India imports around 85% of its crude oil requirements, making energy security one of the country’s biggest economic challenges. To reduce that dependence and encourage fresh discoveries, the government has unveiled Samudra Manthan, an ₹84,084 crore offshore exploration programme aimed at unlocking oil and gas reserves beneath India’s seas.The scheme marks India’s most ambitious push yet to revive offshore exploration by funding seismic surveys, exploratory drilling and shared offshore infrastructure. The idea is to reduce the financial risks that have long discouraged companies from investing in deepwater exploration.Industry experts have welcomed the programme as a significant policy shift. However, they caution that financial support alone may not be enough to attract global oil majors or transform India’s offshore exploration landscape. They argue that regulatory reforms, faster approvals and a more investor-friendly fiscal regime will be equally critical if the programme is to achieve its goals.What is Samudra Manthan?The Cabinet has approved Samudra Manthan, formally known as the National Offshore Exploration Scheme, with a Phase I outlay of ₹84,084 crore until March 2031.The programme spans the entire exploration value chain. It includes modern 2D and 3D seismic surveys, artificial intelligence-led reprocessing of existing geological data, drilling of 60 deepwater exploration wells, development of common offshore infrastructure and creation of domestic oil and gas manufacturing and services clusters.One of the biggest incentives is government support for exploratory drilling. Since a single deepwater well can cost more than ₹1,000 crore and may still fail to find commercial reserves, the government will reimburse up to 50% of eligible drilling costs, subject to a cap of ₹675 crore per well.The objective is to encourage companies to invest in India’s frontier offshore basins, including Krishna-Godavari, Mahanadi, Kaveri and the Andaman region, while reducing the country’s dependence on imported crude oil and natural gas.Why is the government launching the scheme now?The programme comes at a time when India’s domestic oil and gas production has remained largely stagnant even as energy demand continues to rise. Although the government has introduced reforms such as the Hydrocarbon Exploration and Licensing Policy (HELP) and the Open Acreage Licensing Policy (OALP), exploration activity has not picked up meaningfully.At the same time, geopolitical uncertainties and volatile global energy markets have reinforced the need to strengthen India’s energy security. The government hopes that reducing the financial risks of exploration will encourage companies to search for new reserves in frontier offshore basins.Why has offshore exploration remained difficult?While India has opened up most of its offshore acreage through reforms such as HELP and OALP, exploration activity has remained subdued because offshore drilling is capital-intensive, technically complex and carries a high risk of failure.Former ONGC Chairman and Managing Director RS Sharma believes the government should have introduced such incentives much earlier.”Better late than never,” Sharma told CNBC-TV18. “These kinds of incentives should have been given 20 years back.”According to Sharma, many international oil companies entered India during the early rounds of the New Exploration Licensing Policy but eventually exited because of regulatory delays, limited fiscal incentives and the country’s relatively modest hydrocarbon potential.”Whatever announcements they have made, I would welcome them,” he said. “Still, there are a few more things to be done.”Why do experts say the scheme may not be enough?All three panellists agreed that Samudra Manthan is a step in the right direction, but said further reforms will determine whether India can compete successfully for global exploration capital.Sharma argued that exploration should be treated more like research and development than a conventional commercial activity.”Exploration is not a revenue-generating activity. It is more like an R&D effort,” he said, suggesting that exploration-related imports should be exempt from customs duty and GST.He also called for changes to India’s “ring-fencing” rules, under which each exploration block is treated separately for cost recovery. According to him, companies should be allowed to offset losses from unsuccessful wells against profits from successful discoveries elsewhere.”The government needs to provide more incentives and more flexibility,” Sharma said, adding that operational approvals should also be expedited.How does India compare with other exploration markets?Prateek Pandey, Partner and Head of APAC Oil & Gas Research at Rystad Energy, said India has become more competitive but still trails established offshore exploration destinations such as Guyana and Brazil.Both countries have attracted billions of dollars in offshore investment after making major discoveries and offering stable fiscal regimes, making them global benchmarks for frontier exploration.”It is always tricky to set the right fiscal terms and policies for a frontier exploration area,” Pandey said.He noted that Samudra Manthan goes beyond financial support by also addressing infrastructure gaps and project timelines, making India more attractive than many other frontier regions.However, he added that greater exploration success would be needed before India could compete with the world’s most attractive offshore investment destinations.”If you ask whether this stands on par with Guyana or Brazil, there will need to be more exploration success to raise investor confidence before reaching that level,” Pandey said.He also highlighted the broader economic rationale behind the programme.”India is spending about $12 billion a month on energy imports,” he said. “The seven years of expenditure under this scheme is less than one month’s import bill.”Why is offshore exploration still a high-risk business?While ONGC and Oil India are expected to lead the initial phase of exploration, experts believe attracting international operators will require more than financial incentives.Pandey said national oil companies are likely to remain at the forefront over the next few years because the immediate focus will be on seismic surveys and appraisal drilling.However, if better geological data emerges and commercial discoveries are made, international companies with deepwater expertise could become more interested in operating Indian blocks. Countries such as Guyana and Brazil have demonstrated how partnerships between national oil companies and global energy majors can accelerate offshore development following major discoveries.According to Probal Sen, Senior Research Analyst at ICICI Securities, investors should recognise that exploration is inherently uncertain.”The exploration cycle of seven to 10 years is the most important point,” Sen said.Although the government will bear part of the drilling costs, companies will still face substantial financial exposure, with individual wells costing around ₹700 crore after government support and carrying relatively low chances of success.Sen believes the incentives are likely to encourage ONGC and Oil India to pursue exploration more aggressively. However, whether they are sufficient to attract global oil majors remains uncertain.He also pointed to another important feature of the programme: common offshore infrastructure.Shared production and evacuation facilities could make smaller discoveries commercially viable by reducing development costs, potentially encouraging companies to explore fields that would otherwise be uneconomical.What will determine Samudra Manthan’s success?The government’s ambition is to increase domestic oil and gas production from around 62 million tonnes of oil equivalent annually to 80 million tonnes, expand India’s hydrocarbon resource base by 600 million tonnes of oil equivalent and reduce the country’s annual crude import bill by nearly ₹1 lakh crore.However, experts say those targets depend less on government spending and more on whether exploration leads to commercially viable discoveries.Sharma believes the biggest challenge is rebuilding investor confidence after many global companies left India following earlier exploration rounds.”The most important thing is to give comfort to prospective investors that we have an investor-friendly regime,” he said.Samudra Manthan represents India’s biggest offshore exploration push in decades and addresses one of the sector’s biggest hurdles by sharing the risks of expensive deepwater exploration. But experts say its success will ultimately depend less on the size of the government’s financial support and more on whether India can create a stable, investor-friendly policy environment with faster approvals, greater regulatory flexibility and better geological data. Only then are global energy companies likely to view India’s offshore basins as worth the long-term exploration risk.Watch accompanying video for full conversation.

Source link