Amid concerns over U.S. President Donald Trump’s hard-hitting tariff policy, diversified Indian financial services company Motilal Oswal has suggested that India could strengthen its domestic industries and ramp up local production. Trump has a history of imposing heavy tariffs on India, including 25% on steel and 10% on aluminum imposed in 2018. The tariffs had an inimical effect on India’s trade with the U.S., with steel exports plunging 46% one year after the tariffs were announced.
Meanwhile, India’s heavy reliance on oil imports leads to huge capital outflows and a weaker rupee. India imports 87% of its oil, mainly from Russia, Iraq, Saudi Arabia, the United Arab Emirates and the U.S. India spent $132.4 billion on crude oil imports in the 12 months up to mid-2024, a 16% Y/Y drop thanks to lower oil prices. Luckily, India is well endowed with substantial oil reserves. Last year, S&P Global Commodity Insights reported that four largely unexplored sedimentary basins in India could hold up to 22 billion barrels of oil. In effect, lesser-known Category-II and III basins namely Mahanadi, Andaman Sea, Bengal, and Kerala-Konkan contain more oil than the Permian Basin which has already produced 14 billion of its 34 billion barrels of recoverable oil reserves.
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Rahul Chauhan, an upstream analyst at Commodity Insights, has emphasized the potential of India’s unexplored Oil & Gas sector, “ONGC and Oil India hold acreages in the Andaman waters under the Open Acreage Licensing Program (OALP) and have planned a few significant projects. However, India still awaits the entry of an international oil company with deepwater and ultra-deepwater exploration expertise to participate in current and upcoming OALP bidding rounds and explore these frontier regions,” he has declared.
Currently, only 10% of India’s 3.36 million sq km wide sedimentary basin is under exploration. However, Petroleum Minister Hardeep Singh Puri says that figure will jump to 16% in 2024 following the award of blocks under the Open Acreage Licensing Policy (OALP) rounds. So far, OALP has resulted in the award of 144 blocks covering about 244,007 sq km. Under OALP, India allows upstream exploration companies to carve out areas for oil and gas exploration and put in an expression of interest for any area throughout the year. The interests are accumulated thrice a year following which they are put on auction. According to Puri, India’s Exploration and Production (E&P) activities in the oil and gas sector offer investment opportunities worth $100 billion by 2030.
India boasts significant discoveries in the Krishna-Godavari, Barmer, and Assam basins, but exploration in other areas has been slower to develop. Of India’s 3.14 million square kilometers of sedimentary basins, 1.3 million sq km are in deep waters. India had its first foray into deepwater exploration in the Bay of Bengal in 2024 in the Krishna-Godavari Basin, courtesy of India’s state run Oil and Natural Gas Corporation (ONGC). ONGC said it was planning to spend over $10 billion developing multiple deepwater projects in its KG-DWN-98/2 block in that basin.
Meanwhile, state-owned upstream company Oil India Ltd is looking to start exploration activities in Nagaland
“We have a total of 30 blocks under the OALP. We have already drilled all wells under the awarded OALP blocks, except in Nagaland. We are pursuing the ministry and they have set up a high power committee involving OIL, ONGC, government officials, to discuss the issue with the Government of Nagaland and resume exploration,” the official said.
Unlike Pakistan, India is likely to have little trouble attracting the oil and gas majors. Indeed, British energy giant BP Plc (NYSE:BP) has been hunting for more opportunities in the country. BP has forged a joint venture with Indian multinational conglomerate Reliance Industries to operate 1,900 fuel retail stations across India and produces oil and gas from a deepwater block in the Krishna-Godavari basin. The JV has teamed up with ONGC to bid for exploration rights for an offshore block in India.
Analysts have predicted that India is set to become the key driver of global oil demand growth, overtaking China.
“China’s role as a global oil demand growth engine is fading fast,” Emma Richards, senior analyst at London-based Fitch Solutions Ltd, told The Times of India. According to the analyst, over the next decade, China’s share of emerging market oil demand growth will decline from nearly 50% to just 15% while India’s share will double to 24%.
A rapidly growing population, which has likely surpassed China’s, is expected to be the main driver of consumption trends in India. Meanwhile, the country’s transition from traditional gasoline and diesel-fueled transport is expected to lag other regions, in sharp contrast to China’s skyrocketing adoption of electric vehicles and clean energy in general.
By Alex Kimani for Oilprice.com
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