Lok Sabha passes bill to boost investment in oil and gas sector, Puri hails ‘far-reaching amendments’

New Delhi: Parliament on Wednesday passed a bill that is expected to bring in ease of doing business in the oil and gas exploration and production sector and attract greater investments.

The Oilfields (Regulation and Development) Amendment Bill 2024, which was passed by the Lok Sabha, now awaits the President’s nod to become law. Rajya Sabha had passed the bill in December 2024.

The bill’s proposal to delink petroleum operations from mining is expected to bring in more investments into the sector.

Union minister for petroleum and natural gas Hardeep Singh Puri said the bill’s “far-reaching amendments made in the existing legislation will further strengthen and propel India’s energy sector under the leadership of PM Modi Ji, and ensure policy stability, international arbitration, extended lease period etc.”

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Noting that the global energy scenario and the hydrocarbon landscape has dramatically changed, Puri said on X there was a need to amend the law to reflect current realities, national priorities, promote ease of doing business, decriminalize provisions and align India’s Exploration and Production framework with practices and competitive geographies.

The original Act from 1948 defined petroleum and natural gas as mineral oils. This bill expands the definition to include coal bed methane, oil shale, shale gas, shale oil, tight gas, tight oil and gas hydrate, but does not include coal, lignite and helium occurring in the petroleum process.

The bill also alters the previously used term ‘mining lease’ and introduces ‘petroleum lease’, allowing companies to explore, prospect, produce, make merchantable, and dispose of mineral oils. However, the existing mining leases in use will remain valid.

As small operators and new entrants often face difficulties in carrying out operations due to high costs of infrastructure and facilities, this bill proposes to enable the government to make rules to allow sharing of production and processing facilities and other infrastructure by two or more lessees.

Also, in a bid to bringing in stability and investor confidence, the bill assures that the terms of the lease shall remain stable for the entire duration of the lease and will not be altered to the investor’s disadvantage. The amendments also propose alternative dispute resolution mechanisms for efficacious dispute resolution methods catering to investors’ needs and expectations.

Puri, in his post also said: “By virtue of the fact that we are going to rely on conventional energy for some time we need to step up our exploration and production activities. Today’s successful passage of the bill will be a constructive and positive step in this direction.”

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Focus on production

Noting that currently India consumes 5.5 million barrels of crude oil in a day, compared with 5 million barrels per day about three-and-a-half years ago, Puri said that at the current growth rate, India’s daily oil consumption would go up to 6.5-7 million barrels.

The bill emphasizes the requirement for increase in domestic production of oil and gas to meet the rising demand and reduce import dependence. 

“In order to unlock valuable mineral oil resources, it is necessary to attract investment in the sector to infuse necessary capital and technology for expediting petroleum operations in the country by creating an investor friendly environment that promotes ease of doing business, prospects for exploration, development and production of all types of hydrocarbons, ensures stability, promotes adequate opportunities for risk mitigation, addresses energy transition issues including next-generation cleaner fuels and provides for a robust enforcement mechanism for ensuring compliance of the provisions of the said Act,” the bill says.

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The development gains significance as India is a net importer of crude oil and is dependent on foreign sources for 85% of its energy requirement.