Context: India's crude oil production fell by 5 per cent and natural gas output slumped by 8 per cent in the fiscal year to March 2021 as private and public sector firms produced less, government data showed.

• Crude oil production fell to 30.5 million tonnes in 2020-21 from 32.17 million tonnes a year back, according to the latest data released by the Ministry of Petroleum and Natural Gas. Oil and Natural Gas Corporation (ONGC) produced over 2 per cent less oil at 20.2 million tonnes than a year back as a nationwide lockdown that lasted over two months shut some of its fields.

Reason for Decline

• Ageing Sources: Most of India's crude oil and natural gas production comes from ageing wells that have become less productive over time.
• Need of Intensive Technology: There is no more easy oil and gas available in India and that producers would have to invest in extracting oil and gas using technologically intensive means from more difficult fields such as ultra deepwater fields.
• Low Interest of Foreign Companies: India's efforts to attract foreign energy giants into hydrocarbon exploration and production haven't been quite fruitful.
• The government has asked ONGC to boost its investments in explorations and increase tie-ups with foreign players to provide technological support in extracting oil and gas from difficult oil and gas fields.
• The government is also reaching out to major foreign players to convey that the current system of auction and regulation is much more "open and transparent" than before.
• Climate Change: Mounting pressure due to climate change is prompting oil and gas players to diversify into clean energy.

Road Ahead

• A variety of new technologies can prolong the life of ageing oil fields but the acquisition, testing and application of these technologies is capital-intensive. Thereby, the fiscal framework must ensure adequate returns for producers to deploy Enhanced Oil Recovery mechanisms.
• The current approval processes must be simplified with stipulated timelines for each sign-off, thereby avoiding cost escalations due to delays.
• Potential of Unconventional Hydrocarbons (UHC) such as Shale Oil and gas, tight oil/gas and gas hydrates must be opened now for commercial exploitation.