Petroleum and Natural Gas Sector in India

From Digboi

• India’s first-ever oil discovery was made at Digboi, Assam, in 1889.
• Digboi is Asia’s oldest refinery. It was built right beside Assam’s own oil fields.
• See Assam for the state.

ONGC

• The Oil and Natural Gas Corporation (ONGC) was founded in 1956, as India’s national exploration company.
• It sits under the Ministry of Petroleum and Natural Gas.
• It produces about 70% of India’s crude oil and about 84% of its natural gas.
• It holds Maharatna status, the highest tier of financial autonomy for a public sector company.

Oil India Limited

• Oil India Limited (OIL) was founded in 1959. Its headquarters is at Duliajan, Assam.
• OIL holds Navratna status, one tier below ONGC’s Maharatna rank.
• It operates in the same Assam basin as the 1889 discovery.

The regulator

• The Petroleum and Natural Gas Regulatory Board (PNGRB) was set up in 2006.
• It regulates only the downstream sector: refining, storage, transportation, distribution, marketing and sale.
• It does not regulate upstream production of crude oil or natural gas.
• India imports most of the crude it uses, so it is exposed to global price swings.

NELP, 1999–2010

• The New Exploration Licensing Policy took effect in 1999.
• Private and foreign firms could bid for blocks, competing with ONGC and OIL on equal terms.
• It used a production-sharing model, with profit shared only after the contractor recovered its costs.
• NELP ran till 2010 and led to 177 oil and gas discoveries.

OALP, 2016

• The Open Acreage Licensing Policy came in 2016. It replaced NELP’s fixed bidding rounds.
• Companies can offer any block for exploration at any time of the year.
• A company carves out the exact area it wants and submits an Expression of Interest at any time.
• The government then auctions that area to other bidders.
• OALP switched to revenue-sharing. Gross revenue is split from day one, whether or not costs are recovered.

Same aim, different tools

• Both policies tried to bring private capital into a sector long led by ONGC and OIL.
• NELP used periodic rounds. OALP uses year-round offers.

Strategic petroleum reserves

• Indian Strategic Petroleum Reserves Limited (ISPRL), set up in 2004, manages India’s emergency crude stock.
• The crude is stored in underground rock caverns at three coastal sites.
• Visakhapatnam holds 1.33 million metric tons (MMT). Mangalore holds 1.5 MMT. Padur holds 2.5 MMT.
• That totals 5.33 MMT, enough for about 9.5 days of India’s crude needs.
• Oil marketing companies’ own 64.5 days of commercial stock bring total cover to roughly 74 days.
• Expansion is planned at Chandikhol and a Padur Phase-II.

Refineries near demand, not oil fields

• Modern refineries increasingly sit near demand centres, not oil fields.
• Refined products are far more numerous and harder to move efficiently than crude.
• Cross-country pipelines let refineries draw crude from distant fields cheaply.
• India imports roughly 85% of its crude. Coastal refineries like Jamnagar and Mumbai receive it by tanker.

Digboi versus Jamnagar

• Digboi is the rare field-adjacent exception.
• Reliance’s Jamnagar complex is the world’s largest single refining complex. It sits nowhere near a major Indian crude field.
• It runs on imported crude and is built for export-oriented trade.
• Barauni, Panipat and Mathura were sited partly for regional development goals. Policy spread industrial investment to specific States this way.

The strategic cost

• Building refineries near ports deepens dependence on imported crude and the shipping routes that carry it. See The Strait of Hormuz and India’s Energy Security.
• Coastal siting also shifts pollution and environmental risk to port cities and consumption regions.
• Remote crude-producing areas carry less of that burden.

Cutting oil dependence

• One reason India pushes EVs is to cut oil imports. See Electric Vehicles in India.
• See also GOBARdhan: National Circular Bioenergy Scheme, Solar Energy in India and Coal Sector in India: From Nationalisation to the Coal Exchange.

Samudra Manthan, 31 July 2026

• The Union Cabinet approved Samudra Manthan, formally the National Offshore Exploration Scheme.
• It is a Central Sector Scheme under the Ministry of Petroleum and Natural Gas.
• The outlay is ₹84,084 crore, up to FY 2030-31.
• It targets reserve accretion of over 600 million metric tons of oil equivalent.
• It funds seismic data, deepwater and ultra-deepwater drilling, shared offshore infrastructure, and a new Oil & Gas Manufacturing and Services Zone.
• Tying exploration funding to indigenous manufacturing under Make in India and Atmanirbhar Bharat marks a break from past schemes, which generally funded exploration alone.
• The name refers to the mythological churning of the cosmic ocean. See Samudra Manthan: The Churning of the Ocean. (Source: PIB)

Mahanadi basin and OALP progress

• A week earlier, on 25 July 2026, 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 four planned deepwater wells there. (Source: PIB)
• Puri also cited OALP progress: 172 exploration blocks awarded, covering over 3.8 lakh sq km, with committed investment above $4.3 billion. (Source: PIB)
• Samudra Manthan signals a return to large, direct government-funded exploration, even as OALP keeps the door open to private players.

Incentive scheme for domestic PNG connections

• The Incentive Scheme for Promotion of Domestic PNG Connections was launched on 18 August 2026. It took effect from 1 September 2026. (Source: PIB)
• As of 18 August 2026, India had 1.74 crore domestic PNG connections across 309 PNGRB-authorised Geographical Areas.
• For each billed connection added beyond a fixed minimum per area, a City Gas Distribution entity earns an extra 200 SCM of cheaper, domestically produced APM gas.
• That replaces costlier LNG used for CNG for transport.
• This is expected to shrink a domestic connection’s payback period from about 10 years to nearly 3.