The petroleum industry in India dates back to 1889 when the first oil deposits in the country were discovered near the town of Digboi in the state of Assam. The natural gas industry in India began in the 1960s with the discovery of gas fields in Assam and Maharashtra (Mumbai High Field). As of 31 March 2018, India had estimated crude oil reserves of 594.49 million metric tonnes (Mt) and natural gas reserves of 1339.57 billion cubic metres of natural gas (BCM).

India imports 82% of its oil needs and aims to bring that down by replacing it with local hydrocarbon exploration, renewable energy and indigenous ethanol fuel.India launches first auction of exploration blocks under new licensing policy , Economic Times, 18 January 2018. India was the second top net crude oil (including crude oil products) importer of 205.3 Mt in 2019. Meanwhile, India’s refining capacity has steadily increased over the years, rising from 215.1 million metric tonnes per annum (MMTPA) to reaching 258.1 MMTPA as of FY25.

By March 2021, India's domestic crude oil production output fell by 5.2% and natural gas production by 8.1% in the FY21 as producers extracted 30.4917 Mt of crude oil and 28.67 BCM of natural gas in the fiscal year. In August 2021, crude oil production decreased by 2.3%, but there was a 20.23% increase in homegrown natural gas.

India offers US$ 12 per MMBTU whereas natural gas exploration and production cost is capped at $3 in many markets. Oil recovery is still only 30–35 per cent in India whereas state of the art technology can double it.

History

The first oil deposits in India were discovered in 1889 near the town of Digboi in the state of Assam.

The natural gas industry in India began in the 1960s with the discovery of gas fields in Assam and Gujarat. Natural gas gained further significance after the discovery of large reserves in the South Basin fields by ONGC in the 1970s.

Reserves As of 1 April 2021, India had estimated crude oil reserves of 587.335 Mt, decreasing by 2.65% from the previous year. The largest reserves are found in the Western Offshore (37%) and Assam (27%). The estimated reserves of natural gas in India as of 1 April 2021 was 1,372.62 BCM, increasing by 0.52% from the previous year. The largest reserves of natural gas are located in the Eastern Offshore (40.6%) and the Western Offshore (23.7%).

Distribution of reserves by state/region The following table shows the estimated crude petroleum and natural gas reserves in India by state/region as on 31 March 2017.

RegionCrude oil reserves (Mt)Share of oil (%)Natural gas reserves (BCM)Share of gas (%)Arunachal Pradesh1.520.250.930.07Andhra Pradesh8.151.3548.313.75Assam159.9626.48158.5712.29Coal Bed Methane00106.588.26Eastern Offshore40.676.73507.7639.37Gujarat118.6119.6362.284.83Nagaland2.380.390.090.01Rajasthan24.554.0634.862.70Tamil Nadu9.001.4931.982.48Tripura0.070.0136.102.80Western Offshore239.2039.60302.3523.44Total604.101001,289.81100

Strategic petroleum reserves Building petroleum reserves like underground tank storage, above-ground tank storage, and fully developed and ready-to-exploit in situ reserves is a lucrative proposition for an oil-importing country like India, as the oil exporters charge exorbitant prices when the oil demand is little more than supply. The Indian Strategic Petroleum Reserve (SPR) is an emergency fuel store of total 5 Mt or of strategic crude oil enough to provide 70 days of consumption, which are maintained by the Indian Strategic Petroleum Reserves Limited.Alexander's Gas & Oil Connections - India to build up storage of crude oil Strategic crude oil storages are at 3 underground locations in Mangalore, Visakhapatnam and Padur, Udupi district, Karnataka with ready access to the refineries on the east and west coasts. Another method to build up strategic petroleum reserve at low cost is to develop a proven oil field for a higher oil extraction rate and keeping it reserved for full production on an intermittent basis when the global oil price crosses a set upper limit.

Two more SPRs will add strategic petroleum reserves of 12 days in addition to 10 days of reserves achieved in Phase I. These SPRs under Phase II will be located at Chandikhol in Odisha and Padur in Karnataka. Indian refiners maintain 65 days of crude storage, and when added to the SPR storage planned and achieved, it takes the Indian crude storage tally to 87 days. This is very close to the storage of 90 days mandated by IEA for member countries. The total storage figure is excluding the storage capacity of petroleum products with the marketing agencies and bulk consumers. India is also considering storing oil in other countries.

Production India's domestic crude oil and natural gas production has declined steadily since 2011–12. India produced 30.49 Mt of crude petroleum in 2020–21, declining by 5.21% over the previous fiscal. The production of natural gas was 28.67 BCM in 2020–21, declining by 8.05% over the previous year. Production of crude oil and natural gas declined by a compound annual growth rate (CAGR) of 2.44% and 5.47% respectively over the previous decade.

India also produces petroleum products and produced 233.51 Mt in 2020–21, a decline of 11.19% over the previous year. Among petroleum products, high speed diesel oil accounted for 43%, followed by motor gasoline (15%). Production of petroleum products grew by a CAGR of 1.56% over the previous decade.

ONGC is developing the KG-DWN-98/2 block in Krishna Godavari basin with capital expenditures of about US $5.07 billion (approximately INR 340 billion) leading to oil production from the field to the extent of 25 million tons and 45 billion m3 natural gas . The capex works out to nearly US$11 per barrel of oil equivalent (BOE) only for the total production of oil and gas. ONGC already has proved oil and gas reserves to the extent of 462.12 MMTOE at very low capex comparable with that of OPEC countries. Oil fields in Rajasthan state are emerging as a major oil and gas producer. In 2021, Reliance BP also started production from Krishna Godavari basin gas fields substantially enhancing the indigenous gas production.

India has deployed 159 rigs and drilled 545 production wells during 2017-18 which stands globally fifth but the oil and gas production is not commensurate with the wells drilled. India has planned to produce 15 Mt/year of compressed biogas (CBG), a carbon neutral fuel, by 2023. CBG replaces the CNG which is imported in the form of LNG.

Gasification of coal or lignite or pet coke or biomass produces synthesis gas or syngas (also known as coal gas or wood gas) which is a mixture of hydrogen, carbon monoxide and carbon dioxide gases. Coal gas can be converted into synthetic natural gas by using the Fischer–Tropsch process at low pressure and high temperature. Coal gas can also be produced by underground coal gasification if the coal deposits are located deep in the ground or it is uneconomical to mine the coal. Synthetic natural gas production technologies promise to dramatically improve India's supply of natural gas. Many coal-based fertiliser plants can also be economically retrofitted to produce synthetic natural gas. It is estimated that the production cost for syngas could be below US.

The abundantly available coal in India is low rank coal which is not suitable for coal gasification without blending with pet coke. However, low rank coal/lignite can be converted into SNG by using hydrogen.

Petroleum refining As on 31 March 2021, there were 23 crude oil refineries in India, of which 18 were state-owned, 3 were privately owned and 2 were joint ventures. The total oil refining capacity in India stood at 248.87 Mt per year, remaining unchanged from the previous year. India has developed a strong petroleum refining industry supported by both public and private sector investments. The country’s refineries produce key petroleum products such as gasoline, diesel, LPG, and aviation fuel to meet growing domestic and export demand. Refineries in India processed 221.37 Mt of oil in 2020-21 achieving a capacity utilization of 88.8%. With a total refining capacity of 69.23 million metric ton per year, the state-owned Indian Oil Corporation was the largest refiner in the country by capacity. Indian Oil's refineries processed 62.35 Mt of crude oil in 2020–21.

Many refineries are using the lower end residual oil with higher sulphur content to produce more lighter oils (petrol, diesel, etc.) by installing petroleum coker units. This process generates a solid fuel called Pet coke which has higher calorific value and sulphur. As developed countries have banned use of high sulphur pet coke and residual oils, these fuels further are converted in to synthetic natural gas and methanol in Methanation plants to avoid their disposal problem. Nearly 38% of residual fuel oils are consumed in the shipping sector. The International Convention for Prevention of Pollution from Ships (MARPOL), adopted by the IMO, has mandated that marine vessels shall not consume residual fuel oils (bunker fuel, etc.) with a sulphur content greater than 0.1% from the year 2020. Thus complete use of residual oil or pet coke in gasification unit would be part of petroleum refining complexes/plants in future to avoid waste products disposal.

Due to the COVID-19 pandemic of 2020, refineries are forced to operate at lower capacities as the demand for petroleum products (mainly aviation turbine fuel and petrol) have fallen steeply. After the implementation of IMO rules restricting use of high sulfur fuel oil (HSFO) by the marine vessels, the prices of HSFO have fallen so low compared to crude oil and using it has become more economical by the advanced refineries with vacuum distillation and coker units to produce petrol, diesel, pet coke, etc. Pet coke is in high demand for use in cement production.

By 2025, India's total oil refining capacity increased to approximately 258.1 million metric tonnes per annum (MMTPA), making the country one of the largest refining hubs in Asia. Major refiners such as Indian Oil Corporation, Reliance Industries and Nayara Energy have expanded their refining and petrochemical integration projects to increase exports of petroleum products and strengthen India's position in the global refining market.

Consumption

India is the third largest consumer of crude oil in the world, after the United States and China. The estimated total consumption of crude oil in India rose from 204.12 Mt in 2011–12 to 221.77 Mt in 2020–21 with a CAGR of 0.93%. Consumption declined by 12.82% in 2020–21 compared to the previous fiscal primarily due to disruptions caused by the COVID-19 pandemic. The estimated total consumption of natural gas was 60.64 BCM, declining by 0.67% over the previous fiscal year.

High speed diesel oil accounted for 37.42% of total consumption of all types of petroleum products in 2020–21, followed by petrol (14.40%), liquefied petroleum gas (14%), petroleum coke (8.03%), and naphtha (7%). The largest consumers of natural gas are the fertilizer industry (29%), power generation (18%), and transportation (15%). Natural gas is consumed for both energy (57.08%) and non-energy (35.45%) related uses.

The Dankuni coal complex produces syngas that is piped to industrial users in Calcutta.

Electricity generation

Crude oil and natural gas are the second and third largest sources of electricity generated in India, after coal. Crude oil accounted for 10.34% and natural gas accounted for 8.7% of the total electricity produced in 2017–18. As of 31 March 2021, the installed capacity of gas-based power plants in India was 24,924 MW, accounting for 6.5% of the total installed capacity.