The proposed amendments to the Oil Fields (Regulation and Development) Act of 1948 include provisions for international arbitration in disputes, a longer lease period for exploration blocks, and expanded exploration opportunities. However, the bill still requires approval from the Lok Sabha to become law.

Rahul Chauhan, the upstream technical research country lead at S&P Global Commodity Insights, stated that the objective of the changes is to enhance the global competitiveness of oilfield contracts and address long-standing concerns of exploration companies.

In recent years, India has implemented reforms to revitalise its upstream sector. Under the Open Acreage Licensing Policy, companies can propose areas for exploration throughout the year, which are then auctioned. The government has also granted greater marketing freedom to producers by eliminating the need for approval to sell domestically produced crude oil and condensates.

In a move welcomed by industry stakeholders, the government abolished the windfall tax on domestically produced crude oil, which had been in place since July 2022. The tax, introduced to bolster government revenues during a period of elevated crude prices, was reviewed biweekly based on global price trends.

Rajeev Lala, director for upstream companies and transactions at S&P Global Commodity Insights, mentioned that the windfall tax had been detrimental to oil producers emerging from a period of low prices. He emphasised that India should focus on incentivising production growth instead, in order to mitigate the risks associated with stranded assets in the energy transition era.