Explained: How India’s New Oilfield Law Aims To Simplify Rules And Expand Oil And Gas Exploration

The Lok Sabha on Wednesday (12 March) passed the Oilfield (Regulatory and Development) Amendment Bill, 2024, marking a significant overhaul of India’s oil and gas regulatory framework.

The Bill, which was earlier approved by the Rajya Sabha on 3 December 2024, seeks to streamline licensing processes, improve investor confidence, and facilitate new exploration and production projects.

Key Regulatory Reforms

One of the most notable changes introduced by the Bill is the replacement of multiple licenses with a single petroleum lease.

Earlier, contractors had to obtain separate permits for different hydrocarbon activities. The new system is expected to reduce bureaucratic hurdles and improve ease of doing business in the sector.

Additionally, the Bill eliminates the long-standing practice of treating mining and petroleum operations under the same regulatory framework. This will ensure more precise governance of the oil and gas industry.

Investor-Friendly Measures

The government has emphasised that the amendments are aimed at making India a more attractive destination for energy investments.

According to Petroleum Minister Hardeep Singh Puri, extensive discussions were held with industry leaders and potential investors to address regulatory pain points.

The amendments offer legal stability, predictable policies, and faster dispute resolution mechanisms, which are critical for investors given the high-risk nature of oil exploration projects.

The reforms also build on past policy shifts, such as the transition from a production-sharing to a revenue-sharing model, which allows companies to focus on maximizing output rather than complex cost calculations.

The Bill also aims to resolve one of the biggest grievances of global oil companies interested in investing in India by providing stability in operations, both in terms of tenure of the lease and conditions therein.

It emphasises efficient alternate dispute resolution mechanisms which will ensure disputes can be resolved in a timely, fair and cost-effective manner.

Support for Small Operators & Infrastructure Sharing

The Bill introduces provisions to enhance resource and infrastructure sharing among different operators.

This is particularly crucial for small and isolated oil fields, many of which were left unmonetized due to lack of infrastructure.

The government had earlier introduced the Discovered Small Fields (DSF) policy in 2015, allowing smaller operators to take over fields unmonetised by previous operators

The new Bill seeks to help small operators by enabling sharing of resources and infrastructure between different operators to improve viability of oil blocks.

Strengthening Regulatory Oversight & Penalties

To ensure better enforcement, the Bill significantly increases penalties for violations.

Companies found in breach of regulations could now face fines of Rs 25 lakh rupees and upto 10 lakh per day for continuing infraction so that they have deterrent effect

Further, to make the system effective and expeditious, the Bill creates an adjudication authority and an appellate mechanism for levy of penalties.

Cooperative Federalism & State Rights

Addressing concerns over state authority, Minister Puri clarified that the Bill does not affect state governments’ rights.

The States will continue to give Petroleum leases, necessary statutory clearances and receive royalties, as before.

India’s Energy Future

With these reforms, the government aims to unlock India’s hydrocarbon potential and accelerate domestic production.

Since 2014, India has awarded over 76 per cent of its active oil exploration blocks under new policies, reflecting an increasing push towards self-reliance in energy.

By simplifying regulations, ensuring investor security, and promoting collaboration, the Oilfield (Regulatory and Development) Amendment Bill, 2024, is expected to improve the “Ease of doing business”, make India an attractive destination for production of oil and gas.