The oil and gas sector in India is the lifeblood of the country’s transport, industry, cooking and power systems, and also one of its greatest strategic vulnerabilities. India consumes far more petroleum than it produces and meets most of its crude oil needs through imports, which makes energy security a permanent concern of economic and foreign policy. At the same time, the country has built one of the largest refining industries in the world and exports significant quantities of petroleum products.
This explainer walks through the structure of the industry, from upstream exploration to midstream pipelines and downstream refining and marketing. It introduces the key public and private players, describes how refining capacity, strategic petroleum reserves and city gas distribution work, and explains why the government is pushing for a larger role for natural gas in what is often called the gas-based economy. Figures are described in general terms because production, import and price data move from year to year.
Quick Facts
| Feature | Details |
|---|---|
| Nodal ministry | Ministry of Petroleum and Natural Gas |
| Upstream regulator | Directorate General of Hydrocarbons (DGH) |
| Downstream and midstream regulator | Petroleum and Natural Gas Regulatory Board (PNGRB), set up under the 2006 Act |
| Crude oil import dependence | Over four-fifths of requirement met through imports |
| Major public sector firms | ONGC, Oil India, IOC, BPCL, HPCL, GAIL |
| Major private players | Reliance Industries, Nayara Energy |
| Strategic reserve agency | Indian Strategic Petroleum Reserves Limited (ISPRL) |
| First oil discovery | Digboi, Assam, in 1889 |
| Natural gas policy goal | Raise gas share in the primary energy mix substantially |
How the Industry Is Organised: Upstream, Midstream, Downstream
The petroleum value chain is usually divided into three segments, and India has significant activity in each.
Upstream
The upstream segment covers exploration and production (E&P): geological surveys, seismic studies, drilling of wells and the extraction of crude oil and natural gas from onshore and offshore fields. Companies here include ONGC, Oil India and a number of private and foreign operators working under production sharing or revenue sharing contracts.
Midstream
Midstream involves moving and storing hydrocarbons, through crude oil pipelines, product pipelines, gas pipelines, tankers, terminals and storage. Liquefied natural gas (LNG) import terminals are also part of midstream, as are the gas pipeline grids operated by firms such as GAIL.
Downstream
Downstream covers refining crude into petrol, diesel, aviation turbine fuel, kerosene, LPG, naphtha, bitumen and petrochemical feedstocks, and marketing these through retail outlets, bulk supplies and LPG distributors. Public sector oil marketing companies (OMCs) dominate retail, while private firms operate refineries and also export.
A Brief History: From Digboi to Bombay High
India’s oil story began in the north-east. Oil was struck at Digboi in Assam in 1889, and the Assam Oil Company later developed it into one of Asia’s oldest refineries. For decades, the country remained a modest producer. After independence, the government recognised that oil was a strategic resource and set up the Oil and Natural Gas Directorate in 1955, which became the Oil and Natural Gas Commission in 1956 and later a corporation.
Oil India was established in 1959 to develop discoveries in Assam, including the Naharkatiya field found in the 1950s. A major breakthrough came in the 1970s with the discovery of the Bombay High field in the Arabian Sea, which transformed domestic production. Indian Oil Corporation was formed in 1964, and in the mid-1970s the government nationalised several foreign-owned marketing companies, forming Bharat Petroleum and Hindustan Petroleum.
Key milestones
| Period | Development |
|---|---|
| 1889 | Oil discovered at Digboi, Assam |
| 1956 | Oil and Natural Gas Commission established |
| 1959 | Oil India formed |
| 1964 | Indian Oil Corporation created |
| 1970s | Bombay High discovered; BPCL and HPCL come under state control |
| 1984 | GAIL established for gas transmission |
| 1991 onwards | Economic reforms open parts of the sector to private and foreign players |
| 1999 onwards | New Exploration Licensing Policy introduced |
Crude Oil Import Dependence and Energy Security
India’s economy has grown much faster than its domestic oil production, which has been flat or declining at mature fields for many years. As a result, the country meets well over four-fifths of its crude requirement through imports, mainly from West Asia, Africa, Russia and the Americas, with the mix shifting according to prices and geopolitics. The import bill is a major component of the current account and is sensitive to global price swings and the rupee exchange rate.
Energy security is commonly described as having availability, affordability, accessibility and acceptability, the last relating to environmental sustainability. Heavy import dependence exposes India to supply disruptions, price shocks and shipping risks, especially in chokepoints such as the Strait of Hormuz.
How India manages the risk
- Diversifying suppliers across regions and contracts.
- Building strategic reserves to cushion short-term disruptions.
- Acquiring equity in overseas oil fields through ONGC Videsh and other firms.
- Promoting domestic exploration through reformed licensing.
- Substituting oil with natural gas, ethanol, biofuels, electric mobility and renewables.
Upstream: Exploration and Production
India has large sedimentary basins, onshore and offshore, but only a fraction has been explored thoroughly. Principal producing areas include the Mumbai offshore basin, Assam and Assam-Arakan, the Cambay basin in Gujarat, the Krishna-Godavari basin on the east coast and the Cauvery basin. The Directorate General of Hydrocarbons, set up in 1993, regulates upstream activity, manages data and oversees contracts.
The policy framework has evolved over time. The New Exploration Licensing Policy (NELP) opened blocks to private and foreign firms beginning in 1999. It was succeeded by the Hydrocarbon Exploration and Licensing Policy (HELP), which introduced a uniform licence, open acreage licensing and a revenue-sharing model. Discovered Small Field policy sought to monetise small pockets of oil and gas that were not being developed.
Key upstream players
- ONGC, the largest producer of crude oil and natural gas in the country.
- Oil India Limited, active mainly in Assam, Arunachal Pradesh and Rajasthan.
- Private and foreign operators in blocks awarded under various licensing rounds.
- ONGC Videsh, the overseas arm that invests in fields abroad.
Midstream: Pipelines, Storage and LNG Terminals
Midstream infrastructure carries crude oil from ports and fields to refineries and moves refined products to demand centres. India has an extensive network of crude and product pipelines, owned largely by public sector companies, which are cheaper and safer than road and rail transport for bulk volumes.
For natural gas, the national gas grid has been expanding. Major trunk lines such as the Hazira-Vijaipur-Jagdishpur system were early backbones, and more pipelines are being added so that gas can reach the east and south. The vision of a single connected national gas grid, sometimes called One Nation One Gas Grid, aims to link supply sources, LNG terminals and demand centres across states.
LNG import terminals
Since a large part of India’s gas is imported as LNG, regasification terminals on the coast are crucial. Terminals have operated at places such as Dahej and Hazira in Gujarat, Dabhol in Maharashtra, Kochi in Kerala and Ennore in Tamil Nadu, with more projects added on both coasts. Capacity expansion helps India buy gas on long-term contracts and in the spot market.
Downstream: Refining and Marketing
India is one of the world’s largest refiners, with refining capacity far above domestic consumption of petroleum products. This has made the country a net exporter of products such as diesel, petrol and aviation fuel, even while it imports crude. Refineries are owned by public sector companies and by private firms.
| Company | Notable refining and marketing role |
|---|---|
| Indian Oil Corporation (IOC) | Largest public sector refiner and marketer, with refineries across the country and a vast pipeline network |
| Bharat Petroleum (BPCL) | Refineries in Mumbai, Kochi and Bina; major retail network |
| Hindustan Petroleum (HPCL) | Refineries in Mumbai and Visakhapatnam, with additional refining via joint ventures |
| Reliance Industries | Operates the Jamnagar complex in Gujarat, among the largest refining sites in the world |
| Nayara Energy | Private refinery at Vadinar, Gujarat, with its own retail network |
| Others | Mangalore Refinery and Petrochemicals, Numaligarh Refinery, Chennai Petroleum and ONGC-linked units |
Complexity and exports
Many Indian refineries are technologically complex, meaning they can process a wide variety of crude grades and produce a high share of valuable light products. This flexibility lets them buy from diverse sources according to price. Alongside fuels, refineries feed the petrochemical industry, which makes plastics, fibres and chemicals.
Key Players: Public and Private Sector
The sector has historically been dominated by public sector undertakings, but private participation has grown since the economic reforms of 1991.
Public sector
- ONGC and Oil India in exploration and production.
- IOC, BPCL and HPCL in refining and marketing, collectively handling most retail fuel sales.
- GAIL in gas transmission, marketing and petrochemicals.
- Engineers India Limited in engineering consultancy for refineries and pipelines.
Private sector and foreign firms
Reliance Industries operates the large Jamnagar refining complex and has been a notable player in deepwater gas production in the Krishna-Godavari basin, including partnership with global major BP. Nayara Energy runs the Vadinar refinery. International oil firms have participated through production sharing contracts and joint ventures, and global traders and technology companies serve the supply chain.
Retail pricing of petrol and diesel was deregulated in stages, with petrol freed in 2010 and diesel in 2014, so that prices move with international benchmarks, although tax structure and government influence on retail pricing remain matters of regular public discussion.
Strategic Petroleum Reserves
A strategic petroleum reserve is a stock of crude oil held by the government to be drawn upon during supply disruptions. India’s programme is run by Indian Strategic Petroleum Reserves Limited (ISPRL), a special purpose vehicle under the Oil Industry Development Board. The reserves are stored in underground rock caverns, which are secure, cost-effective and space-saving.
Phase I sites
- Visakhapatnam in Andhra Pradesh
- Mangaluru in Karnataka
- Padur, near Udupi, in Karnataka
Together, these caverns hold only a limited number of days of national consumption, roughly a little over a week of crude requirement, so they function as a buffer rather than a long-term substitute for supply. India has planned additional capacity at places such as Chandikhol in Odisha and further expansion at Padur, sometimes involving partnerships with foreign national oil companies, which can also store their crude in Indian caverns. Commercial refiners also hold their own stocks, which add to the national cushion.
City Gas Distribution and the Push for Natural Gas
City gas distribution (CGD) networks supply piped natural gas (PNG) to homes, commercial establishments and industries, and compressed natural gas (CNG) to vehicles. The Petroleum and Natural Gas Regulatory Board authorises CGD entities through bidding rounds for defined geographical areas, and the rounds have extended coverage to a large majority of districts.
CNG is cheaper than petrol and diesel for many vehicle owners and cleaner in terms of local air pollutants, which is why it has been mandated for public transport in several cities. PNG for kitchens offers a convenient alternative to LPG cylinders and avoids refilling and transport issues.
Why gas?
- Cleaner burning than coal and oil, with lower particulate emissions.
- A bridge fuel in the transition to lower-carbon energy.
- Versatile feedstock for fertilisers, power and petrochemicals.
- Reduces reliance on liquid fuels in some sectors.
The government has set a long-term goal of increasing the share of natural gas in the primary energy mix to around the mid-teens in per cent terms by 2030, from a much lower base. Achieving this requires more pipelines, LNG terminals, domestic production and competitive pricing, which is the heart of the gas-based economy idea.
LPG, Ujjwala and Clean Cooking
Liquefied petroleum gas is a vital household fuel in India, and the country is a major importer of LPG. The Pradhan Mantri Ujjwala Yojana, launched in 2016, extended LPG connections to poor households, particularly women, to replace firewood and cow dung with cleaner fuel. This improved indoor air quality and saved time previously spent collecting fuel, though ensuring sustained refilling remains an issue for low-income families.
LPG distribution is organised through distributors attached to the three public sector OMCs, and subsidy delivery has moved to direct benefit transfer into bank accounts, tied to Aadhaar. These changes reduced leakages and diverted use of subsidised cylinders.
Biofuels, Ethanol and the Energy Transition
India has been blending ethanol, made from sugarcane and other feedstock, into petrol to cut crude imports and support farmers. The blending target has risen in steps, with the national goal of reaching 20 per cent ethanol blending, often called E20, moved forward over the years. Other measures include compressed biogas, biodiesel and the promotion of electric vehicles.
Oil companies are also investing in green hydrogen, solar power and battery storage, signalling a gradual diversification of their portfolios. Even so, petroleum will remain important for transport, aviation, shipping and petrochemicals for a long time, which is why the oil and gas sector in India continues to receive steady policy attention.
Challenges and Outlook
The industry faces a set of interlinked challenges. Domestic production from mature fields has been difficult to raise, and exploration in frontier basins demands high capital and appetite for risk. Global oil prices are volatile, affecting India’s trade balance, inflation and fiscal position. Taxation on fuels is a significant source of revenue for central and state governments, which complicates reforms such as bringing petroleum under the Goods and Services Tax.
The energy transition poses a long-term question about demand. India’s per capita energy consumption is low, and its demand for fuel is expected to keep growing for years, but the mix will shift towards gas, electricity and renewables. Balancing affordability, security and climate commitments is the central policy task.
Conclusion
From Digboi’s first well to the vast Jamnagar complex, the oil and gas sector in India has evolved into a complex industry that combines public enterprises and private giants. Heavy dependence on imported crude keeps energy security at the top of the national agenda, and tools such as strategic reserves, supplier diversification, ethanol blending and a growing natural gas network are all part of the response. Last reviewed: 3 October 2026.
Frequently Asked Questions
How dependent is India on imported crude oil?
India imports well over four-fifths of the crude oil it needs, because domestic production meets only a small share of demand. Supplies come from West Asia, Africa, Russia and the Americas, and the mix changes with prices and geopolitical conditions.
What is the difference between upstream, midstream and downstream?
Upstream refers to exploring for and producing crude oil and gas. Midstream covers transport and storage through pipelines, terminals and tankers, while downstream covers refining crude into fuels and petrochemicals and marketing them to consumers.
Which are the major oil and gas companies in India?
The leading public sector companies are ONGC, Oil India, Indian Oil Corporation, Bharat Petroleum, Hindustan Petroleum and GAIL. Reliance Industries and Nayara Energy are the major private refiners, with Reliance operating the huge Jamnagar refining complex.
What are India’s strategic petroleum reserves?
They are underground rock caverns at Visakhapatnam, Mangaluru and Padur that store crude oil for use during supply emergencies. Managed by Indian Strategic Petroleum Reserves Limited, they hold roughly a little over a week of national crude demand, so they serve as a short-term buffer.
What is city gas distribution?
City gas distribution is a network that supplies piped natural gas to households, businesses and industries and compressed natural gas to vehicles. The Petroleum and Natural Gas Regulatory Board awards licences for geographical areas through competitive bidding.
What is meant by a gas-based economy?
It is the policy goal of raising the share of natural gas in India’s energy mix from a low base, by building pipelines, LNG terminals and city gas networks. Gas is cleaner than coal and oil, so it is seen as a bridge fuel towards a lower-carbon energy system.
