Amid concerns over U.S. President Donald Trump’s strict tariff policies, Indian financial services firm Motilal Oswal suggests that India should focus on strengthening its domestic industries and increasing local production. Trump has previously imposed heavy tariffs on India, including a 25% duty on steel and a 10% duty on aluminum in 2018. These tariffs significantly impacted India’s trade with the U.S., leading to a 46% decline in steel exports within a year.
India’s Oil Dependency and Potential Reserves
India heavily relies on oil imports, which results in large capital outflows and a weaker rupee. The country imports 87% of its oil, mainly from Russia, Iraq, Saudi Arabia, the United Arab Emirates, and the U.S. In the 12 months leading to mid-2024, India spent $132.4 billion on crude oil imports, marking a 16% year-over-year decline due to lower global oil prices.
Despite this dependency, India possesses significant untapped oil reserves. According to a report by S&P Global Commodity Insights, four largely unexplored sedimentary basins in India may contain up to 22 billion barrels of oil. These lesser-known Category-II and III basins—the Mahanadi, Andaman Sea, Bengal, and Kerala-Konkan—are estimated to hold more oil than the Permian Basin, which has already produced 14 billion of its 34 billion barrels of recoverable reserves.
Rahul Chauhan, an upstream analyst at Commodity Insights, emphasized the potential of India’s unexplored oil and gas sector. He noted that state-owned companies like Oil and Natural Gas Corporation (ONGC) and Oil India Limited hold exploration rights in the Andaman waters under the Open Acreage Licensing Program (OALP) and have planned major projects. However, India still awaits investment from international oil companies with deepwater exploration expertise to participate in current and future OALP bidding rounds.
Government Push for Exploration
Currently, only 10% of India’s 3.36 million square kilometers of sedimentary basins are under exploration. However, Petroleum Minister Hardeep Singh Puri has announced that this figure will rise to 16% in 2024, following the allocation of new blocks under the OALP. So far, the program has awarded 144 blocks covering approximately 244,007 square kilometers.
Under the OALP framework, companies can identify potential exploration areas and submit expressions of interest throughout the year. The government then accumulates these interests three times a year before putting them up for auction. According to Minister Puri, India’s oil and gas exploration activities offer investment opportunities worth $100 billion by 2030.
Significant Discoveries and Future Plans
India has made notable discoveries in the Krishna-Godavari, Barmer, and Assam basins. However, exploration in other areas has progressed slowly. Of India’s 3.14 million square kilometers of sedimentary basins, 1.3 million square kilometers lie in deepwater regions.
India’s first deepwater exploration took place in the Bay of Bengal in 2024, led by ONGC in the Krishna-Godavari Basin. ONGC has announced plans to invest over $10 billion in developing multiple deepwater projects in its KG-DWN-98/2 block in this basin.
Meanwhile, state-owned Oil India Limited is preparing to start exploration activities in Nagaland. The company has been awarded 30 blocks under OALP and has already drilled wells in all awarded blocks except for Nagaland. An Oil India official stated that discussions are ongoing with government officials, ONGC, and the Nagaland administration to resume exploration efforts.
Growing Interest from Global Energy Companies
Unlike Pakistan, India is expected to attract major global oil and gas companies. British energy giant BP Plc has already been expanding its presence in India. BP has formed a joint venture with Reliance Industries to operate 1,900 fuel retail stations across the country. The company also produces oil and gas from a deepwater block in the Krishna-Godavari Basin and has partnered with ONGC to bid for offshore exploration rights.
India’s Role in Global Oil Demand Growth
Analysts predict that India will soon become the primary driver of global oil demand growth, surpassing China. According to Emma Richards, a senior analyst at Fitch Solutions, China’s dominance in global oil demand is rapidly diminishing. Over the next decade, China’s share of emerging market oil demand growth is expected to drop from nearly 50% to 15%, while India’s share is projected to double to 24%.
India’s rapidly growing population, which has likely surpassed China’s, is expected to drive higher energy consumption. Additionally, India’s transition from gasoline and diesel-powered transportation to alternative energy sources is expected to lag behind other regions. In contrast, China is rapidly adopting electric vehicles and clean energy solutions.
With growing domestic demand and substantial untapped reserves, India is set to expand its role in the global energy market. The government’s efforts to boost exploration and attract foreign investment may position the country as a significant player in the oil and gas industry in the coming years.
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