Introduction

India is the sixth largest energy consumer in the world and oil and gas represent over forty per cent of the total energy consumption in India. Oil production in India has stagnated at around 30 million tonnes of crude oil per annum since 2000 and the growing consumption has been met by increased quantity of imports, estimated at around 100 million tonnes currently. Demand for natural gas is expected to grow from around 77 to 87 million standard cubic metres per day (mmscmd) currently to over 225 mmscmd by 2025, again signifying a high dependence on imports of gas. The issue of energy security and the heavy dependence on oil and gas has been emerging as a matter of concern at policy levels.

The policy of state ownership of major mineral resources in the early years after independence led to the establishment of the Oil and Natural Gas Commission (ONGC) that developed capabilities for exploration and production with Russian assistance in the early 1950s. The most significant discovery was the Bombay High property, off the coast of Mumbai, in the early 1970s. Other discoveries in Assam, Gujarat, and Rajasthan marked initial successes until the mid-1980s. In the downstream sector, the refining and marketing segments were operating as a free market with many of the multinational oil companies such as Caltex, Esso, and others, having a significant presence. The first oil shock in 1973 and the reluctance of the multinationals to adhere to guidelines in prices set by the government persuaded a strong left-of-centre inclined government to nationalize the industry by taking over the assets of the private players, including refineries and retail outlets. From the mid-1970s, the sector remained tightly regulated. All the upstream activities, including geological drilling, exploration, and production were entrusted to the Oil and Natural Gas Commission. The Director General of Hydrocarbons, a government directorate, served as a regulator for this sector.