Background
The Oilfields (Regulation & Development) Act, 1948 (“Original Act”)[1] is the principal legislation governing the exploration and development of mineral oil resources in India. It was first enacted as the Mines and Minerals (Regulation and Development) Act, 1948 (“1948 Act”) as a common legislation governing mines and minerals as well as mineral oil resources (including petroleum and natural gas). Subsequently, in the year 1957, the Mines and Minerals (Development & Regulation) Act (“1957 Act”) [2] was enacted to specifically govern and regulate the mines and mineral sector.
To accommodate the 1957 Act, the 1948 Act was renamed as the Oilfields (Regulation & Development) Act, 1948, and its scope was narrowed to specifically deal with oilfields and petroleum related matters. While the 1948 legislation was renamed, many of the terminologies continued to reflect the earlier conflation of mining and petroleum activities. This is where the Oilfields (Regulation & Development) Amendment Act, 2025 (“Amendment Act”) steps in. The draft bill of the Amendment Act was introduced earlier this year and after being passed in both houses of the Parliament, it received the President’s assent on 28 March 2025. The Amendment Act, which came into force on 15 April 2025, introduces calibrated amendments to the Original Act in harmony with the Government’s efforts to encourage investment in the Indian Exploration & Production (“E&P”) sector.
The Amendment Act marks an important legislative development by providing statutory clarity and embedding within it several long-standing policy decisions in the oil and gas sector. In doing so, it lends legislative backing to India’s broader energy objectives, particularly the goal of reducing import dependency. India’s reliance on imported crude oil remains a pressing concern, with import dependency rising to 88.2% in FY 2024–25, up from 87.8% in FY 2023–24.[3] Given that India’s oil demand is projected to grow at a compound annual rate of 3–5% through 2030 [4], reducing this dependency has become critical to insulate India from geopolitical risks and supply disruptions in the global oil market.
One area with significant potential is shale gas, where the United States’ experience particularly stands out. In the last two decades, the United States underwent a shale gas revolution, with dramatic increases in shale gas production, which has fundamentally transformed its gas market. Investment in extraction techniques—particularly hydraulic fracturing—have propelled the U.S. towards greater energy security and self-sufficiency. In this context, the Amendment Act's explicit incorporation of shale gas into the definition of "mineral oils" establishes a legal framework for the commercial exploration and production of shale gas in India, thereby facilitating foreign investment in this unexplored resource. As India looks to diversify its energy sources, the development of shale gas could potentially play a central role in its move towards energy self-sufficiency.
Part I of this two-part article series analyses the key amendments effected by the Amendment Act against the backdrop of the Government’s larger policy objectives. We particularly focus on the Amendment Act’s introduction of the State’s obligation to ensure stability in the terms and conditions of a petroleum lease, its promotion of alternate dispute resolution tools in disputes between the Government and contractors, and its approach to the imposition and adjudication of penalties for violations of certain provisions and rules under the Amendment Act. We also examine related steps taken by the Government in this direction, noting how this ties to the broader goal of making the E&P Sector in India more investor friendly.
The Amendment Act – An Overview
The predominant objective of the Amendment Act, as stated by the Minister of Petroleum and Natural Gas, is the need to meet investor expectations, promote Ease of Doing Business and promote collaboration between the Government and contractors— making India an attractive destination for production of oil and gas [5].
One of the most notable changes introduced by the Amendment Act is the dissociation of petroleum operations with mining operations thereby eliminating the long-standing practice of grouping petroleum and mining operations under the same regulatory framework. This delinking can be identified by the introduction of a Petroleum Lease in place of a Mining Lease. This change in the nomenclature across the Act avoids conflation of petroleum exploration with mining activities, which differ fundamentally in both their methods and impact. The objective behind this clarification was also to curtail the confusion that arose by using the same term, which often led to the delaying of petroleum exploration operations for the need of irrelevant permits and licenses.[6]
Another significant change effected is the expansion of the definition of ‘mineral oils’. While ‘mineral oils’ in the Original Act only covered natural gas and petroleum, the Amendment Act broadens its scope to encompass all naturally occurring hydrocarbons while clarifying that the mineral oils will not include coal, lignite or helium. Notably, it expressly includes unconventional hydrocarbons such as shale gas, tight oil, coal bed methane, and gas hydrates within the ambit of Section 3 of the Amendment Act. This amendment is strongly indicative of the Government’s broader intentions to realise energy security by the exploitation of unconventional hydrocarbons. In 2018, the Government reformed policies to promote coal bed methane and enhanced oil and gas recovery - also permitting Coal Bed Methane operations by coal miners.
According to estimates, there are large deposits of shale gas in Cambay, Krishna, Godavari and Kaveri basin. According to Oil and Natural Gas Corporation (ONGC), there is 187.5 trillion cubic feet of shale gas in 5 basins (Cambay On-land, Ganga Valley, Assam & Assam Arakan, Krishna Godavari On-land & Cauvery On-land) [7]. The Amendment Act’s introduction of a mandatory composite license under a uniform licensing regime may open the door for participation by foreign players. While this can help unlock India’s shale gas potential, it will be important to see how India balances the extraction of shale gas with the environmental concerns associated with hydraulic fracturing (‘fracking’), the primary method of extraction of shale gas.
The changes introduced in the Amendment Act complement the already existing exploration and licensing policy named ‘Hydrocarbon Exploration and Licensing Policy’ (“HELP”)[8], which replaced the former ‘New Exploration Licensing Policy’ (“NELP”) [9]. Approved in 2016, HELP provides a uniform license to enable E&P operators to explore and extract all hydrocarbon resources including conventional and unconventional oil and gas resources including Coal Bed Methane, Shale Gas/Oil, Tight Gas, Gas Hydrates and any other resource to be identified in future which fall within the definition of ‘Petroleum” and “Natural Gas” under Petroleum and Natural Gas Rules, 1959. The Amendment Act, thus, provides express statutory recognition to the concept of uniform licensing, which until now existed only as a policy-based framework.
Statutory assurance of Stability
The E&P sector is characterised by intensive capital investments, a volatile situation of oil prices and long gestation periods with inherent risks of the investment proving unproductive. Further, agreements between the Government and E&P contractors are usually long-term, rendering the perception of stability of a project one of the foremost considerations for any investor.
Section 5(3) of the Amendment Act reads, “The terms and conditions of a petroleum lease shall remain stable during the period of the lease for expeditious and efficient development of oilfields or production of mineral oils and shall not be altered to the disadvantage of the lessee during the period of the lease.”.Thus, the Amendment Act expressly places a positive obligation on the Government to ensure that the terms and conditions of a petroleum lease remains stable during the period of the lease and that it’s not altered to the disadvantage of the lessee. This clause recognizes the importance of stability and predictability for foreign investors, particularly where substantial investments are involved. It has been inserted to redress one of the biggest grievances of global oil companies interested in investing in India by providing stability in operations, both in terms of tenure of the lease and the conditions therein.
With the increasing incorporation of stabilisation clauses in agreements between states and investors such as Revenue Sharing Contracts (RSCs) or other investment agreements, it is important to distinguish these contractual protections from the statutory stability conferred under Section 5(3) of the Amendment Act. While both mechanisms aim to mitigate political and regulatory risks for foreign investors, their scope differs. Contractual stabilisation clauses offer broader protection and are designed to shield investors from the adverse impact of subsequent legislative or regulatory changes in the host State. Depending on how these clauses are drafted, such clauses may freeze the legal regime at the time of contracting or provide for economic equilibrium adjustments in case of a legal change affecting project viability. Section 5(3) of the Amendment Act provides a narrower, statutory assurance, confined to the stability of the terms and conditions of the lease granted under the Amendment Act. The provision, being narrowly worded, does not purport to immunise investors from future changes in the broader legal or regulatory environment. It is likely to be construed strictly by Indian courts and, on its own, is not likely to fetter the State’s right to regulate in public interest.
From a practical perspective, historically an E&P operator’s assertion of a breach of this provision may be analogized to an investor’s claim of a breach of legitimate expectations under the fair and equitable treatment (FET) standard in the investment treaty arbitration regime. The statutory assurance of stability, especially where explicitly stated in legislation or contractual frameworks, may be interpreted as giving rise to legitimate expectations on the part of the contractor.[10] Since the contractor enters into the lease arrangement relying on the continuity of the regulatory and contractual environment, any unilateral alteration to the terms and conditions of the lease, particularly where it affects the tenure of the lease or the viability of the investment, may constitute a violation of these expectations. However, it is important to note that India’s recent bilateral investment treaties (BITs) include explicit carve-outs for regulatory measures adopted in the legitimate exercise of sovereign authority. These treaties clarify that the mere adverse impact of such measures on an investor’s expectations shall not, by itself, amount to a breach of the treaty.[11]
Petroleum Leases & Dispute Resolution:
The Amendment Act inserts Section 5(2)(e), by which it promotes alternative dispute resolution mechanisms like arbitration to enable resolution of disputes connected to the grant or authorisation of petroleum leases. Notably, Section 5(2)(e) contemplates the choice of a foreign-seated arbitration to resolve disputes between the Government and the Contractor. In doing so, the Amendment Act makes it amply clear that revenue/production sharing contracts entered into with the Government can provide for a foreign seat of arbitration. Since the model Revenue Sharing Contract designates a domestic seat in the dispute resolution clause, this provision comes as a welcome clarification and augments party autonomy in the choice of seat of arbitration which would ultimately boost investor confidence.
This particular amendment can be contrasted against a more restrictive approach on arbitration adopted by the Government in the context of domestic public procurement contracts. In June 2024, the Ministry of Finance circulated an office memorandum containing new guidelines for arbitration and mediation in domestic public procurement contracts.[12] The guidelines impose restrictions on the use of arbitration in domestic Government procurement contracts, restricting the incorporation of arbitration clauses in high-value domestic procurement contracts. This divergence in approach is instructive of the targeted, sector-specific approach adopted by the Government as opposed to a one-size-fits-all policy on arbitration. Since the focus in E&P sector is on attracting foreign investment, the Government has statutorily recognised the possibility of a foreign seat to match investor expectations.
Penalties and the Adjudication thereof – Revised Framework of Section 9:
Section 9 of the Original Act provided that any rule made under the Original Act may impose penalties (fines up to one thousand rupees, imprisonment up to six months, or both) for contravention of that rule. It also provided for the continued imposition of fines (up to one thousand rupees) in cases of continued violations after the first conviction.
The Amendment Act overhauls this provision by doing away with the criminal penalties (such as imprisonment) and replacing it with stricter financial penalties, to be imposed by an Adjudicating Authority designated by the Central Government. It also specifies the events that lead to the imposition of penalties – being contraventions of (i) Section 4A of the Amendment Act which bars petroleum operations except under a valid lease in accordance with the Act or, (ii) Sections 6A(1) and 6A(2), which provide for the payment of royalties by the holder of the petroleum leases in respect of mineral oils. The Amendment Act stipulates a penalty of up to INR 25 lakh in cases of violation of the said provisions, with continued infractions attracting fines of up to INR 10 lakh per day. Additionally, the Amendment Act retains the provision that any rule made under the Act may attract penalties for the contravention thereof; however, this penalty is only civil i.e., an imposition of fines up to INR 25 lakh.
What emerges, therefore, is that while the Amendment Act stipulates stricter financial penalties, it has eliminated any criminal penalty for offenders of the relevant provisions or rules framed under the Amendment Act. While this move may boost investor confidence, the absence of any criminal liability could also dilute the deterrent effect – potentially allowing Oil and Gas giants to view fines as merely the cost of doing business.
Significantly, Sections 9A and 9B of the Amendment Act provide for the mechanism relating to the conduct of inquiry and imposition of penalties under Section 9. Pertinently, Section 9A (3) stipulates that no penalty can be levied on any person without affording any opportunity of being heard. Accordingly, Section 9A provides for the designation of an adjudicating authority, not below the rank of Joint Secretary to the Government of India, which will conduct the inquiry to decide on the imposition of penalties. Section 9A (1) provides that the Central Government shall make rules relating to the eligibility criteria for designating an Adjudicating Authority and the manner of conducting enquiries and imposing penalties under the Act. Further, Section 9A (2) provides that while deciding whether there has been a contravention under Section 9 and the corresponding penalties, the Adjudicating Authority will have the power to summon and enforce attendance of any person acquainted with the facts and circumstances of the case to produce any document/evidence relevant to the subject matter of the inquiry.
The Amendment Act also introduces Section 9B which provides that an appeal against the order of the Adjudicating Authority would lie with the Appellate Tribunal designated under the Petroleum and Natural Gas Regulatory Board Act, 2006 i.e., the Appellate Tribunal for Electricity.
Past Steps in Similar Direction
The Amendment Act is another addition to the Government’s initiatives to make India’s oil and gas sector an attractive destination for investors to undertake exploration and production operations. Over the last decade, the Government has brought about many reforms in this direction, including the paradigm shift to the Revenue Sharing model instead of the Production Sharing. Another significant move is the replacement of Government of India’s former NELP with HELP in 2016. Key aspects of HELP include – a uniform license for exploration and production of all forms of hydrocarbons, a revenue sharing model (instead of the earlier profit- sharing model which provided for profit-sharing post cost recovery by the Contractor under NELP), an open acreage policy, marketing and pricing freedom for the crude oil and natural gas produced, and a National Data Repository (NDR) which acts as a central database for Indian E&P sector data. The NDR was introduced to streamline the bidding process, allowing investors to review this data and submit Expressions of Interest around the year.
Notably, the Open Acreage Licencing Policy (“OALP”) was introduced by the Government of India in 2017 under the broader scheme of HELP. [13] It was launched to make oil and gas exploration easier and more investor- friendly. Under OALP, instead of waiting for the Government to offer blocks during bidding rounds, companies can choose blocks themselves and then seek approval of the Government by submitting an Expression of Interest. These blocks could be subsequently offered through biannual formal bidding process. By early 2024, at least nine bidding rounds were held, which has allowed several new E&P players to penetrate the Indian exploration sector.
Interestingly, in 2018, the Government of India also notified the ‘Policy Framework for Exploration and Exploitation of Unconventional Hydrocarbons under Existing Production Sharing Contracts (PSCs), Coal Bed Methane (CBM) Contracts and Nomination Fields’ [14]. While the exploration and exploitation of shale oil/gas could only be undertaken by National Oil Companies initially under the Shale Gas Policy of 2014[15], through this policy, the Government decided to open up exploration and exploitation of all types of hydrocarbons under the Original Act and the Petroleum and Natural Gas Rules, 1959, including Shale oil/gas in the existing Coal Bed Methane contracts subject to certain conditions outlined in the policy.
Undoubtedly, the Amendment Act represents a calibrated step in line with the Government’s intent to reform India’s E&P sector, and it comes alongside a series of other developments aimed at attracting foreign investment in the sector.
Conclusion
The Amendment Act is representative of India’s broader policy shift towards attracting further foreign investment in its oil and gas sector over the last few decades and aligned with the liberalised revenue sharing model along with other ongoing legal and policy changes. Building on this momentum, the Ministry of Petroleum and Natural Gas recently released the Draft Petroleum and Natural Gas Rules, 2025 (“Draft Rules”) for public consultation[16]. While the Amendment Act comes as a welcome development, providing statutory solutions to longstanding challenges in the E&P industry, the real test, however, will lie in how effectively the Government leverages this legislative reform to build investor confidence, unlock domestic potential, and position India as a resilient and competitive global energy player.
In Part II of this series of articles, we will analyse the Draft Rules to provide a comprehensive picture of the changes vis-à-vis the Amendment Act.
References:
[1] Act No. 53 of 1948.
[2] Act No. 67 of 1957.
[3] Sukalp Sharma, India’s oil import dependency on course to hit fresh full-year high in FY25 amid growing demand, stagnant domestic production, Indian Express (March 22, 2025, at 01:29 IST) https://indianexpress.com/article/business/indias-oil-import-dependency-on-course-to-hit-fresh-full-year-high-in-fy25-amid-growing-demand-stagnant-domestic-production-9897857/.
[4]India’s oil demand to grow 3-5% annually till 2030, import reliance to rise: Moody’s, ET Energyworld.com from the Economic Times (May 22, 2025 at 07:02 PM IST) https://energy.economictimes.indiatimes.com/news/oil-and-gas/indias-oil-demand-to-grow-3-5-annually-till-2030-import-reliance-to-rise-moodys/121342374.
[5] Lok Sabha debates, March 12, 2025, Eighteenth Series, Vol. VII No. 12, available at https://eparlib.sansad.in/bitstream/123456789/2989843/1/lsd_18_IV_12-03-2025.pdf.
[6] Lok Sabha debates, March 12, 2025, Eighteenth Series, Vol. VII No. 12, available at https://eparlib.sansad.in/bitstream/123456789/2989843/1/lsd_18_IV_12-03-2025.pdf.
[7] Shale Gas, National Data Repository, Directorate General of Hydrocarbons, Ministry of Petroleum & Natural Gas, Government of India, https://www.ndrdgh.gov.in/NDR/?page_id=11624.
[8] Hydrocarbon Exploration and Licensing Policy (HELP) – A Win-Win approach, Ministry of Petroleum & Natural Gas, Government of India, https://mopng.gov.in/en/exp-and-prod/help.
[9] NELP Rounds, Directorate General of Hydrocarbons, Ministry of Petroleum & Natural Gas, Government of India, https://www.dghindia.gov.in/index.php/page?pageId=59&name=E&P%20Regime.
[10] LSG Building Solutions GmbH and others v. Romania, ICSID Case No. ARB/18/19, Decision on Jurisdiction, Liability and Principles of Reparation, 11 July 2022, para. 1033; Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award, 16 May 2018, para. 491.
[11] India-UAE BIT 2024, Article 3.
[12] Guidelines for Arbitration and Mediation in Contracts of Domestic Public Procurement, Ministry of Finance, Office Memorandum No. F.1/2/2024-PPD (June 3, 2024), https://doe.gov.in/circulars/guidelines-arbitration-and-mediation-contracts-domestic-publicprocurement-reg.
[13] Open Acreage Licensing Program, Ministry of Petroleum & Natural Gas, Government of India, https://mopng.gov.in/en/pdc/investible-projects/exploration-amp-production/open-acreage-licensing-program.
[14] Ministry of Petroleum & Natural Gas, Government of India (Aug. 20, 2018), 2.Policyframeworkforexplorationandexploitationofunconventionalhydrocarbons.pdf.
[15] Policy Guidelines for Exploration and Exploitation of Shale Gas and Oil by National Oil Companies under Nomination Regime, Ministry of Petroleum & Natural Gas, Government of India (Oct. 14, 2013) https://mopng.gov.in/files/ExpAndProd/Unconventional/7.ShaleGasPolicy.pdf.
[16] MoPNG invites Feedback & Suggestions on Draft Petroleum & Natural Gas Rules, Directorate General of Hydrocarbons, Ministry of Petroleum & Natural Gas, Government of India, https://online.dghindia.org/feedback/Login.
Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Authors:
Shravan Yammanur, Partner
Mangesh Krishna, Senior Associate
Prachi Kaushik, Associate