Draft Petroleum & Natural Gas Rules, 2025

10.07.2025

Draft Petroleum & Natural Gas Rules, 2025

Context

India has released the Draft Petroleum & Natural Gas Rules, 2025, aiming to update and simplify its upstream oil and gas regulation system for modern needs.

About the Draft Rules

• Issued by the Ministry of Petroleum and Natural Gas to improve regulatory efficiency and investor confidence.
• Intended to replace outdated regulations from 1949 and 1959, which lacked relevance for today’s energy landscape.
• Designed to support climate goals, energy security, and ease of doing business.
• Aligned with amendments to the Oilfields (Regulation and Development) Act, 1948.

Key Features

1. Stabilisation Clause:
    Provides protection to investors from future increases in royalties or taxes through compensation or deductions.
    
2. Third-Party Infrastructure Access:
    Oil and gas operators must declare unused pipeline capacity and offer fair access to others, supervised by the government.
    
3. Integration of Renewable Energy:
    Allows setting up solar, wind, hydrogen, and geothermal projects within existing oilfields to promote clean energy use.
    
4. Environmental Safeguards:
    Requires greenhouse gas (GHG) monitoring, plans for carbon capture and storage, and post-closure site restoration.
    
5. Data Ownership & Control:
    All operational data will be government-owned, with external use requiring approval and confidentiality for seven years.
    
6. Dispute Resolution Mechanism:
    A new Adjudicating Authority (of Joint Secretary level) will handle violations, compliance, and disputes within the sector.
    

Significance of the Petroleum & Natural Gas Sector in India

1. Foundation of Energy Security:
    This sector supplies over 35% of India’s energy needs, especially for transport and industrial sectors, making it a critical pillar of national energy security.
2. Source of Employment and Investment:
    It plays a major role in attracting foreign direct investment (FDI), generating domestic jobs, and driving infrastructure development across various regions.
3. Geostrategic Importance:
    India uses energy trade to strengthen diplomatic ties with countries in West Asia, Africa, and Latin America, enhancing its global strategic presence.
4. Revenue Generator for Government:
    The sector significantly contributes to government income through tax collections, royalties, and dividends from public sector oil companies.
5. Support for Energy Transition:
    Oil and gas infrastructure offers a base for hybrid energy systems, helping integrate green hydrogen and carbon capture technologies in the long term.

Challenges Addressed

1. Outdated Legal System:
    The earlier rules were too old and unsuited to modern exploration, digitalisation, and clean energy projects.
    
2. Mismatch with Global Trends:
    India needed rules that align with international climate goals and the push for net-zero emissions.
    
3. Low Investor Confidence:
    Investors had long asked for clear contracts, stable taxes, and quicker regulatory decisions.
    
4. Inefficient Infrastructure Use:
    Several pipelines were underused, leading to wasted capacity and higher infrastructure costs.
    

Way Forward

1. Attract Global Investment:
    Clearer rules and stability can make India a preferred location for oil and gas exploration and production.
    
2. Accelerate Green Transition:
    By allowing renewables within oilfields, India can move faster toward its decarbonisation targets.
    
3. Strengthen Governance:
    Central control over data and an independent authority will improve transparency and accountability.
    
4. Promote Operational Efficiency:
    Policies supporting shared infrastructure and unitisation of oilfields will cut costs and boost productivity.
    

Conclusion

The 2025 draft rules represent a major reform in India’s oil and gas policy. They promote an investor-friendly, clean energy-aligned, and efficient regulatory environment for sustainable energy growth.