India’s upstream strategy seeks to reset economics of deepwater exploration

India is accelerating efforts to unlock its offshore oil and gas potential through a key policy initiative that combines public investment, financial support, and risk-sharing measures aimed at making frontier drilling commercially viable by reducing the financial burden on upstream companies, government officials, CEOs, and analysts told Platts, part of S&P Global Energy, Oct. 6.

The National Offshore Exploration Scheme -- or 'Samudra Manthan' -- is designed to address one of the biggest barriers to offshore exploration: the high cost and risk of drilling wells that may not result in a commercial discovery. The initiative seeks to enhance the attractiveness of India's deepwater and ultra-deepwater acreage for both domestic and international oil and gas companies, they added.

"Samudra Manthan will be a game changer for India's upstream sector. It will not only open new frontiers for oil and gas exploration but will act as a major catalyst for the country's energy security," Ranjit Rath, chairman and managing director of Oil India Ltd., told Platts.

"The program marks one of the biggest policy initiatives, as the government, recognizing the high-risk and high-cost nature of offshore exploration, has adopted a risk-sharing approach to unlock the resources," he added.

The federal Cabinet in late July approved investments of up to 840 billion Indian rupees ($8.8 billion) over five years to advance offshore oil and gas exploration under the scheme. The initiative is expected to catalyze reserve accretion of more than 600 million mt of oil equivalent by fiscal 2030-31 (April-March), the petroleum ministry said July 31.

The government will fund up to 50% of eligible deepwater exploration drilling costs, capped at $71 million per well. By partially covering the cost, the scheme can significantly improve the economics of frontier exploration. The allocation comes at a time when India has offered 18 deepwater and ultra-deepwater blocks under the 10th and 11th Open Acreage Licensing Policy rounds, or OALP-X and OALP-XI, analysts and officials said.

"Samudra Manthan is precisely the kind of risk-sharing intervention international operators respond to, because it reduces the cost of a dry hole rather than promising a larger share of a success that may never come," Arun Kumar Singh, chairman and CEO of Oil and Natural Gas Corp. Ltd., told Platts. "For an operator, this changes the arithmetic of a dry hole in the deep waters."

Petroleum Minister Hardeep Singh Puri told a conference in the week ended Oct. 2 that Samudra Manthan would bolster India's energy security by expanding exploration capabilities and unlocking nearly 1 million square kilometers of offshore areas previously classified as "No-Go" zones. The initiative is expected to strengthen domestic exploration and production while helping reduce the country's reliance on imports.

Vast unexplored potential

India's most prospective yet underexplored offshore basins, including Krishna-Godavari, Cauvery, Mahanadi, Bengal, and Andaman, require significant upfront investment before their commercial potential can be proven, S&P Global Energy analysts said. Oil India is expanding exploration across several of these basins, while ONGC's Project DeepX aims to double the company's deepwater drilling activity over the next two years, Platts reported earlier.

Analysts said a single deepwater exploration well can cost $125 million-$150 million, while ultra-deepwater wells may require even greater investment depending on water depth and geological complexity. In basins with limited drilling histories and uncertain success rates, such expenditures have often been difficult for operators to justify.

"India has made significant progress in improving its regulatory and licensing framework, but attracting greater exploration investment into frontier deepwater and ultra-deepwater basins would require measures that improve exploration economics and address the high-risk, high-cost nature of offshore drilling," said Rahul Chauhan, senior principal upstream analyst at S&P Global Energy CERA.

The program's significance extends beyond the possibility of new oil and gas discoveries. It could also support the development of domestic technology, skills, and supply chains required to operate in technically demanding offshore environments, industry officials said.

Private-sector companies have also welcomed the initiative.

"Samudra Manthan recognizes a simple reality — India's deepwater resources represent one of the largest remaining opportunities to strengthen domestic energy capability," Kartikeya Dube, chairman of BP India, told Platts recently. "Its significance lies not only in the resources that may be discovered, but in the technology, skills, and ecosystem that can be developed around them."

Risk and reward

Gauri Johar, Global Executive Director for Strategic Climate and Energy Initiatives at S&P Global Energy, said India had listened to investors by addressing the risk-reward equation through the Samudra Manthan program.

New Delhi has committed to sharing exploration risk by covering up to 50% of deepwater exploration well cost and by supporting large-scale 2D and 3D seismic data acquisition to identify prospects in unexplored deepwater blocks. Further, to lower development risks and enhance project returns, the government will incentivize common infrastructure sharing.

"The proposed incentives for upstream supply chains and infrastructure sharing represent new thinking on creating upstream ecosystem depth," she said.

Subject to exploration success, Samudra Manthan aims to increase India's oil and gas production from around 62 million mt of oil equivalent to 80 million mt of oil equivalent annually. The program also seeks to expand the country's hydrocarbon resource base from 1.6 billion-2.2 billion mt of oil equivalent. The resulting increase in domestic production could reduce crude oil imports by nearly 1 trillion Indian rupees, or about $10.5 billion, per year, according to CERA.

"These outcomes are far from guaranteed. Deepwater exploration remains inherently uncertain, and commercial discoveries may take years to emerge," Chauhan said. "However, the government's approach recognizes that without sustained investment in exploration today, future domestic production growth will remain constrained."

For India, Samudra Manthan is not only an exploration program but also a long-term effort to strengthen energy security, reduce import dependence, and develop domestic capabilities in one of the most technically challenging segments of the global oil and gas industry, S&P Global Energy analysts added.