Prime Minister Narendra Modi's cabinet approved a new rule to give some oil and gas companies with active leases on drilling blocks extra time to extract fossil fuels from their respective territories.
The move would allow the extraction of 426 million extra barrels of oil over what was stipulated in original production contracts offered by the New Delhi government - unlocking over $21 billion in potential additional revenues for energy firms operating in the nation.
Only blocks granted to companies prior to 1999 will be affected by the rule change, Reuters reports.
A government statement describing the anticipated effects of the new system said contractors would invest an additional $5.4 billion due to the extended lease periods.
"This policy will enable the contractors to extract not only the remaining reserves but also plan to extract additional reserves by implementing new technologies," the release said, adding that New Delhi's share of oil profits from overtime output would increase by 10 percent.
Modi and his Bharatiya Janata Party (BJP) have been leading efforts to bolster India's energy independence by increasing coal and oil output. Currently, the booming nation of roughly 1.25 billion imports 80 percent of its energy needs. By 2020, Modi aims to bring that figure down to 67 percent.
India's oil consumption growth reached a record-level 11 percent in 2016 as an increasing urban population with rising income fueled greater use of cars, trucks, and motorbikes. The country consumed 196.5 million tons of oil products in 2016, up from 177.5 million tons in 2015, according to the Oil Ministry's Petroleum Planning & Analysis Cell.
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The U.S. Department of Energy reports that India was the fourth largest consumer of crude oil and petroleum products in the world in 2015, after the U.S., China, and Japan. The country depends heavily on imported crude oil, mostly from the Middle East, similar to China.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More