India's oil production in dire straits as fuel use continues to be strong

Oil and Natural Gas Corporation (ONGC) and Oil India Ltd, which account for most of India’s crude oil output, have projected a 10-21 per cent decline in domestic production by 2030 — which they have told a parliamentary committee. 

This is despite years of government effort to reverse the fall in production and comes against the backdrop of India’s emerging “superpower status” as a demand centre for oil and gas. 

India’s import dependence is worsening, with the oil ministry telling the standing committee that the share of import in the volume of crude processed will increase to 91 per cent by 2028-29.  

ONGC’s output is expected to decline by 10 per cent from an estimated 410,000 barrels per day (bpd) in 2025-26 to 372,000 bpd in 2029-30, according to the second report of the Standing Committee on Petroleum & Natural Gas, presented to the Lok Sabha last week. 

India’s biggest producer of oil and gas is also lagging in exploration. It drilled only 74 exploratory wells essential to find new oil, compared to 124 in 2024-25 and has targeted 111 wells next fiscal, according to the report. 

It has also failed to meet production targets it agreed upon with the government, with standalone production including condensate, a liquid product, at 390,000 bpd in 2023-24 as against the target of 458,000 bpd. 

Oil India’s output is expected to decline by 21 per cent to 66,000 bpd by 2029-30 from 84,000 bpd next financial year, according to the report. On the reasons for this the report said “there has been a natural decline in production of crude oil and natural gas, and there were not many significant (discoveries ) of hydrocarbon for quantum jump of production in those old fields”. The committee said “even after significant increase in exploration efforts over the years, no new important oil field has been discovered, and that exploration efforts need to be increased substantially”. 

This exposes the world’s fastest-growing economy to suppliers located in the geopolitically sensitive hotspots of West Asia and Russia. The dip comes despite New Delhi’s efforts to increase output by relaxing rules, such as opening up no-go areas such as the Andaman basin in the Bay of Bengal to explorers. New Delhi also amended the Oilfields Regulation Act this month in a last-ditch effort to get foreign drillers to bid under the 10th licensing round. 

ONGC could not be reached for comments. 

 

Demand surge 

The projected slump comes even as the world’s top forecasters, led by the International Energy Agency and the US Energy Information Administration (EIA), project India as the biggest contributor to world oil demand this year. 

“India is one of the few places growing faster than its pre-pandemic trend,” said the EIA’s short-term energy outlook, published in January. “We expect liquid fuels consumption in India will increase by 300,000 bpd in both 2025 and 2026, compared with an increase of 200,000 bpd in 2024, driven by rising demand for transportation fuels.” 

Top executives in state-run refiners project demand for oil to grow at 3-4 per cent annually with gasoline use slated to increase 5-6 per cent next fiscal. 

India’s refining capacity may increase to 6.2 million bpd in 2028 from around 5 million bpd now, according to the report. But that would involve greater dependence on imported crude oil. 

India processed 5.2 million bpd in 2023-24, with indigenous oil accounting for 11 per cent, according to the report. 

Gas prospects 

Natural gas production may see an upswing even though the increase may not be commensurate with a double-digit increase in consumption and the government’s plans to more than double the ratio of gas demand in the proportion of the country’s energy mix to 15 per cent. 

ONGC’s gas production is expected to increase by 25 per cent to 27.8 billion cubic metres (bcm) by fiscal 2030 from 22.3 bcm in 2025-26 during the period, aided by deepwater discoveries in the Krishna Godavari basin on the east coast. Oil India’s gas production is expected to go up 42 per cent to 5.1 bcm from 3.6 bcm during the period. Demand for gas was 67.5 Bcm last financial year, according to the oil ministry.