Inside India’s New Petroleum Bill: What’s New And What’s Next?

India’s rapidly growing energy sector just took a giant leap forward with the Rajya Sabha passing landmark amendments to the Oilfields (Regulation and Development) Act, 1948, on 3 December.

This isn’t just another policy update. It’s a game-changing reform that promises to reshape the country’s energy landscape, streamline business processes, and propel India towards its ambitious green energy goals.

But why overhaul a 75-year-old law? What do these changes bring to the table? Let’s dive into the details shaping India’s energy future.

Why Amend the Act?

Originally, oilfields, mines, and minerals were regulated under a single framework through the Mines and Minerals (Regulation and Development) Act, 1948. But by 1957, the growing complexity of the sector prompted a split.

The Mines and Minerals (Development and Regulation) Act, 1957, took charge of mines and minerals under the control of the Union, while the original 1948 Act was renamed the Oilfields (Regulation and Development) Act, 1948, focusing solely on mineral oils.

Crafted at a time when India’s petroleum and natural gas exploration was still in its infancy, the 1948 Oilfields Act served its purpose for decades. But the global energy and hydrocarbons landscape has since dramatically changed, with new forms of hydrocarbons — like shale oil and coal-bed methane — emerging.

The bill’s statement of object notes that the existing law needs to be amended to meet the country’s aspirations for "energy access, energy security, and energy affordability."

Major Changes in the Act

The amended Act is set to boost domestic oil and gas production, meeting the growing demand for energy and reducing import dependence.

By aligning India’s exploration and production framework with practices of competing geographies, the bill aims to attract investment, infuse capital, and bring in cutting-edge technology, all while creating an investor-friendly environment that fosters ease of doing business.

Expanded definition of mineral oils

The 1948 Act originally defined petroleum and natural gas as mineral oils. However, with the rise of unconventional hydrocarbon resources, there was a need to update the definition to reflect the modern understanding of the term.

The bill broadens the definition to include resources like coal-bed methane, shale gas, shale oil, tight gas, tight oil, oil shale, and gas hydrates — leaving out coal, lignite, and helium found with petroleum, coal, or shale.

Why does this matter? A clearer, more inclusive definition of mineral oils paves the way for seamless exploration, development, and production of both conventional and unconventional hydrocarbon resources without policy confusion.

Introduction of the petroleum lease

This bill updates the terminology, replacing ‘mining lease’ with ‘petroleum lease’ to better reflect today’s industry standards. The updated lease will allow companies to prospect (search for oil and gas fields), explore, develop, produce, make merchantable, and dispose of mineral oils.

Existing mining leases are still valid, but going forward, all new licences will adhere to the new nomenclature. It’s a small change that makes a big difference in clarity and syncs with today’s standards!

Granting a lease on stable terms

Investors thrive on stability, and this bill delivers that.

The bill seeks to assure that the terms of a petroleum lease shall remain stable for the entire duration of the lease and will not be altered to its disadvantage during the period of the lease.

This proposal gives investors the confidence to develop oilfields and produce mineral oils without the fear of sudden legal shifts.

Providing for efficacious dispute resolution

The amendments introduce alternative dispute resolution (ADR) mechanisms, offering investors effective, non-court solutions to resolve disputes quickly and efficiently.

Given the delays in Indian court proceedings and rising litigation costs in India, the provision for ADR is a welcome change that promises to cut through the red tape.

“This Bill aims to ensure policy stability for oil and gas producers and allow international arbitration,” said Union Oil Minister Hardeep Singh Puri while speaking at the Geo India 2024 conference on 15 November.

Facilitating energy transition

The bill seeks to create an environment for facilitating energy transition by promote and facilitating the development of comprehensive energy projects for harnessing wind and solar energy alongside mineral oil at oilfields.

Moreover, the bill empowers the central government to make rules for the protection of the environment and promoting the development of green energy projects and adoption of energy transition measures.

Decriminalising offences

Under the original Act, the Centre regulated the grant, terms, and conditions, and duration of leases, along with the production, storage, and conservation of mineral oils, including royalties and taxes.

Now, this bill takes it further, giving the Centre the power to frame rules for lessees to reduce emissions, share oil production and processing units, merge leases, and resolve lease-related disputes.

And here’s the twist: while the bill decriminalises offences like invalid leases and non-payment of royalties, it significantly raises the penalty from Rs 1,000 to a hefty Rs 25 lakh, ensuring accountability while fostering a more streamlined, efficient industry.

By moving from criminal penalties to administrative fines for minor infractions, the bill creates a more predictable regulatory environment. This shift will allow companies to focus on compliance, innovation, and operational improvements rather than fear heavy legal consequences, sparking growth and making the regulatory process more efficient.