The India Hydrocarbon Vision 2025report, published by the Indian government in February 2000, painted a rather alarming picture of the Indian energy security situation.1 It pointed out that India's requirements of oil and gas would increase significantly over the next twenty-five years to sustain the high growth rates of 8 to 10 per cent per annum to which the country was committed. It said that the country's domestic resources would not be able to meet these high demands, and that India's dependence on imported oil would increase from 65 per cent in 2000 to 85 per cent in 2025. Again, India's gas requirements would also increase significantly to fuel the needs of the power, fertilizer and industrial sectors and for domestic usage. The electric power sector was projected to account for 71 per cent of the total incremental growth in India's natural gas demand from 2000 to 2025. The report highlighted the importance of boosting domestic production through a vigorous national effort, which would include further liberalizing the upstream hydrocarbon sector and encouraging Indian and foreign companies to participate in exploration and development activity by bringing in their rich experience and the latest technology.

One significant impact of this new focus on energy security has been the enthusiasm with which exploration activity is now taking place in India and discoveries are being announced in areas that had been largely unexplored till recently. The recent discoveries of oil and gas in the Krishna-Godavari basin of the Bay of Bengal indicate that this newly explored region has very rich potential. Even before these discoveries, earlier discoveries in the offshore areas of Bangladesh and Myanmar had already indicated that the Bay of Bengal could emerge, in the words of former Indian Petroleum Minister Mani Shankar Aiyar, as the “North Sea of South Asia”.

The Bay of Bengal, which already had great significance in terms of India's strategic interests as the link between South Asia and Southeast Asia, has now acquired a new energy salience as well, with hectic exploration activity being undertaken both by India and Myanmar, and indications that Bangladesh and Sri Lanka are also anxious to expand exploration in their littoral.