Indian Petroleum industry has a vital role to play in India's economic growth. Read about origin and growth of oil & gas sector in India.

Oil & Gas Industry in India

The origin of oil & gas industry in India can be traced back to 1867 when oil was struck at Makum near Margherita in Assam. At the time of Independence in 1947, the Oil & Gas industry was controlled by international companies. India's domestic oil production was just 250,000 tonnes per annum and the entire production was from one state - Assam.

The foundation of the Oil & Gas Industry in India was laid by the Industrial Policy Resolution, 1954, when the government announced that petroleum would be the core sector industry. In pursuance of the Industrial Policy Resolution, 1954, Government-owned National Oil Companies ONGC (Oil & Natural Gas Commission), IOC (Indian Oil Corporation), and OIL (Oil India Ltd.) were formed. ONGC was formed as a Directorate in 1955, and became a Commission in 1956. In 1958, Indian Refineries Ltd, a government company was set up. In 1959, for marketing of petroleum products, the government set up another company called Indian Refineries Ltd. In 1964, Indian Refineries Ltd was merged with Indian Oil Company Ltd. to form Indian Oil Corporation Ltd.

During 1960s, a number of oil and gas-bearing structures were discovered by ONGC in Gujarat and Assam. Discovery of oil in significant quantities in Bombay High in February, 1974 opened up new avenues of oil exploration in offshore areas. During 1970s and till mid 1980s exploratory efforts by ONGC and OIL India yielded discoveries of oil and gas in a number of structures in Bassein, Tapti, Krishna-Godavari-Cauvery basins, Cachar (Assam), Nagaland, and Tripura. In 1984-85, India achieved a self-sufficiency level of 70% in petroleum products.

In 1984, Gas Authority of India Ltd. (GAIL) was set up to look after transportation, processing and marketing of natural gas and natural gas liquids. GAIL has been instrumental in the laying of a 1700 km-long gas pipeline (HBJ pipeline) from Hazira in Gujarat to Jagdishpur in Uttar Pradesh, passing through Rajasthan and Madhya Pradesh.

After Independence, India also made significant additions to its refining capacity. In the first decade after independence, three coastal refineries were established by multinational oil companies operating in India at that time. These included refineries by Burma Shell, and Esso Stanvac at Mumbai, and by Caltex at Visakhapatnam. Today, there are a total of 18 refineries in the country comprising 17 in the Public Sector, one in the private sector. The 17 Public sector refineries are located at Guwahati, Barauni, Koyali, Haldia, Mathura, Digboi, Panipat, Vishakapatnam, Chennai, Nagapatinam, Kochi, Bongaigaon, Numaligarh, Mangalore, Tatipaka, and two refineries in Mumbai. The private sector refinery built by Reliance Petroleum Ltd is in Jamnagar. It is the biggest oil refinery in Asia.

By the end of 1980s, the petroleum sector was in the doldrums. Oil production had begun to decline whereas there was a steady increase in consumption and domestic oil production was able to meet only about 35% of the domestic requirement. The situation was further compounded by the resource crunch in early 1990s. The Government had no money for the development of some of the then newly discovered fields (Gandhar, Heera Phase-II and III, Neelam, Ravva, Panna, Mukta, Tapti, Lakwa Phase-II, Geleki, Bombay High Final Development schemes etc. This forced the Government to go for the petroleum sector reforms which had become inevitable if India had to attract funds and technology from abroad into the petroleum sector.

The government in order to increase exploration activity, approved the New Exploration Licensing Policy (NELP) in March 1997 to ensure level playing field in the upstream sector between private and public sector companies in all fiscal, financial and contractual matters. This ensured there was no mandatory state participation through ONGC/OIL nor there was any carried interest of the government.

To meet its growing petroleum demand, India is investing heavily in oil fields abroad. India's state-owned oil firms already have stakes in oil and gas fields in Russia, Sudan, Iraq, Libya, Egypt, Qatar, Ivory Coast, Australia, Vietnam and Myanmar. Oil and Gas Industry has a vital role to play in India's energy security and if India has to sustain its high economic growth rate.

Note: The above information was last updated on 21-07-2007