Reduction of India’s oil and gas production

Context

 India's crude oil and natural gas production have been falling since 2011-12, which in turn is increasing the imports of oil and gas.

Reasons behind the fall

• Pandemic: Covid-19 related delays are cited as among the key reasons by producers behind lower production in the year 2021.
• Older and ageing wells of production: Most of India’s crude oil and natural gas production comes from ageing wells that have become less productive over time.
• Lack of technological advancement: There is a need to invest in extracting oil and gas using technologically intensive methods from more difficult fields such as ultra deepwater fields.
• Lack of interest from foreign investors: ONGC and Oil India are the only key bidders for hydrocarbon blocks in auction under the Open Acreage Licensing Policy (OALP) regime. The interest of foreign payers in oil and gas exploration in India had been low.
• Low Private participation: Delays in the operationalisation of hydrocarbon blocks because of delays in clearances including the environmental clearances and approval by the regulator of field development plans are considered to be the reasons behind lower private participation.
• Climate objectives: The internal maximum production levels which are set by oil and gas majors to address climate change had also lowered interest by oil majors to expand operations in India.

Government’s role

• Fiscal incentives: Government may provide the fiscal incentives to attract foreign players.
• Reduction in cess: Industry players are demanding for cess reduction on domestically produced crude oil to 10 per cent from the current 20 per cent.