The old system made geological risk look easier than bureaucratic risk. Companies accepted that they may drill dry wells. What frustrated them was the possibility of years lost to paperwork.

The previous regime carried three structural problems:

• A fragmented licence chain, where companies needed separate clearances to explore, develop discoveries and eventually produce molecules.
• Short lease tenures, which undercut long payback horizons in a sector where surveys and appraisal drilling consume years before commercial output begins.
• Layered oversight, with offshore safety, environment, infrastructure and dispute resolution moving across different authorities and timelines.

These frictions discouraged ambition. Instead of robust seismic programmes and unconventional exploration in CBM or shale, companies took minimalist positions. Litigation dragged. Infrastructure such as pipeline corridors could not be shared easily, increasing unit costs. In a few extreme instances, compliance slips mapped into criminal exposure instead of structured penalties.

Investors learned to treat India as geologically interesting but administratively uncertain. That uncertainty became a valuation discount.

The new rulebook tries to convert hesitation into planning. Its centrepiece is continuity: one petroleum lease covering the entire lifecycle. That allows a company to treat a block as a unified economic project rather than a series of bureaucratic checkpoints. These are the most material shifts:

• A single licence for exploration, development and production.
• Thirty-year lease periods, with scope for extension if a field continues producing.
• Defined approval timelines, giving boards and lenders a predictable window for regulatory response.
• Financial penalties replacing criminal liability, aligning with international compliance practice.
• Shared infrastructure provisions, which let companies negotiate access to pipelines and processing facilities rather than duplicate assets.
• A single offshore safety authority, reducing procedural ambiguity.
• Environmental responsibility linked to specific outcomes, including measurable plans for flaring and emissions.

This is regulatory maturity rather than policy theatrics. It tells operators that geology will still be uncertain, but paperwork does not have to be.

Oil is not just fuel. It is monetary transmission. When crude rises sharply:

• airline ATF costs jump,
• logistics and freight increase,
• petrochemical feedstock becomes expensive,
• inflation expectations shift,
• the RBI is forced into defensive policy,
• and the rupee loses sentiment support.

A marginal improvement in domestic output cannot eliminate these pressures, but it can blunt them. It gives planners space. It gives companies the ability to forecast input costs. And it reduces the cyclical subsidy panic that has shaped fuel debates for decades.

Markets do not react to policy text; they react to volatility. Upstream certainty reduces volatility. Investors look for three outcomes here:

1. A reduced macro-shock channel. If India can replace even a fraction of imported barrels, Brent spikes do not translate one-to-one into inflation shocks.
2. More accurate reserve valuation. A 30-year lease lets companies capitalise assets properly, which feeds into equity pricing.
3. Better field economics. Shared infrastructure lowers breakevens and encourages exploration depth rather than minimum-compliance drilling.

In other words, the market reads this as risk pricing rather than policy cheerleading.

India is not promising an upstream revolution. It is attempting credibility. Exploration capital accepts uncertainty, but it refuses to operate inside unpredictable licensing logic. The Petroleum and Natural Gas Rules 2025 replace suspicion with partnership. They tell operators that the government wants reservoirs evaluated, not delayed by bureaucracy. And they signal to foreign capital that India wants to compete with jurisdictions that already offer stable contracts.

If the rules function as intended, India will not transform into an energy exporter. It will simply become less vulnerable to import-linked inflation shocks and more attractive to long-cycle investment. In the architecture of energy strategy, that is impact enough.

Disclaimer:

This blog is meant only for educational reading. Any mentioned here should not be treated as advice or recommendations. Nothing here is intended to guide investment decisions. Readers should evaluate information independently and carry out their own research before investing.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing. 

Source: Economics Times | The Hindu | News 18