The Oilfields (Regulation And Development) Amendment Bill, 2024

Policy Update
Mohd Asif

Introduction

The Rajya Sabha has approved amendments to the Oilfields (Regulation and Development) Act of 1948. The bill was passed by the Rajya Sabha on December 3, 2024. These changes aim to separate petroleum operations from mining activities, expand the definition of “mineral oils,” and introduce the idea of a “petroleum lease,” along with other updates.

India’s Oil Minister, highlighted the significance of a new legislative framework designed to modernize and streamline the petroleum sector. Addressing the debate on the Bill, Minister explained that the new law aims to stabilize lease terms, enhance petroleum operations through well-defined rules, and address critical aspects such as lease renewals, infrastructure sharing, and safety measures in oilfields.

It also seeks to promote efficient dispute resolution, decriminalize certain provisions of the existing law by introducing penalties, and foster an environment conducive to energy transition. Minister underscored the importance of the oil and gas sector for the next two decades, asserting that the legislation would instill confidence among domestic and foreign investors, benefiting all stakeholders. “This Bill provides a win-win scenario, ensuring ease of doing business for investors while retaining state governments’ authority over petroleum mining leases.

During the debate, opposition called for the Bill to be referred to a select committee, citing concerns over its impact on federal rights. pointed out changes in definitions, such as replacing “mining lease” with “petroleum lease,” which he argued could undermine states’ authority. “Why change mining lease to petroleum lease? Can you extract petroleum without mining?” he questioned. Minister, however, assured that state governments would continue to play a crucial role in granting leases, and the Bill does not aim to corporatize the sector. India, which imports over 85% of its crude oil and half of its natural gas requirements, possesses substantial recoverable reserves of 651.8 million tonnes of crude oil and 1,138.6 billion cubic meters of natural gas. H

ighlighting the untapped potential, Government has reversed its earlier “slow focus” on exploration and production (E&P) by allowing operations in previously restricted “no-go areas,” such as missile testing sites. The recent bidding round offered a record 1.36 lakh square kilometers for exploration, including 38% of previously restricted areas. Minister noted that the ease of doing business in the E&P sector has improved with reforms reducing approval processes from 37 to 18, including self-certification for some. The shift from production-sharing contracts to a revenue-sharing model has also incentivized operators to maximize output while ensuring greater revenue for the government.

To attract global investment, India plans to map its entire sedimentary basin by 2026-27. Efforts include the National Seismic Programme, EEZ offshore surveys, Andaman basin exploration, and upgrading the National Data Repository. Additionally, a data center will be established at the University of Houston, enabling foreign companies to access data and make informed investment decisions.

With rising oil prices and increasing geopolitical uncertainty, Puri emphasized the urgency of revitalizing India’s E&P sector. He also noted that the country’s crude oil consumption, currently at 5.4 million barrels per day (bpd), is projected to rise to 7 million bpd by 2030, far outpacing global averages.The new legislation, replacing outdated laws from the 1940s, represents a strategic step toward securing India’s energy future while fostering investor confidence and enabling a smoother transition to sustainable energy.

Key amendments

Expanded Definition of Mineral Oils:
The existing law defines mineral oils as including petroleum and natural gas. The amended Bill broadens this definition to also encompass (i) all naturally occurring hydrocarbons, (ii) coal bed methane, and (iii) shale oil and gas. However, it explicitly excludes coal, lignite, and helium from being classified as mineral oils.
Introduction of Petroleum Lease:
The current law allows for the issuance of a mining lease, which covers activities such as exploration, prospecting, production, processing, and sale of mineral oils. Prospecting involves evaluating areas for potential oil and gas reserves. The new Bill replaces the mining lease with a petroleum lease, retaining similar provisions. Existing mining leases issued under the law will remain valid.
Rule-Making Powers of the Central Government:
The law gives the central government authority to create Rules on various topics, such as granting leases, their terms and conditions (including size, duration, and area), conservation and development of mineral oils, production methods, and collection of royalties and fees. The Bill keeps these provisions but adds new powers for the government to make Rules regarding: (i) combining petroleum leases, (ii) sharing production and processing infrastructure, (iii) environmental protection and emission reduction obligations for leaseholders, and (iv) alternative mechanisms for resolving lease-related disputes.
Decriminalisation of Offences:
Under the current law, breaking Rules is punishable by up to six months in jail, a fine of Rs 1,000, or both. The Bill eliminates imprisonment and raises the penalty to Rs 25 lakh. Additionally, it introduces penalties of Rs 25 lakh for engaging in mineral oil activities without a valid lease or failing to pay royalties. Continuing violations can result in further penalties of up to Rs 10 lakh per day.
Adjudication of Penalties:
An officer of Joint Secretary rank or above will be appointed by the central government to oversee penalty decisions. Appeals against these decisions can be made to the Appellate Tribunal established under the Petroleum and Natural Gas Regulatory Board Act, 2006. This Tribunal is the same as the one constituted under the Electricity Act, 2003.

Objectives of Oilfield Regulations 2024

The Oilfield Regulations 2024 have been introduced with the overarching aim of modernizing India’s petroleum exploration and production (E&P) sector. This strategic legislation seeks to address the country’s energy needs while aligning with global trends of sustainability, technology adoption, and investment facilitation. Below are the detailed objectives of the regulations:

1. Ensuring Energy Access, Security, and Affordability
The regulations aim to ensure that energy resources are accessible to all, secure in their supply, and affordable for consumers. By creating a streamlined framework for petroleum operations, the government seeks to balance energy demand with availability, ensuring that every stakeholder, from households to industries, has reliable access to energy at reasonable costs.

2. Reducing Import Dependence
Recognizing India’s heavy reliance on energy imports—85% of crude oil and 50% of natural gas—the regulations focus on reducing this dependence by boosting domestic exploration and production. This will not only improve energy security but also reduce the economic burden of import bills and shield the country from global oil price fluctuations.

3. Attracting Investment
The regulations are designed to create a favorable environment for both domestic and foreign investments in the energy sector. By introducing simplified processes, enhanced data transparency, and predictable lease terms, the legislation encourages private and international players to invest in India’s energy exploration and production activities, fostering economic growth and technological advancements.

4.Strong Enforcement Mechanisms
The Oilfield Regulations 2024 prioritize the establishment of a robust enforcement framework to ensure compliance with industry standards and safety protocols. This focus on accountability aims to mitigate operational risks, protect the environment, and instill investor confidence.

Mandatory Safety Audits

Regular inspections will be required for all oilfields to proactively address safety concerns. Operators must implement fire prevention systems and conduct emergency drills to prepare for incidents such as oil spills or blowouts.

Penalties for Non-Compliance

Strict financial penalties will be imposed on operators violating environmental or operational standards. For instance, companies discharging untreated effluents into ecosystems will face hefty fines and potential operational suspensions.

Real-Time Monitoring

The regulations mandate the use of advanced monitoring technologies like IoT sensors to detect irregularities in real time. Automatic shutdown systems for pressure deviations and leak detection will become standard requirements, enhancing operational safety.

Environmental Safeguards

Operators will need to conduct comprehensive Environmental Impact Assessments (EIAs) before commencing projects. Restoration of ecosystems, such as reforestation after land clearance, will be mandatory under government supervision. By implementing these measures, the regulations ensure strict compliance, environmental sustainability, and safer petroleum operations.

5. Separating Petroleum Operations from Mining Activities

To enhance operational efficiency and optimize resource utilization, the regulations decouple petroleum operations from traditional mining activities. This distinction allows petroleum-specific technologies, strategies, and practices to be applied more effectively, enabling better exploration and production outcomes.

6. Encouraging the Use of Advanced Technologies

The Oilfield Regulations 2024 emphasize the adoption of advanced technologies to modernize petroleum exploration and production (E&P) operations. By providing operational flexibility, the legislation incentivizes the use of cutting-edge techniques that enhance efficiency, optimize resource utilization, and reduce environmental impact. for example

Digital Mapping and Artificial Intelligence (AI)

The use of high-resolution digital mapping combined with AI-driven analytics allows companies to precisely locate hydrocarbon reserves. For instance, AI can analyze vast seismic datasets to identify potential drilling sites with higher accuracy, significantly reducing exploration costs and risks.

Seismic Imaging and 3D Modeling

Enhanced seismic imaging, including 3D and 4D seismic technologies, helps map subsurface structures in greater detail. For example, 4D seismic surveys monitor reservoir changes over time, enabling operators to optimize production strategies and recover a greater percentage of available resources.

Enhanced Oil Recovery (EOR) Techniques

Advanced recovery methods, such as carbon dioxide (CO2) injection and microbial EOR, are being encouraged. CO2 injection increases pressure within reservoirs, improving oil flow, while microbial techniques use engineered bacteria to break down hydrocarbons, increasing recovery efficiency. These methods enable the extraction of additional resources from mature or declining fields.

7. Facilitating Energy Transition

In line with global energy transition goals, the regulations also aim to create a framework that supports the gradual shift toward cleaner energy sources. While oil and gas remain critical for the next two decades, the regulations provide an enabling environment for companies to diversify and innovate in low-carbon and renewable energy technologies. By addressing these objectives comprehensively, the Oilfield Regulations 2024 aim to position India as a global leader in energy exploration and production, reduce reliance on imports, attract investments, and ensure a sustainable and secure energy future.

Differences from Previous Provisions:

The Act used the term “mining lease” for petroleum operations.

New Amendments: The Bill replaces the “mining lease” with a “petroleum lease,” specifically tailored for petroleum operations, making it more relevant to the sector.

Mineral oils were defined primarily as petroleum and natural gas.

New Amendments: The definition now includes coal bed methane, shale gas/oil, and any naturally occurring hydrocarbons, while excluding coal, lignite, and helium. In previous provisions environmental concerns were not as strongly emphasized.
Decisions were subject to judicial review, now a clear mechanism for appeals to an Appellate Tribunal is established, and an officer of Joint Secretary rank will be appointed for adjudicating penalties.

Criticism of the Oilfield Regulations 2024

The Oilfield Regulations 2024 has sparked considerable debate, with opposition highlighting several concerns ranging from state autonomy to environmental risks and accountability issues. The following points outline the major criticisms:

State Rights and Federalism

Critics argue that the bill undermines the federal structure by encroaching upon the states’ authority to levy taxes on mining activities as provided under Entry 50 of the State List (Schedule 7). The proposed shift from ‘mining lease’ to ‘petroleum lease’ potentially places regulation under Entry 53 of the Union List, centralizing control with the central government. This transition is seen as a dilution of state powers, raising concerns about equitable revenue-sharing mechanisms and the autonomy of resource-rich states.

Environmental Concerns

The legislation’s emphasis on operational flexibility for private players has raised alarm about potential environmental degradation. Critics stress that unregulated exploration activities could lead to deforestation, groundwater contamination, and biodiversity loss, with irreversible consequences. While private investors are incentivized, there is a growing demand to prioritize public sector companies, such as ONGC, known for adhering to stricter environmental standards and sustainable practices.

Accountability and Oversight

The replacement of criminal penalties with fines is viewed as weakening enforcement and accountability mechanisms. This shift may reduce the deterrence effect on non-compliance, potentially emboldening violations of safety and environmental norms. Critics argue that this approach could undermine public trust and lead to lax oversight in a sector critical to national interests.

Insufficient Public Consultation

Although the bill mentions collaboration with states and experts, the lack of emphasis on extensive public consultation has been criticized. Engaging local communities, environmental activists, and industry experts in policymaking is essential to ensure inclusivity and address potential blind spots in the legislation.

Need for Review

Given the ambiguities and potential risks associated with the bill, there is a growing demand to refer it to a select committee for further deliberation. Such a move could ensure a more balanced approach by safeguarding state interests, addressing environmental concerns comprehensively, and strengthening accountability measures. While the Oilfield Regulations 2024 aim to modernize India’s petroleum sector, opposition argue that the bill requires greater clarity and safeguards to address the concerns raised. A more inclusive approach, emphasizing public consultation and equitable resource management, could help create a framework that balances economic growth with environmental sustainability and federal harmony.

Way Forward

To address the criticisms of the Oilfield Regulations 2024, a more refined approach is necessary. First, to protect states’ financial rights and ensure smoother governance, the bill should clearly define the responsibilities of both the Union and state governments. A comprehensive revenue-sharing framework, aligned with federal principles, can ensure equitable distribution of resources and taxes. Specific roles for states in environmental monitoring, local consultation, and tax collection must be outlined to prevent centralization while preserving states’ autonomy over their resources.

While the recommendation to “make strict environmental rules mandatory” is essential, it needs further specification. The bill could incorporate mandatory Environmental Impact Assessments (EIA) for all petroleum projects, with strict thresholds for carbon emissions, deforestation, and water usage. A dedicated environmental regulatory body could be established to monitor compliance, with the authority to impose penalties for violations. Strengthening enforcement mechanisms would also require setting up an independent audit system to ensure both private and public companies adhere to environmental standards.

To ensure accountability from private companies, the bill should introduce clear, enforceable guidelines on resource management. These could include mandatory transparent reporting on production volumes, financial contributions, and resource utilization. Public access to such data would enhance accountability, allowing stakeholders to monitor corporate actions. In addition, the bill should create a more robust grievance redressal mechanism and penalties for non-compliance to deter misconduct.

The role of public sector companies like ONGC is critical in ensuring responsible and sustainable petroleum exploration. The bill should emphasize ONGC’s involvement in setting benchmarks for sustainable exploration, given its experience and established environmental standards. ONGC’s leadership in new developments can serve as a model for private companies, encouraging them to adopt responsible practices. Additionally, ONGC’s expertise in stakeholder engagement could help foster collaboration with local communities and governments, ensuring more balanced resource management.

Lastly, the bill should formalize a process of regular consultation with stakeholders, including state governments, environmental experts, and industry groups. This would ensure that evolving challenges, such as climate change and technological advancements, are addressed in a timely manner. A statutory review committee could be set up to assess the bill’s implementation every 3-5 years, ensuring it remains adaptive and relevant in the face of new challenges.

By integrating these specific recommendations, the Oilfield Regulations 2024 can be made more robust and aligned with sustainable development goals while respecting India’s federal structure. Clearer definitions of state rights, stronger environmental rules, and enhanced accountability measures will create a more responsible, equitable, and transparent petroleum sector. Regular reviews and inclusive policymaking will ensure that the legislation remains effective and adaptable to emerging challenges.