Andaman discovery holds potential to change India's oil and gas landscape

The catch is that this is still a find of hydrocarbon presence; whether the basin will actually yield natural gas is still unknown, and even it does, it could take a decade for commercialisation

As India’s dependence on imports for crude oil and natural gas grows amid rising domestic demand, the country is now aggressively looking for a major new discovery in its sedimentary basins. Now, with the hydrocarbon potential of its Andaman basin touted as the next big oil and gas find, its hopes of reducing reliance on energy imports seem to have been rekindled.

 

State-run Oil India Ltd (OIL) last month reported a natural gas occurrence in one of its Andaman fields, giving rise to speculation of a significant discovery after decades. India’s Oil Minister Hardeep Singh Puri has expressed confidence that the Andaman find can overturn the country’s oil and gas landscape by making a “Guyana-sized” discovery, referring to the outsize oil reserves the tiny Caribbean nation found in 2015, proceeds from which turned its economy around.

 

What’s new in the Andaman exploration?

 

In late September, India’s upstream major Oil India reported the company’s first 'occurrence' of natural gas from its second exploratory well, Vijayapuram-2, drilled in the offshore Andaman block AN-OSHP-2018/1.

 

According to Puri, the hydrocarbon find was a major step in confirming that the area is rich in natural gas. Verification of the size of the gas pool and its commercial viability, however, will become clearer only after a few months.

 

A so-called 'occurrence' is different from a 'discovery' in that it is merely physical evidence of hydrocarbons in an oilfield during exploration activities. A discovery, on the other hand, confirms commercial viability of a well where the hydrocarbons are found and helps in finalising the investment requirement for extraction.

 

What stage is the find at?

 

For now, the natural gas occurrence in Andaman requires further testing and evaluation to determine the nature of origin of the find, establish reservoir parameters, and confirm commerciality of the block, energy experts said.

 

“The immediate priority lies in leveraging learnings from extensive operations in neighboring provinces either through collaborations with international operators or through their active participation in exploration to accelerate India’s quest for a significant commercial discovery in the Andaman Sea,” said Manas Kumar Sharma, former exploration director at Oil India.

 

Relatively under-explored until now, India’s part of the Andaman basin is located adjacent to proven petroleum reserves in Myanmar to the north and Indonesia to the south.

 

Importance of Andaman discovery to India

 

For decades now, India has been unable to make a big discovery equivalent or comparable to Mumbai High, which was discovered in 1974, or the Krishna-Godavari (KG) basin found in the early 2000s. Due to the absence of a major discovery and declining domestic production, India’s reliance on imports have jumped significantly to 87 per cent for crude oil and around 50 per cent for gas. Until about a decade ago, India sourced about 80 per cent of its crude oil needs.

 

The Andaman discovery could change this trend. If commercial viability is confirmed, major international oil companies (IOCs) are likely to show interest in joining Indian upstream companies to expedite exploration in the area. IOCs typically require robust policy and regulatory frameworks to join exploration in new areas.

 

Pankaj Jain, secretary in the ministry of petroleum and natural gas, has expressed the risk of "losing credibility" if India is unable to make a significant discovery soon.

 

As part of the government's efforts to look for domestic sources, he pointed to the legislative changes it has effected to support the industry.

 

Recently, for example, the Union government approved the Oilfields (Regulation and Development) Act, 2025, opening up 99 per cent of 'no-go areas' in Indian waters for exploration, and conducted bidding rounds for auctioning acreages.

 

Undiscovered, but high potential

 

According to India’s Directorate General of Hydrocarbons (DGH), Andaman is a Category II basin, which means the area has undiscovered but high hydrocarbon potential. Experts believe Andaman could hold around 371 million metric tons of oil equivalent, roughly similar to where Guyana started.

 

“The oil minister was not unrealistic when he said India could have Guyana of its own. However, these are just initial estimates and any firm number on the reserves would be proven when additional wells are drilled,” said Prateek Pandey, head of APAC oil & gas research at Rystad Energy.

 

How far is Andaman from actual production?

 

Most experts say it could be a while before India can see tangibles results from an actual find, going up to as much as a decade.

 

“Even with a major discovery, first production is at least a decade away. The real near-term significance lies in attracting more investments into the Andaman Basin, while the impact on import volumes will build gradually over the longer term,” said Pandey.

 

Exploration activities along with field development, which will finally lead to production, could take years given the difficult geography and technological constraints of Indian upstream companies.

 

The investment required to drill deepwater wells is also substantial, with each well estimated to cost over $100 million. Success rates, however, typically hover around a low 20–30 per cent, underscoring the strategic need for Indian upstream companies to collaborate with technical experts and adequate budgets to manage the risks of frontier exploration, added Pandey.