India's domestic crude oil production has seen a marginal decline over the last five years due to aging oilfields. While state-run producers ONGC and Oil India have kept output steady, rising national demand has increased the country's reliance on imports. The government is now focusing on regulatory reforms and expanded exploration to bridge the supply-demand gap.
Detailed Coverage
India’s domestic crude oil production has faced a slight downward trend over the past five years, primarily caused by the natural decline of mature oil fields. The Ministry of Petroleum and Natural Gas confirmed in the Lok Sabha on July 24 that these aging assets have struggled to maintain historical output levels. This supply constraint comes at a time when the nation's economic growth is driving a steady rise in the consumption of petroleum products.
State Producers Resilience
Despite the broader sector challenges, major state-run energy companies Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) have maintained stable production figures. ONGC has kept its output at approximately 19.6 million metric tonnes annually. Oil India Ltd reported an increase in production, reaching 3.44 million metric tonnes compared to 2.94 million metric tonnes in earlier periods. According to government data, these companies have managed to limit their annual production decline to about 2 percent, a rate that compares favorably to the 6 percent average seen in global mature fields.
Recovery in Natural Gas
While crude oil production has been under pressure, domestic natural gas output has shown a recovery since the 2021-22 fiscal year. This growth is largely driven by production from deepwater blocks in the Krishna-Godavari Basin. The expansion of these offshore assets is a key factor in the government’s energy security strategy, as it aims to supplement the nation's increasing industrial and transport-related energy requirements.
Government Strategy and Import Reliance
To manage the widening gap between domestic supply and demand, India currently sources crude oil from 41 countries. This diversification strategy includes both traditional suppliers in the Middle East—such as Iraq, Saudi Arabia, and the UAE—and newer sources including the United States, Brazil, and Mexico. To further reduce import dependency, the government has introduced significant policy changes. These include the transition from Production Sharing Contracts to Revenue Sharing Contracts and the removal of exploration restrictions in offshore areas. Over the last ten years, the government has opened up over 3.5 lakh square kilometers of acreage for exploration to incentivize investment. Investors should continue to track the progress of new exploratory drilling activities and the success rate of deepwater projects, as these will be the primary drivers for future domestic production targets and the overall sustainability of the country's energy supply chain.