Energy security: India needn't be staring at a $1 trillion import bill

As India races towards economic superpower status, a glaring vulnerability threatens to undermine our progress: our dependence on imported oil and gas. According to the Petroleum Planning & Analysis Cell (PPAC), India's crude oil import dependency has reached 87-88%, with projections suggesting it may exceed 90% by 2030. This trajectory could result in a staggering $1 trillion energy import bill over the next five years.
The decline in domestic production makes for disheartening reading. Our crude oil output has fallen from over 36.9 million tonnes in 2015-16 to just 29.7 million tonnes in 2023-24, even as our consumption stays on a relentless upward trajectory. Natural gas presents a slightly better picture, with import dependency at 50-55%, but rapidly rising demand threatens to widen this gap as well.
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On paper, India holds significant hydrocarbon potential: around 210–215 billion barrels of oil and oil-equivalent gas across 3.14 million sq km of sedimentary basins. Yet, only half this area has been explored. Without aggressive efforts to explore and develop these reserves, this potential will remain untapped.
To its credit, India's government has implemented several policy initiatives to stimulate upstream activity. The Hydrocarbon Exploration and Licensing Policy (HELP), introduced in 2016, replaced the previous New Exploration Licensing Policy with a revenue-sharing contract (RSC) model, uniform licensing for all hydrocarbons and promised marketing and pricing freedom for new gas production. The Open Acreage Licensing Policy (OALP) allowed companies to select exploration blocks year-round, rather than waiting for formal bid rounds.
While more than 150 blocks have been offered across nine OALP rounds since 2018, the results have been modest. Participation has declined and international oil companies—crucial for capital and technology—remain largely absent. The recent OALP-IX round in 2024 saw only eight blocks awarded, primarily to national oil companies.
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A core issue lies in the shift from production sharing contracts (PSCs) to the RSC model. This structure places greater upfront risk on explorers—particularly problematic in under-explored regions where geological uncertainty is high.
Countries like Mexico, Brazil and Colombia offer counter examples. Mexico retained PSCs for high-risk areas following its 2013 reforms, attracting over $40 billion in investment. Brazil's PSCs for its pre-salt reserves brought in significant capital and innovation. Even Colombia, with less prospective geology, succeeded by aligning fiscal terms with investor expectations.
In India, despite policy improvements on paper, practical challenges persist. Administrative delays, unclear fiscal terms and perceptions of high risk deter global participation. The exploration landscape remains dominated by national firms like ONGC and Oil India Ltd. While their efforts are commendable, a more diverse ecosystem—including international majors and specialized independents—is essential to scale exploration meaningfully.
Compounding this is the global energy transition. As decarbonization gains traction, traditional oil and gas investments face increasing scrutiny. Yet, in the context of India's economic growth and our long runway to net-zero by 2070, hydrocarbons will remain critical to India's energy mix for decades. Balancing immediate energy security with long-term sustainability requires strategic intervention for upstream exploration to attract capital.
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To address these challenges, India must adopt a multi-pronged and strategic approach.
A key step is to revisit the fiscal regime and consider re-introducing PSCs, especially for frontier and high-risk basins where geological uncertainty is high. This model better balances risk and reward, as seen in countries like Mexico and Indonesia, which saw investment rebounds after adopting or enhancing PSC frameworks. Administrative complexities related to cost recovery—often cited as a drawback of PSCs—can be managed through appropriate delegation to tax authorities under the ministry of finance.
Also, the National Seismic Programme must be accelerated to map India's sedimentary basins comprehensively. Employing advanced technologies to reduce geological risk will enhance investor confidence and guide better targeted exploration efforts. In tandem, the government should offer more attractive fiscal incentives for technically challenging or less-proven areas.
These could include reduced royalty rates, extended exploration timelines, tax holidays and cost recovery allowances. The UK and Norway offer instructive examples of how tailored financial structures can sustain exploration even in mature or complex basins.
Administrative streamlining is also essential. Simplifying approval processes and ensuring timely, transparent decision-making would go a long way in attracting investment. A single-window clearance system could help eliminate bottlenecks that frustrate developers and delay projects.
To support risk-taking in exploration, particularly by smaller firms and new entrants, the creation of specialized exploration funds with built-in risk-sharing mechanisms could play a catalytic role. These funds could help diversify participation and reduce capital constraints for technically capable but financially constrained players.
Additionally, strengthening the capabilities of national oil companies through strategic international partnerships would help accelerate technology adoption and improve operational efficiency. Institutions like the Directorate General of Hydrocarbons should be empowered with greater independence and resources, allowing them to function more effectively as regulators and facilitators of sectoral growth.
Also Read: Rely on modern geothermal energy to power our AI ambitions
The recent Oilfields Regulation and Development Amendment Act of 2024 modernizes the outdated 1948 law, addressing several industry pain points. It introduces faster dispute resolution, clearer contractual definitions and incentives for enhanced recovery. Importantly, it recognizes new exploration technologies.
If the 2024 amendment is effectively implemented, it could reduce contractual uncertainty and unlock stalled projects. However, as global examples such as Kazakhstan show, legislative reforms must be accompanied by consistent administrative execution. Rules, notifications and clarity in application will determine the amendment's impact.
The $1 trillion that India may spend on energy imports by 2030 is not just a financial burden, it is a lost opportunity to generate domestic jobs, spur innovation and achieve energy sovereignty. The roadmap is clear; the urgency now lies in execution. This is India's trillion dollar question. Our response will shape the nation's energy future and economic destiny for generations to come.
The authors are, respectively, vice president of Pune International Centre; and managing director with Boston Consulting Group and founder member of Pune International Centre.

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