India depends heavily on imported fuel, and now it is spending billions to find more energy at home.
When the Strait of Hormuz was shut, India faced shortages of cooking fuel. Most of India's energy imports had passed through that waterway, and the disruption hit import-dependent economies particularly hard.
Nearly 90% of the oil India consumes and about half of its natural gas come from abroad. Domestic output supplies less than 20% of what India needs, and it is getting smaller. India produced 62.7 million tons of oil and gas in the 12 months through March, down more than 3% from the year before, marking the second straight year of decline.
Prime Minister Narendra Modi's government, in office since 2014, has struggled to attract major oil and gas exploration investment. The new spending aims to turn that around by reducing the financial risk of deepwater drilling. Even so, imports are expected to rise further; the goal is to increase annual domestic output by 10 million to 15 million tons of oil equivalent and reduce India's dependence on energy imports.
India's reliance on overseas energy has long been an economic weak point. With domestic output falling and refining capacity expected to grow, the latest supply shock showed how quickly import disruptions can reach household consumers. The new policy is designed to keep the import bill from climbing even faster.
A five-year package worth roughly 841 billion rupees ($9 billion) was approved by the cabinet to support offshore exploration. Information Minister Ashwini Vaishnaw announced the decision to reporters in New Delhi.
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Around 432 billion rupees will go toward accelerating offshore exploration. A further 285 billion rupees will pay for broad seismic surveys conducted through the fiscal year ending March 2031. Private firms and state-owned companies will get government funding to acquire and process seismic data and to drill 60 deepwater and ultra-deepwater wells.
Officials project that the initiative will lead to the discovery of more than 600 million tons of oil-equivalent reserves.
In a statement, the cabinet said the plan would "stimulate significant investments across the exploration and production value chain, creating long-term opportunities for industry, innovation and economic growth."
India's energy import dependence has been an economic weak point; the Hormuz closure proved that a disruption in a distant chokepoint can turn into shortages for Indian households. The new exploration spending does not end that dependence, but it is meant to slow the rise of import volumes. Deepwater and ultra-deepwater projects are expensive and slow, so the financial support is designed to shift some of that risk away from companies exploring in untested areas. The cabinet also hopes the program will bring private capital into a sector that has seen years of underinvestment.
India is not about to stop importing energy. By 2030, India's refining capacity is projected to expand 16%, to 6.2 million barrels per day. That expansion will probably push import volumes even higher.
India's heavy reliance on purchased fuel has long been a source of economic vulnerability, and the Hormuz closure proved how rapidly that reliance can turn into shortages for households. Even with billions in new spending, India will remain a major importer of oil and gas for the foreseeable future.
The war has prompted a global reassessment of oil and gas exploration following a long stretch of underinvestment. Higher energy prices have left big oil companies with ample cash, and they are now investing in areas previously dismissed as too risky or unprofitable.
Crude oil was listed at $84.79 a barrel, up 1.44%.
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