Upstream oil PSUs may see greater focus on exploration in evaluations

The oil ministry is considering increasing the weightage of exploration activities in the performance assessment of upstream oil PSUs to boost domestic hydrocarbon discoveries

As the government looks to accelerate domestic oil and gas exploration, the Ministry of Petroleum and Natural Gas (MoPNG) plans to significantly increase the weightage assigned to exploration activities in the performance evaluation of upstream public-sector companies, a senior official told Business Standard.

 

The move aims to encourage exploration and production (E&P) firms to step up drilling activity and pursue commercially viable discoveries.

 

At present, crude oil and natural gas production account for around 50 per cent of the performance score of upstream oil PSUs such as Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL), while exploration activities account for only about 5 per cent.

 

“Currently, the production of an E&P company is given higher weighting than exploration in the evaluation. Therefore, they try to produce more from existing fields. If we want more exploration, its weightage needs to equal production,” the official said.

 

The government annually evaluates public-sector undertakings using the memorandum of understanding (MoU) framework, which sets performance targets for the coming financial year.

 

The oil ministry is working on a Cabinet note to secure approvals for increasing the weightage of exploration in year-end assessments. Queries sent to MoPNG remained unanswered until press time.

 

This comes as the West Asia crisis highlighted India’s dependence on energy imports amid stagnant domestic output. Crude oil production declined for the eleventh consecutive year in 2025-26 (FY26), while natural gas output fell for the second straight year due to natural depletion in ageing fields and the absence of major new discoveries.

 

Domestic crude oil production fell 2.6 per cent to 27.95 million tonnes in FY26, while natural gas output declined 3.5 per cent to 34,325 million standard cubic metres, according to official data.

 

The government has recently taken several steps to boost exploration, including launching the Samudra Manthan programme in August 2025. The initiative aims to support and finance deepwater and ultra-deepwater exploration to improve the chances of commercial hydrocarbon discoveries.

 

Most recently, the Centre signed a tripartite MoU on June 11 with Assam and Nagaland to facilitate oil and gas exploration in a disputed border area and unlock hydrocarbon resources that have remained largely untapped for more than three decades.