India’s first appraisal well in the Mahanadi Offshore Basin. Minister Hardeep Singh Puri marked the milestone. The well, MN-DWN18-1-HD, is the first of 4 planned deepwater wells there. (Source: PIB)
- OALP Progress Puri also cited OALP’s broader progress. It has awarded 172 exploration blocks, over 3.8 lakh sq km, with committed investment above $4.3 billion. (Source: PIB)
- FY 2025-26 Drilling India drilled about 674 wells that year. That yielded 5 new discoveries, and 7 discoveries reached monetisation. (Source: PIB)
Cutting oil import dependence is one reason India is also pushing electric vehicles. See IndEco0119 — Electric Vehicles in India for EV sales growth, charging infrastructure, and government schemes like PM E-DRIVE. The same Ministry of Petroleum and Natural Gas also runs IndEco0118 — GOBARdhan, a separate scheme converting organic waste into compressed biogas.
India’s crude oil import dependence also carries a geopolitical angle. See IntlRel0084 — The Strait of Hormuz and India’s Energy Security for how much of that imported crude transits the Strait of Hormuz, and how India has diversified its supply routes since 2026.
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