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India: Oil and Natural Gas
Country Study > Chapter 6 > Character and Structure of the Economy > Industry > Energy > Oil and Natural Gas

OIL AND NATURAL GAS


India has significant amounts of oil and natural gas, and four of India's top six revenue-generating companies are in the oil and natural gas business. India has indigenous sources for around 60 percent of its oil needs and has worked diligently to use substitute forms of energy to fulfill the other 40 percent. Oil in commercial quantities was first discovered in Assam in 1889. The Oil and Natural Gas Commission was established in 1954 as a department of the Geological Survey of India, but a 1959 act of Parliament made it, in effect, the country's national oil company. Oil India Limited, at one time one-third government owned, was also established in 1959 and developed an oil field that had been discovered by the Burmah Oil Company. By 1981 the government had purchased all of the Burmah Oil Company's assets in India and completely owned Oil India Limited. The Oil and Natural Gas Commission discovered oil in Gujarat in 1959 and opened other fields in the 1960s and 1970s.

The early oil fields discovered in India were of modest size. Oil production amounted to 200,000 tons in 1950 and 400,000 tons in 1960. By the early 1970s, production had increased to more than 8 million tons. In 1974 the Oil and Natural Gas Commission discovered a large field -- called the Bombay High -- offshore from Bombay. Production from that field was responsible for the rapid growth of the country's total crude oil production in the late 1970s and throughout the 1980s. In FY 1989, oil production peaked at 34 million tons, of which Bombay High accounted for 22 million tons. In the early 1990s, wells were shut in offshore fields that had been inefficiently exploited, and production fell to 27 million tons in FY 1993. That amount did not meet India's needs, and 30.7 million tons of crude oil were imported in FY 1993.

India has thirty-five major fields onshore (primarily in Assam and Gujarat) and four major offshore oil fields (near Bombay, south of Pondicherry, and in the Palk Strait). Of the 4,828 wells, in 1990 2,514 were producing at a rate of 664,582 barrels per day. The oil field with the greatest output is Bombay High, with 402,797 barrels per day production in 1990, about fifteen times the amount produced by the next largest fields. Total reserves are estimated at 6.1 billion barrels.

The government has sanctioned ambitious exploration plans to raise production in line with demand and to exploit new discoveries as rapidly as possible. In the late 1980s and early 1990s, there were encouraging finds in Tamil Nadu, Gujarat, Andhra Pradesh, and Assam; many of these discoveries were made offshore. Officials estimated that by the mid-1990s these new fields could contribute as much as 15 million to 20 million tons in new production and that total crude oil production could increase to 51 million tons in FY 1994. In the early 1990s, the government renewed attempts, which had begun in the early 1980s, to interest foreign oil companies in purchasing exploration and production leases. These efforts drew only a modest response because the terms offered were difficult, and foreign companies remained suspicious of India's investment climate. One response, agreed on in January 1995, was an Indian-Kuwaiti joint venture to invest in a new oil refinery to be built on the east coast of India.

Substantial quantities of natural gas are produced in association with crude oil production. Until the 1980s, most of this gas was flared off because there were no pipelines or processing facilities to bring it to customers. In the early 1980s, large investments were made to bring gases from Bombay High and other offshore fields ashore for use as fuel and to supply feedstock to fertilizer and petrochemical plants, which also had to be constructed or converted to use gas. By the mid-1980s, natural gas could be delivered to facilities near Bombay and near Kandla in Gujarat. In the mid-1990s, a 1,700-kilometer trans-India pipeline was being built; the pipeline will link the facilities near Bombay and Kandla to a series of gas-based fertilizer plants and power stations. Officials envisage a grid system covering 11,500 kilometers by FY 2004, which will supply 120 million cubic meters of gas a day. Total production in FY 1992 was 18.1 billion cubic meters.

India's need for oil and petroleum-based products -- about 40 million tons per year -- far exceeded its domestic production capabilities of 28 million tons per year in the early 1990s. Given India's dependency on Persian Gulf resources, proposals were made in the early 1990s to develop natural gas pipelines from Iran, Qatar, and Oman that would run under the Arabian Sea to one or more west coast terminals. To assist with oil and natural gas production, in 1992 the government decided to open reserves to private offshore developers. In February 1994, contracts were awarded for three offshore fields in the Arabian Sea to an Indian-United States consortium and one in the Bay of Bengal to an Indian-Australian-Japanese consortium. In June 1995, an agreement was reached to set a joint-venture company to construct the first leg of the pipeline, from Iran to Pakistan.




Last Updated: September 1995


Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for India was first published in 1995. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on Factba.se.

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