India’s Parliament Panel Questions Oil and Gas Sector Capex Despite Output Fall

When More Money Produces Less Oil: India's Upstream Accountability Crisis

There is a peculiar paradox quietly unfolding inside India's energy economy. Across most capital-intensive industries, sustained increases in investment eventually produce measurable output growth. In India's upstream petroleum sector, the opposite has been happening — and the parliament panel questions on oil and gas sector capex despite output fall have brought this contradiction into sharp public focus. Spending has climbed steadily while production has moved in the opposite direction, and the gap between the two trends has grown wide enough to attract formal parliamentary scrutiny.

This is not simply a story about inefficient public enterprises. It reflects deeper structural forces that affect upstream oil economies worldwide: the punishing timeline between capital deployment and first production, the inexorable physics of reservoir depletion, and the difficulty of sustaining output from ageing fields without transformative technological intervention. What makes India's situation distinctive is the scale of its import dependency and the sovereign capital at stake.

The Numbers Behind the Parliament Panel Questions on Oil and Gas Sector Capex Despite Output Fall

The parliamentary Committee on Public Undertakings tabled an action taken report in August 2026 that placed hard figures against a growing concern. Capital expenditure by petroleum and natural gas public sector undertakings rose from ₹1.33 lakh crore in FY2020-21 to a projected ₹1.70 lakh crore in FY2024-25, representing growth of approximately 28% over four years. Over roughly the same window, domestic crude oil production is expected to fall to 28.70 million metric tonnes (MMT) in 2024-25, compared with 34.20 MMT recorded in 2018-19.

That is a contraction of approximately 5.5 MMT, or close to 16%, measured against the sector's recent peak. The divergence between rising capex and falling output is the core issue that prompted the committee to formally demand a comprehensive explanation from the petroleum ministry. Furthermore, this pattern echoes broader concerns raised by analysts tracking crude oil price dynamics globally, where investment cycles and production realities are increasingly misaligned.

Natural gas output presents a more encouraging picture. Production rose from approximately 32.87 billion cubic metres (BCM) to around 36.11 BCM over the same reference period. This asymmetry is analytically significant: it suggests that capital is achieving results in gas-prone geological settings, even as conventional oil-producing assets continue to struggle. The divergence between gas gains and oil losses points toward a basin-specific story rather than a blanket failure of investment strategy.

Why Geological Ageing Is the Elephant in the Room

Understanding Natural Field Decline in India's Producing Basins

A foundational concept in petroleum engineering is the production decline curve, which describes how output from a hydrocarbon reservoir inevitably falls over time as reservoir pressure depletes and fluid-to-rock dynamics change. India's largest producing fields, including assets in the Mumbai High offshore region and onshore basins in Assam and Gujarat, have been producing for decades. Many are now operating on the tail end of their natural production curves.

This is not a uniquely Indian problem. Mature fields globally exhibit annual natural decline rates that can range from 5% to 15% per year without active intervention. Indeed, comparable oil production decline challenges have emerged in other major producing nations facing ageing asset bases. In India's case, the legacy asset base has experienced exactly this trajectory. Key contributing factors include:

• The natural exhaustion of primary and secondary recovery phases in fields discovered between the 1960s and 1990s
• Limited historical investment in enhanced oil recovery (EOR) technologies such as polymer flooding, CO2 injection, or thermal recovery methods that could unlock additional reserves from depleted reservoirs
• The geological reality that India's sedimentary basins, while vast, contain complex reservoir architectures that reduce well productivity compared to simpler structural traps found in the Middle East
• Deferred workover and maintenance programmes during the COVID-19 disruption period of 2020-21, which accelerated decline in fields that would otherwise have received routine production support

The EOR Gap: A Lesser-Known Vulnerability

One dimension of India's production challenge that receives less public attention is the relatively underdeveloped state of EOR application across its PSU-operated fields. Globally, EOR methods can add 5% to 20% of original oil in place to recoverable reserves in mature fields. India's national oil companies have piloted EOR projects but have not deployed them at scale.

Given that India's largest fields already hold decades of geological characterisation data, there is a credible technical argument that accelerating EOR investment could arrest decline more quickly than waiting for new deepwater discoveries to reach production. According to research from the IEEFA, the oil and gas industry more broadly faces a capex conundrum where spending decisions do not always translate into proportional output gains — a dynamic that resonates strongly with India's current predicament.

The Long Gestation Problem: Why Capex and Output Move on Different Clocks

Exploration Timelines and the Decade-Long Lag

One of the most frequently misunderstood aspects of upstream oil and gas investment is the time compression problem. Capital allocated today to exploration does not produce oil today, or next year, or necessarily within this decade.

A deepwater exploration project follows a journey from seismic acquisition through drilling, discovery appraisal, field development planning, infrastructure construction, and finally first production that commonly spans seven to twelve years. Investments committed in 2024 may not register as production volumes until the mid-2030s at the earliest.

This gestation reality creates a structural disconnect between parliamentary accountability cycles, which operate on annual reporting rhythms, and the physical timelines of upstream project development. The committee acknowledged this dynamic in its report but maintained that such constraints do not eliminate the need for:

1. Clear production benchmarks tied to each major capital allocation decision
2. Periodic technical reviews of exploration block performance against predefined milestones
3. Transparent accountability frameworks that link expenditure approvals to time-bound output commitments
4. Medium-term production forecasts that distinguish between capital targeting near-term recovery from existing fields versus capital targeting long-dated deepwater discoveries

What Parliament's Oversight Committee Has Formally Required

The Scope and Significance of the Committee's Intervention

The Committee on Public Undertakings holds a constitutional mandate to evaluate whether government-owned enterprises are deploying public capital in the national interest. Its scrutiny of the petroleum sector signals a broader concern: that rising sovereign investment in upstream energy is not currently translating into the energy security outcomes it is designed to achieve.

The committee's action taken report described the petroleum ministry's initial response as interim and inadequate. The ministry had catalogued a range of policy initiatives but had not established a credible link between those initiatives and measurable future production outcomes. The panel specifically called for:

• A comprehensive medium-term production report covering newly awarded exploration acreage under the Open Acreage Licensing Policy (OALP)
• Detailed timelines for first production from deepwater and frontier blocks currently under active development
• An explanation of how exploration policy reforms are expected to convert into volume gains, supported by data rather than intent
• Evidence that major capital projects are governed by defined performance benchmarks and not merely broad strategic objectives

The committee's position, as reflected in the report, was that investments of this scale demand the same rigour of accountability as any other major sovereign expenditure. The expectation is not that production will recover overnight but that a credible, time-bound trajectory toward stabilisation and eventual growth must be demonstrable.

India's Import Dependency: Why the Stakes Are Higher Than They Appear

The 90% Import Problem and Its Cascading Consequences

India imports approximately 90% of its crude oil requirements, a structural dependency that creates multiple layers of economic vulnerability. Unlike a manufacturing sector exposed to commodity price risk, petroleum import dependency generates compounding pressure across the national balance sheet. This vulnerability extends beyond oil, as India's resource and energy exports partners face their own pressures navigating a shifting global energy landscape:

• Foreign exchange drain: India's crude import bill fluctuates with global Brent prices, creating unpredictable current account pressure. During periods of elevated oil prices, the import burden can widen the current account deficit significantly, placing downward pressure on the rupee.
• Energy security exposure: Geopolitical disruptions to major supply routes, sanctions regimes affecting key exporters, or tanker availability constraints can create acute supply stress in an economy with minimal domestic production buffer.
• Fiscal transmission risk: Indian oil PSUs operate within a politically sensitive fuel pricing environment. When international crude prices spike, the government faces difficult choices between passing costs to consumers, subsidising PSU losses, or drawing down fiscal reserves.

The Samudra Manthan Scheme: Scale, Ambition, and Open Questions

Weeks before the parliamentary panel tabled its report, the central government approved the Samudra Manthan national offshore exploration scheme, committing approximately ₹84,000 crore to accelerate deepwater and ultra-deepwater exploration across India's exclusive economic zone. However, understanding India's LNG import structure alongside this initiative is essential to appreciating the full complexity of the country's energy supply challenge.

The programme's ambition is significant. India's offshore sedimentary basins, particularly in the Krishna-Godavari and Andaman deep-water areas, are considered geologically prospective but remain substantially underexplored relative to their estimated resource potential. Deepwater drilling technology has advanced considerably since earlier Indian offshore campaigns, and modern 3D seismic interpretation tools have improved the probability of commercial discovery.

However, the committee's concerns remain directly applicable to Samudra Manthan. The scheme represents exactly the kind of long-gestation capital commitment that requires clear milestones, transparent progress reporting, and realistic production timeline projections to ensure accountability. Without those frameworks, a programme of this size risks repeating the pattern the committee has already identified: large expenditure, modest near-term output, and insufficient explanatory architecture.

A Framework for Measuring Capital Efficiency in Petroleum PSUs

Five Metrics That Should Govern Upstream Accountability

The deepest analytical gap identified by the parliamentary committee is the absence of standardised capital efficiency reporting across India's petroleum PSUs. Most global major oil companies publish detailed reserve and production metrics that allow investors and regulators to evaluate whether capital is being deployed productively. India's PSUs have not consistently applied equivalent transparency. A rigorous accountability framework should incorporate:

1. Finding and Development (F&D) Cost per Barrel: Measures capital required to add one barrel of proved reserves. Rising F&D costs in a mature basin are a warning signal that exploration is targeting increasingly difficult geological targets.
2. Reserve Replacement Ratio (RRR): Tracks whether new discoveries and reserve additions are keeping pace with production depletion. A ratio below 100% means the company is consuming its asset base faster than it is replacing it.
3. Production per Rupee of Capex: A simplified PSU-level metric designed for parliamentary-level accountability, enabling year-on-year comparison of output efficiency relative to investment scale.
4. Time-to-First-Production: Monitors whether exploration and development timelines are being compressed through operational improvements, better contractor management, or regulatory process efficiencies.
5. Enhanced Recovery Factor: Evaluates whether EOR investments in mature fields are successfully arresting natural decline rates and extending productive field life.

India's petroleum PSUs have not consistently published standardised capital efficiency metrics in their public disclosures. The committee's demand for comprehensive reporting may be the catalyst that finally drives adoption of transparent, internationally comparable performance frameworks across the sector.

Structural Reforms That Could Close the Gap

Where Policy Can Make a Measurable Difference

Several reform levers exist that could improve the rate at which capital investment converts into production volume. These are not speculative: analogues from comparable upstream jurisdictions suggest meaningful efficiency gains are achievable. Moreover, the broader energy industry's strategic rethink, as documented by Carbon Tracker's analysis of industry-wide capital retreat, underscores how critical disciplined capital allocation has become globally.

Exploration and Acreage Policy

• Continued acceleration of block awards under the Open Acreage Licensing Policy, with streamlined timelines from bid to work programme commencement
• Fiscal incentives specifically targeting EOR deployment in mature onshore fields, where incremental recovery is achievable without the decade-long timeline of deepwater development
• Simplified environmental clearance pathways for offshore exploration campaigns, where delays in regulatory approvals have historically extended pre-drilling timelines

Operational and Technical Improvements

• Wider adoption of digital oilfield technologies, including real-time production monitoring, predictive maintenance systems, and reservoir simulation tools that optimise recovery from existing assets
• Strengthened contractor accountability frameworks to reduce project cost overruns and timeline slippage, both of which inflate effective capex per barrel
• Greater deployment of horizontal drilling and hydraulic fracturing in tight onshore formations, where India has underdeveloped potential relative to its resource base

Governance and Reporting

• Mandatory production forecasts linked to each capital approval above a defined threshold
• Independent technical audits of reserve estimates for PSU-operated assets, improving the reliability of the data underpinning investment decisions
• Quarterly production performance reporting to parliamentary committees, enabling real-time oversight rather than retrospective scrutiny

Frequently Asked Questions

Why is India's crude oil production falling despite higher investment?

India's output decline is driven primarily by natural reservoir depletion in ageing onshore and shallow-water fields, the long lead times between exploration capital deployment and first production, and historically limited application of enhanced oil recovery technologies. Higher capex is being committed, but much of it targets assets that will take years to contribute production volumes.

What is the Samudra Manthan scheme?

Samudra Manthan is a government-approved national offshore exploration programme with an approved budget of ₹84,000 crore, designed to accelerate deepwater exploration across India's exclusive economic zone and reduce the country's dependence on imported crude oil.

How much has India's crude production declined?

Domestic crude output fell from 34.20 MMT in 2018-19 to a projected 28.70 MMT in 2024-25, a reduction of approximately 5.5 MMT representing roughly 16% of peak production over six years.

What did the parliamentary committee require from the petroleum ministry?

The committee asked for a comprehensive medium-term production report detailing how newly awarded exploration blocks and major capital projects will contribute to reversing the production decline, supported by specific performance benchmarks, accountability mechanisms, and realistic first-production timelines.

How much do India's petroleum PSUs invest annually?

Capital expenditure by petroleum and natural gas PSUs reached approximately ₹1.70 lakh crore in 2024-25, up from ₹1.33 lakh crore in 2020-21, reflecting a 28% increase over four years.

The Accountability Imperative: Spending Must Be Governed, Not Just Announced

The parliament panel questions on the oil and gas sector capex despite output fall represent more than routine legislative oversight. They reflect a structural stress point in India's energy sovereignty agenda: the country is committing unprecedented capital to domestic exploration at precisely the moment when production trajectories and investment timelines are moving in opposite directions. Consequently, the pressure for meaningful reform has rarely been more acute, with observers drawing parallels to the oil price shock that forced Canadian energy executives to fundamentally reassess capital discipline.

Reversing this dynamic does not require abandoning ambition. It requires governing that ambition with the same analytical rigour that characterises well-run upstream operations globally. That means publishing standardised capital efficiency metrics, linking expenditure approvals to measurable production milestones, accelerating EOR deployment in mature fields where near-term recovery potential exists, and ensuring that programmes like Samudra Manthan are built on transparent, independently auditable performance frameworks from day one.

The question is not whether India should continue investing in its upstream energy sector. The strategic and economic logic for doing so is unambiguous given its import exposure. The question is whether the institutions governing that investment are equipped to ensure it delivers the production outcomes the country urgently needs.

Disclaimer: This article is intended for informational purposes only and does not constitute financial or investment advice. Production forecasts, capex projections, and exploration timelines referenced are drawn from publicly available parliamentary and government sources and are subject to revision. Readers should conduct independent research before making any investment or policy-related decisions.

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