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United States President Donald Trump’s tariff barrage against India for buying Russian oil might be a crude strategy — both to pressure Russian President Vladimir Putin on Ukraine and to extract concessions from our trade negotiators. But Mr Trump’s claim that a US company could unlock Pakistan’s “massive” oil reserves — and that some might get sold to India — adds insult to our injury!
India can, if necessary, switch to many alternate suppliers without much additional cost. (Official statements suggest the 5 million barrels per day we import are now sourced from 40 different countries.) But there will be political, compliance, and reputational costs to pay, and India’s refined petroleum exports may face a haircut. All this provides crude lessons on the ruthless geoeconomic competition in the emerging world order.
Many believe Mr Trump’s geopolitical strategies mesh with the drive to sustain US production and exports of oil by keeping prices stable at present high levels. Shale oil and gas companies (which drove the decade-long surge in US production) need prices above $60-65 per barrel to stay profitable. Many productive shale basins have peaked; and despite Mr Trump’s call to “drill baby drill’, companies are prioritising shareholder returns over maximising production. Oil and gas are the US’ largest export item, but the billions in energy sales that Mr Trump keeps announcing require that prices not fall even as Opec+ unwinds production cuts, and increases global supplies. Mr Trump is cognisant of Opec’s long game of retaking the market share it lost to the US after 2015. For him, sanctioning Iran, Venezuela, and now Russia are dual-use policies.
As the world’s third-largest importer, spending almost $400 million per day on crude imports, India is a prize market for sellers. But with dependence on imports nearing 90 per cent of consumption, our economic growth encounters growing geopolitical risk. Reversing the slide in domestic production has become a strategic necessity.
The Minister for Petroleum and Natural Gas Hardeep Singh Puri, rightly points to major reform initiatives in recent years. Nearly 1 million sq km of the erstwhile “no go” areas have been opened for exploration since 2022. He told the Rajya Sabha on July 29 of 172 hydrocarbon discoveries, including 62 offshore, since 2015. But the figures he cited added potential reserves of just about 600 million barrels, only some of which can be extracted. Tiny, compared to the 11 billion barrels found in Guyana, which he believes can be replicated in the Andaman offshore.
Actual exploration in the newly opened acreage has been inadequate, as not enough has been done to make exploration and production attractive in India. The problem is that Mr Puri operates with one hand tied behind his back by those in charge of taxation; for whom the oil industry is exclusively a source of revenue — to be extracted relentlessly.
In 2022, Oil and Natural Gas Corporation (ONGC) set an exploration target of 500,000 sq km by 2025. That has now been pushed forward to 2030, with exploration having reached only 180,000 sq km! ONGC told investors in February 2025 it had spent about ₹10,000 crore on exploratory drilling in 2024. It may not have mentioned that ₹14,000 crore was also spent on the oil industry development cess. This cess — a relic from the 1970s — does not fund oil industry development; for many decades, it has only fed the finance ministry’s insatiable appetite for taxing oil companies. The ₹43,000 crore shelled out as cess in the last three years, could have dramatically enhanced exploratory activity.
India’s domestic oil producers also paid a sizable chunk of the ₹45,000 crore squeezed out of the industry as a “windfall tax” in 2022-24, when high prices made exploration globally attractive. There was no relief for new investments — as in the UK, which designed this “windfall” revenue-earning device. International oil companies, with viable investment opportunities elsewhere, preferred to wait and watch if policy reforms would be matched by financial compensation for exploratory risk. Meanwhile, they opened new frontiers for oil and gas production in Namibia, Senegal, Ghana, and elsewhere, with additional revenues accruing to those governments!
Some recent developments do, however, hold prospects for an upturn in domestic production. In February, ONGC contracted BP as a technical services provider to deliver over a 40 per cent increase in incremental production from the mature Mumbai High field. The newly unveiled Draft Petroleum & Natural Gas Regulations can encourage exploration in other mature fields, which have underutilised infrastructure in place. Energy agency Rystad has noted that many countries have prioritised such cost-effective “infrastructure-led exploration” over high-risk new exploration plays. India needs both, and thus ONGC’s recent announcement of another deal, with BP and Reliance, for exploration of a potentially promising block offshore Saurashtra, is encouraging.
The offshore areas stretching from Pakistan’s Indus basin to Kutch/Saurashtra are considered prospective, despite the lack of commercial-scale discoveries so far. In 2024, speculative reports emerged of massive oil potential in Pakistani waters, based on long surveys conducted with an unnamed “friendly country”, thought to be Turkey. Mr Trump did not reveal any updated evaluation of Pakistan’s potential , whether in the offshore Indus basin, further west offshore Makran, or in onshore shale belts. However, dismissing his salvo as uninformed bluster will not get us anywhere. More exploration will.
The author is a former foreign secretary
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
