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The government may notify the modified version of the policy on enhanced recovery (ER) and improved recovery (IR) for oil and gas in 2025, officials said. Set to replace the existing policy from 2018, the new policy is expected to provide better financial incentives for projects to be commercially viable.
While an expert committee had provided its recommendations on the updated policy, it could not be adopted earlier. “Other issues were being studied. This is expected to be taken up for consideration (to be notified) in the early part of next year,” an official said.
In October 2018, the government issued a policy framework to promote ER and IR methods for oil and gas and provide fiscal incentives for operators to adopt them alongside unconventional hydrocarbon production methods. The policy included a provision for review after five years, which began in June 2023 with the constitution of an expert committee by the Ministry of Petroleum and Natural Gas. While the committee completed its task within two months and submitted the draft Modified ER Policy, 2023, with its recommendations, it has not yet been adopted.
According to the latest government estimates from 2018, the recovery level is 60 per cent for oil fields and 80 per cent for gas fields in India. Enhanced extraction is often required to increase oil production beyond what is achieved by naturally flowing vertical wells. The extraction of oil and gas resources is a complicated, strenuous process, and ER techniques involve changing the chemical and physical properties of the formation fluids and rocks to recover the remaining crude oil. This could
involve infill drilling, hydraulic fracturing, and drilling horizontal and multilateral wells.
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Declining production
Both private and public sector oil exploration and production (E&P) companies have flagged the need for updating the existing policy, given the vast number of legacy wells in the country with decreasing productivity.
“These oilfields need to be upgraded on a massive scale and in a systematic manner if production loss is to be stopped or reversed. Existing ER/IR techniques are cost-intensive, and existing fiscal exemptions are insufficient to make projects commercially viable,” said an executive with a private sector E&P company.
Case in point: The New Exploration Licensing Policy regime for oil and gas exploration and production was introduced by the Centre in 1999 to replace the Nomination regime. Blocks awarded under these two regimes account for around 90 per cent of India's crude oil production. Meanwhile, India’s overall domestic oil production has been declining consistently since 2011-12, standing at 29.4 million tonnes (mt) in 2023-24 (FY24), down from a high of 38.1 mt in 2011-12.
Private sector companies have previously complained about the cumbersome administrative processes they must go through to avail of ER/IR incentives. They have pointed out the high recovery factors required to avail of incentives, a ceiling on prices, and the exclusion of tight oil discoveries.
Reliance Industries and Cairn Oil & Gas, a vertical of the Vedanta group, are the two major private sector upstream companies, while national oil companies Oil and Natural Gas Corporation and Oil India are the public sector players. The country is a net importer of hydrocarbons to meet its ever-increasing domestic consumption. In FY24, the country imported 232.5 mt of crude oil, almost the same as the preceding year. However, the import dependency for oil has risen to 87.8 per cent, up from 83.8 per cent in 2018-19.
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