The Indian government is preparing to introduce an advanced new policy for Enhanced Recovery (ER) and Improved Recovery (IR) to take effect in 2025 in the oil and gas sector. The upcoming ER/IR policy looks at upgrading the current existing 2018 edition of the same so as to provide enhanced finance as a better incentive scheme toward more profitable oil-gas-based ventures.
Table of Contents
Background of the Policy
In October 2018, the Indian government unveiled a policy that encourages ER and IR methods in oil and gas extraction. This policy aimed at providing operators with financial incentives to make them use these methods besides new ways of producing hydrocarbons. The original plan required a review after five years, which resulted in June 2023 in forming an expert committee by Ministry of Petroleum and Natural Gas. Though this committee carried out its review very shortly and submitted a draft version of the new ER Policy, it is yet to receive formal adoption.
Oil and Gas Production Challenges
India's oil and gas industry is facing many issues, especially when production levels decline. According to government estimates in 2018, recovery rates are at approximately 60% for oil fields and 80% for gas fields. Most old wells are yielding less oil and gas. Both public and private exploration companies have been asking the government to update the existing policies. Industry leaders believe that the existing ER/IR techniques are too expensive, and the current tax breaks alone cannot make projects financially viable.
Decreasing Domestic Production
India's oil production has been on a declining trend since 2011-12, from a peak of 38.1 million tonnes to about 29.4 million tonnes in 2023-24. This is yet another pointer to the imperative need for rejuvenation in ageing oilfields. The New Exploration Licensing Policy introduced in 1999 was expected to boost production, but it did not fully address the problems of declining output.
Future Outlook
As India becomes increasingly dependent on imports-by bringing in as much crude oil as 232.5 million tonnes in the FY24-to rely totally on imports; the upcoming Modified ER policy, though expected to throw open better options for exploring and producing oil and gas, will become a much more necessary driver for policy shifts to fuel increased domestic output. The people involved in the oil and gas industry are hopeful that this important policy change by the government will be accompanied by a more supportive environment moving forward.
This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not corpseed, and have not been evaluated by corpseed for accuracy, completeness, or changes in the law.
