Latest news with #Oilfields(RegulationandDevelopment)AmendmentAct
Business Times
3 days ago
- Business
- Business Times
India oil law revamp unlikely to draw foreign drillers amid red tape and weak incentives
[SINGAPORE] India's first rewrite of its 77-year-old oilfield rules kicked in on Apr 15, with New Delhi hoping it'll help turn around a decade of sluggish output and and ease its growing reliance on imported crude, which stands at over 85 per cent. But analysts say there's still too much red tape in a system that seems to favour local players, making it tough for foreign drillers to break in. Currently, international players form less than 10 per cent of India's total oil and gas (O&G) production, noted CreditSights' South and South-east Asia corporates team. 'Foreign participation in India's upstream O&G sector remains low due to restrictive legacy regulatory procedures and poor economic incentives,' the team told The Business Times. That's why the calibrated changes under the Oilfields (Regulation and Development) Amendment Act, 2025 are unlikely to move the needle on foreign investment, say industry watchers. Limited overseas interest has long weighed on India's output, and the gap matters more than ever now as the country scrambles to boost upstream capacity to meet surging energy demand. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Heavy reliance on imports CreditSights' analysts noted that India reportedly consumes about five million barrels of oil per day, while domestic production of crude oil stands at only around 0.6 million barrels per day, underscoring the country's O&G import dependence. India's reliance on imported crude has become a pressing concern, prompting calls for law amendments. The country's import dependency rose to 88.2 per cent in the period from April 2024 to February 2025, from 87.7 per cent in the corresponding period a year ago, based on data from its oil ministry's petroleum planning and analysis cell. After the lower house in India's Parliament approved the amendment Bill on Mar 12, paving the way for it to become law, Petroleum and Natural Gas Minister Hardeep Singh Puri highlighted the country's rising energy consumption needs: 'Today, we are consuming 5.5 million barrels a day of crude oil… If we continue to grow at the rate at which we are, we will go up to 6.5 million to seven million barrels a day. 'India's transformation to become a developed nation will require a large amount of energy in all forms. Steps have been taken to enhance India's energy exploration and production.' For years, India's upstream output has dwindled, contracting at an average annual rate of 1.1 per cent over the past decade, according to S&P Global Commodity Insights. This decline is largely attributed to the natural depletion of mature fields operated by state-run entities, persistent delays in monetising existing discoveries, and a notable scarcity of new finds, noted the team. Compounding these challenges, international interest in India's exploration bidding rounds has largely remained elusive, with restrictive legacy regulatory procedures and poor economic incentives deterring overseas players. Law reforms The new amendments to the Oilfields Act – the principal legislation governing the exploration and development of mineral oil resources in India since 1948 – seek to address these long-standing concerns of exploration companies, with the explicit objective of fostering a more investor-friendly environment, said S&P Global Commodity Insights' analysts. CreditSights team highlighted these key features of the amendments: Empowering the central government to grant licenses for oilfield exploration through notification/bidding/other methods, as opposed to direct application by foreign players in the past; Further streamlining and digitising of approval processes; Improving transparency and legal clarity of the upstream regulatory framework; Introducing a structured penalty system. One of the core changes is the dissociation of petroleum operations from mining operations. By eliminating the long-standing practice of grouping petroleum and mining operations under the same regulatory framework, the law change aims to avoid past confusion that often resulted in the delay of petroleum exploration operations due to the need to obtain irrelevant permits and licences. Investment risks John Zadkovich, partner at Stephenson Harwood, said permitting remains one of the biggest hurdles for upstream players in India, particularly given the capital-intensive nature of the exploration and production sector. 'I've seen projects stymied for six to 10 years because of permitting challenges. So, unless the Indian government has resolved that, it is going to continue to be a problem in attracting investment,' he said. Zadkovich added that upstream projects usually require initial capital of tens, if not hundreds, of millions of dollars, leading to long gestation periods with inherent investment risks. 'If they do get a permitting challenge early in the place, that is gonna be a long time to have an asset setup without development or exploration.' Lengthy legal processes CreditSights' team noted that the introduction of a structured penalty framework will help reduce uncertainty over dispute resolution – a key area of concern for international players. 'We think the new oilfield regulation helps establish a transparent legal framework to reduce ambiguity and operational frictions, which should bolster foreign investor confidence in India's upstream sector,' said the team. However, Stephenson Harwood's Zadkovich noted that legal clarity alone does little to address procedural bottlenecks caused by a shortage of judicial officers. 'It's almost a joke among lawyers that if you kick something into the court system there, it can be 10 to 15 years before you get a judgment. That's not a reflection on the competence of the judiciary but on the shortage of judicial officers and huge backlog. 'It's one thing to streamline the law from a procedural perspective, but if it ends up in the courts or in a tribunal, it can be 10 years for some parties,' he added. Ian Hiscock, director of boutique energy consultancy MMC, said that foreign investors in the sector have 'got burned in the past', so they will be cautious despite the Indian government's consistent efforts to deregulate. Similarly, CreditSights' team noted that the amendments would not bring in a substantial increase in foreign participation in the near term. Despite improving legal and operational clarity, the amendment does not introduce sweeping reforms or explicitly attract new investment into the sector, the research team said. This is on top of execution risks, such as a failure to reduce bureaucratic red tape and inconsistent enforcement across states. More importantly, the government may ultimately have an innate preference towards its domestic O&G companies, given energy security concerns, said the analysts. Current landscape India's upstream O&G sector is dominated by national players (public sector undertakings, or PSUs), namely Oil India and Oil and Natural Gas Corporation. The competitive landscape poses resistance to new entrants, making strategic partnerships more important for foreign players. Zadkovich noted: 'The energy players I've worked with are incredibly astute, well-connected and typically well-backed. So some of the majors there will protect their positions, and I think there'll be a bit of resistance to newcomers.' He highlighted that to navigate the resource-intensive regulatory regime, newcomers will have to be 'very strategic with whom they partner with'. Creditsights' team noted that the PSUs have shed some market share to the Indian private companies over the years, including Reliance Industries, Cairn India (an entity under metals giant Vedanta), and Hindustan Oil Exploration. 'Foreign participation is mainly through joint ventures, production sharing contracts, or minority stakes in specific blocks,' said the team. Some of the major international players in India are BP, TotalEnergies, Shell, ENI, and ExxonMobil.
Mint
30-05-2025
- Business
- Mint
Oil prices likely to stay around $65/bbl, says petroleum minister Puri
New Delhi: Minister for petroleum and natural gas Hardeep Singh Puri on Friday said that crude oil prices are likely to stay near $65 per barrel due to the ample supply of oil in the global market. Speaking at the CII Annual Business Summit 2025, the minister said that high production is weighing on the oil market. "There are enough supplies in the market. I see global prices, and here I am, very careful, to be in the range of $65 per barrel. My sense is that prices will hold. Supplies becoming available, the prices will be close to $65 a barrel,' he said. He noted that although there have been disruptions due to geopolitical tensions, the prices have not surged as the market is aware that there are adequate supplies. Puri also said that economies with strategic reserves would want to fill them up when the price is low. Mint earlier reported that the government is looking at filling the strategic reserves amid low global prices. The July contract of Brent on the Intercontinental Exchange was $63.96 per barrel, 0.3% lower than its previous close, at the time of going to press. On the likely cut in retail prices of petrol and diesel, the minister told the media, 'If prices remain like this, then going forward, these are things which you can legitimately expect.' Addressing the event, the minister highlighted steps taken by the government to boost domestic oil and gas production. He said that over 1 million square kilometres of sedimentary basins, previously marked as 'no-go' zones, have now been opened for exploration, following which over 37% of bids under the Open Acreage Licensing Policy (OALP) have come from these newly opened areas. Stating that India will be one of the refining hubs, he said the trend was towards the emergence of refining hubs instead of teapot refineries. India's refining capacity is 260 million metric tonnes per annum (mmtpa), which is expected to reach 309.5 mmtpa by 2028, he said. On the significance of the recently passed Oilfields (Regulation and Development) Amendment Act, 2025, Puri emphasised that India has made it easier to do business in exploration and production activities by introducing a single permit system. Despite importing 5.6 million barrels of crude oil per day and spending $139 billion last year on imports, domestic reforms are expected to reduce this dependency. The minister said the government is encouraging domestic exploration while diversifying import sources to 40 from 27 countries. On the clean energy front, he said that there is huge potential for the production of Sustainable Aviation Fuel (SAF) in large quantities in countries like India, Brazil, the US and Canada.
