Parliamentary Committee Probes Discrepancy Between Increased Capex and Production Levels in Oil & Gas Sector
NEW DELHI: A parliamentary committee has raised concerns about the effectiveness of rising capital expenditure in India’s oil and gas sector, questioning whether it is leading to increased domestic production. Despite a significant rise in investments, crude oil output continues to decline. The committee has requested the petroleum ministry to provide a detailed report on how recent exploration reforms and newly awarded blocks will contribute to production increases.
The committee’s action report, presented in Parliament on Thursday, highlighted that capital expenditure by public sector undertakings in the petroleum and natural gas sector is projected to rise from Rs 1.3 lakh crore in 2020-21 to Rs 1.7 lakh crore by 2024-25. However, domestic crude oil production is expected to drop to 28.7 million metric tonnes (MMT) in 2024-25, down from 34.2 MMT in 2018-19. This scrutiny follows the Centre’s approval of the Rs 84,000 crore Samudra Manthan national offshore exploration scheme aimed at enhancing deepwater oil and gas exploration and reducing reliance on imported crude.
The committee emphasized the need for tangible results from increased investments, noting that India imports nearly 90% of its crude oil. While the petroleum ministry’s response outlined various policy initiatives, the committee found it lacking in demonstrating how the increased spending would lead to higher output. The committee described the ministry’s reply as interim and requested a comprehensive report detailing expected production gains from new exploration blocks and significant capital investments over the medium term.
The committee acknowledged the long gestation periods of exploration projects and the natural decline of mature oilfields. However, it insisted that such investments should be accompanied by clear performance benchmarks, regular evaluations, and accountability mechanisms. The report stated, “The real returns on these massive investments must reflect in reversed production curves – changing the trajectory of oil or gas output from a period of continuous decline to a period of growth or stabilization.”
In its response, the petroleum ministry outlined measures to enhance domestic exploration and production. It noted that 38 offshore exploration blocks were awarded under Open Acreage Licensing Policy (OALP) Rounds VIII and IX over the past three years. Additionally, OALP Round X, launched in April, offered another 25 blocks covering nearly 1.9 lakh square kilometers. The ministry also mentioned the release of nearly 1 million square kilometers of offshore “no-go” areas for exploration, allocation of about Rs 7,500 crore for seismic surveys and stratigraphic drilling, and fiscal incentives to promote enhanced oil recovery from mature fields.
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