How refining boom masks India’s falling crude and gas production

In a foreword to a report titled India’s Hydrocarbon Outlook 2024-25, released on July 17, Minister for Petroleum and Natural Gas Hardeep Singh Puri hailed the “historic transformation” in the Indian energy sector. “India's upstream oil and gas sector, once considered complex and risk-ridden, is now witnessing a renewed momentum” because of new reforms, innovations and investments, Puri wrote.

To assure the readers, he provided evidence of “tangible results”: The ONGC drilled 578 wells in FY25, “the highest in the last thirty-five years”, and together with Oil India Ltd (OIL), new hydrocarbon discoveries have added “reserves of 75 million tonnes of oil equivalent”.

Claims of achievements

On July 29, the minister told the Rajya Sabha that India had opened up 1 million sq km of “no-go” offshore areas in 2022, especially the Andaman-Nicobar (AN) offshore basin, triggering the current momentum in offshore activities.

On July 1, he had said the market capitalisation of oil and gas PSUs had nearly doubled to ₹8.79 lakh crore since 2014.

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Besides, the Petroleum Ministry releases statements with headlines screaming “OMCs' FY24 combined profit rose over 25-times year-on-year”, “OMC’s combined net profit in FY24 up 543% vs FY14”, and “Oil India registers highest ever net profit of Rs 6810.40 crore since its inception (in FY23)”.

These OMCs (oil marketing companies) are public sector enterprises like Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL). They are making huge profits by trading refinery products, rather than oil and gas production.

Long-term decline

But behind the facade of such historic transformations and profits lies a dark secret: Domestic production of crude oil and gas is on a long-term decline.

The ministry’s data shows that crude oil production fell by (-)26.3 per cent and natural gas by (-)24.1 per cent during FY12-FY25. These numbers are for both public and private oil companies.

The following graph captures the declining trend; crude production is in million tonnes (MT) and natural gas in billion cubic metres (BCM).

It is due to such a decline that crude oil imports have jumped by 41 per cent and LNG by 100 per cent during the same period.

Import dependence

Crude import dependence was at 90 per cent or more during FY23-FY25 and also in the April-August period of FY26 — up from 58 per cent in FY99, since when the ministry provides data. The data for natural gas production is from FY12, explaining the graph’s choice of FY12-FY25.

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But if you are looking for answers in the India’s Hydrocarbon Outlook 2024-25 report, or any other such reports released every year by the Directorate General of Hydrocarbons (DGH), or even the MoSPI’s annual “Energy Statistics 2024-25” and earlier such reports, you will be disappointed.

So will you be if you look at the largest crude oil producer, Oil and Natural Gas Corporation Ltd (ONGC).

ONGC’s annual report of 2024-25, for example, talks of higher or lower oil and gas productions in its overseas assets (Vietnam, Russia, Russia, Venezuela, South Sudan, etc.) but about domestic production, it limits itself to “data acquisition, processing and interpretation” activities.

Tall claims, admission of failure

The India’s Hydrocarbon Outlook 2024-25 report fills the pages with a long list of new and historic initiatives, various achievements and mountains of data that include claims that 91 per cent targets were achieved in oil and gas productions in FY25. It then inserts a sentence on page 73: “The year (FY25) witnessed a decrease in crude oil production by 2.2% and in gas production by 0.9% as compared to the previous year i.e., FY2023-24. In contrast, natural gas production has shown modest growth...”

On page 77, it says the decline actually started a decade ago and gives the reasons in passing: “Crude oil production has generally declined from 36.96 MMT in 2015-16 to 28.70 MMT in 2024-25, attributed to depletion of reserves and limited contribution from new discoveries. In contrast, natural gas production has shown modest growth…”

It doesn’t give any details about the “depletion of reserves” or “limited contributions from new discoveries”.

Energy demand and production

On page 90, the report says “the need to bolster domestic energy production is both urgent and strategic”. This is because “India's energy demand is projected to grow significantly in the coming decades, potentially at a rate higher than the global average”. It also notes that crude oil import dependence exceeded 88% in FY25.

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The DGH’s 2022-23 report hints about another factor: “Earlier, in our country, more generalised methodologies were in use for reserves & resources, its estimation and reporting. They were not consistent and uniform company to company, nomination regimes to contract regimes, conventional to unconventional hydrocarbons.”

The hint is, India’s estimates about reserves and gains from explorations have been highly exaggerated. The DGH’s 2023-24 report says, to address such exaggerated claims and data, the global reporting standard of Petroleum Resources Management System (PRMS) was adopted from April 1, 2021.

What went wrong?

How to know what’s wrong with domestic production?

To find the answers, one would have to look at the “monthly production report” of the MoPNG.

For example, the November and December 2024 reports say the crude production of the oil PSUs is down because of “delay” in projects, oil wells producing “less than estimated”, “losses due to sub-optimal performance”, “less than planned contribution from new and work over wells”, “reservoir issues like high water cut”, “decline” in oil fields etc.

The private sector (directly or in joint ventures) isn’t doing better either.

These reports flag issues such as “multiple well failure”, “production yet to commence”, “underperformance”, “increase in water cut, sand issue, and gain not as per expectation from workover” etc. with the private sector activities.

Similarly, natural gas production is adversely impacted by “delay” in projects, “less than estimated” production, “well failures”, “delay in drilling of new wells” due to administrative reasons, “low consumer demand” etc — for both public and private entities.

Crisis-like situation

These are monthly reports, the causes are marked against individual oil fields/wells but the issues they flag are repeated month after month. For example, April 2024 lists the very same factors.

Rarely do ministry officials talk or admit that it is a crisis-like situation.

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On October 26, MoPGN secretary Pankaj Jain said at a public function that India needed to make a big oil and gas discovery – but for a different reason: “It will become more and more difficult for us to make a case to believe in India and believe that India has the ability to discover something.”

Another official was quoted the same day as saying that India hasn’t made a big oil and gas discovery since Mumbai High (1974) and the Krishna-Godavari (KG) basin (2000s).

In 2021, then Petroleum Minister Dharmendra Pradhan had talked about under-explorations, which forced the government to contemplate auctioning of large oil and gas fields of ONGC and OIL to increase production, admitting that it was declining for several years.

Refinery business flourishing

In contrast, the crude oil refinery business is booming — the only oil and gas segment doing rather well (both public and private entities). The MoPNG’s monthly production reports use phrases like “higher than target”, “higher than” previous month’s production etc to qualify crude oil processing.

This is the segment making the historic profits mentioned earlier. Financial Times’ revelation of August 2025, that Indian refiners made “extra profit” of $16 billion from the discounted Russian oil, is also about this segment.

Here is a comparative picture of domestic crude production and processed crude production using the ministry’s data. Note, the sudden drop in refinery productions was in FY21, the COVID year.

Two private refiners, Reliance and Nayara, accounted for an average of 34.5 per cent of the total refined products during the 10 fiscals of FY16-FY25.

Big picture, finer points

Sumit Ritolia, lead research analyst at global real-time data and analytics provider Kpler, provided a comprehensive explanation to The Federal on what ails oil and gas production. He said it is due to “a mix of structural and operational challenges”, listing five challenges:

(i) Most oil fields are mature and experiencing natural decline

(ii) Few new discoveries have been made in recent years, limiting the addition of fresh reserves to offset falling production

(iii) Despite initiatives like the Open Acreage Licensing Policy (OALP), investments in exploration remains subdued, hindered by regulatory delays, bureaucratic hurdles and relatively high costs, especially for deepwater or technically complex projects

(iv) Extraction has become more expensive and technically demanding due to challenging geology and the need for advanced recovery technologies, further discouraging aggressive development

(v) Persistent policy uncertainty and limited fiscal incentives have dampened investor confidence, slowing growth in production and increasing reliance on imported crude.