In a major legislative step, the Rajya Sabha passed the Oilfields (Regulation and Development) Amendment Bill, 2024, on Tuesday, which aims to create a more favorable environment for oil and gas exploration and production (E&P) in India. The bill, passed via a voice vote, introduces a series of reforms expected to attract more investments and enhance ease of doing business in the sector.
Rajya Sabha’s Key Provisions of the Amendment
The amendment includes several significant changes designed to modernize the 1948 Act and align it with the current global energy landscape. A primary feature is the separation of petroleum operations from mining activities, which is seen as a move that will encourage greater investment.
Petroleum and Natural Gas Minister Hardeep Singh Puri emphasized the importance of updating the legislation to meet the country’s evolving needs. In a debate on the bill, Puri stated, “We need oil and gas sector (for) 20 more years. We need to bring this legislation here to provide a win-win confidence not only to our own operators but also to foreign investors so that they can come and do business here with view to benefit everyone.” He called the amendments “landmark” and posted on social media platform X that these changes will help strengthen and propel India’s energy sector.
The bill updates the definition of petroleum and natural gas to include unconventional resources such as coal bed methane, oil shale, shale gas, shale oil, tight gas, tight oil, and gas hydrate, while explicitly excluding coal, lignite, and helium produced during petroleum processes. Puri noted that “the term ‘mineral oil’ is traditionally understood to be natural gas and petroleum. As unconventional hydrocarbon resources have been discovered and developed, the definition needs to be updated to reflect the modern understanding of the term.”
One of the significant amendments is replacing the term ‘mining lease’ with ‘petroleum lease.’ This change will allow companies to explore, prospect, produce, market, and dispose of mineral oils, facilitating clearer operational parameters. Existing mining leases will continue to remain valid, ensuring that current operators are not disadvantaged by the legislative update.
Rajya Sabha Encourages Investment and Infrastructure Sharing
Small operators and new market entrants have often struggled with high infrastructure and operational costs. To address this challenge, the bill proposes measures enabling the Centre to create rules for the shared use of production and processing facilities among multiple lessees. This approach is expected to reduce expenses and make the sector more accessible to smaller players.
A crucial aspect of the bill is the assurance of stability for lease agreements. The bill guarantees that lease terms will remain consistent throughout their duration and will not be altered to the investor’s disadvantage. It also introduces alternative dispute resolution mechanisms to resolve conflicts efficiently, aligning with investors’ expectations for a fair and predictable business environment.
Meeting India’s Energy Goals
The bill’s statement of objects acknowledges that the existing law was developed under a different global energy framework and no longer suits India’s current energy needs and aspirations. The government believes that this amendment is necessary to meet the nation’s energy access, security, and affordability goals.
India’s dependence on imported crude oil—currently at 85%—makes the bill’s provisions particularly timely. The bill states that increasing domestic oil and gas production is essential to meet rising demand and reduce import reliance. It aims to attract investment that will inject capital and technology, facilitating the exploration and development of all types of hydrocarbons.
Beyond boosting conventional oil and gas production, the bill also addresses next-generation energy transition issues. It highlights the importance of developing cleaner fuels as part of the energy mix, thus aligning with global sustainability trends. The bill also emphasizes adequate risk mitigation strategies and robust enforcement mechanisms to ensure compliance with the new provisions.
Broader Implications for India’s Energy Sector
This legislative reform is part of India’s broader strategy to enhance energy security, attract global investments, and foster an environment conducive to growth in the oil and gas industry. By modernizing the legal framework and promoting technological advances, the government hopes to unlock the potential of its energy sector, ensuring that it can meet both present and future demands.
As Minister Puri aptly put it, the passage of the bill marks “a win for science” and an essential step forward for the sector. The amendments aim not just to simplify operations but to build a robust, stable, and competitive oil and gas industry that can support India’s growing energy needs while contributing to economic development.
