NEW DELHI: India is embarking on what could be one of the world's first large-scale programmes to fund high-risk offshore oil and gas exploration directly from the national budget, wagering that the country's largely untapped deepwater reserves can help curb its growing dependence on imported crude and gas.
The Union Cabinet last week approved the Rs 84,084-crore Samudra Manthan National Offshore Exploration Scheme, under which the government will fund half of the the cost of drilling a deep-sea and ultra-deep water exploration well or Rs 650 crore, whichever is lower, directly from the budget, officials said.
"This perhaps is the first time that any government in the world is funding risk exploration from the budget," an official said, adding that in all, 60 deepwater and ultra-deepwater exploration wells over the next five years will be funded from the budget.
Besides underwriting part of the cost of drilling exploration wells, the government will part-fund common infrastructure, including subsea pipelines and onshore oil and gas receipt and processing facilities, allowing multiple operators to commercialise hydrocarbon discoveries using shared assets.
Officials said private companies have largely shied away from risk exploration because the investment has to be written-off if no commercially viable hydrocarbon discovery is made.
"They were spending money only on development drilling -- producing already established discoveries. Hardly any money went into risk exploration, which is key to finding new resources," an official said.
The scheme is designed to draw global energy majors into India's offshore basins. "Samudra Manthan is, in that sense, a game-changing scheme," another official said.
Companies holding blocks awarded under previous Open Acreage Licensing Programme (OALP) rounds, as well as those securing acreage in the ongoing bid round, will be eligible to claim government support of up to Rs 650 crore for each deepwater or ultra-deepwater exploratory well they drill, the official said.
Prashant Vashisht, Senior Vice President, ICRA Ltd, said the scheme provides funds for offshore seismic data acquisition especially in erstwhile No-Go zones, which is a key issue hampering commercial exploitation of oil and gas reserves in these areas due to lack of good prospectivity data.
"Additionally, the scheme provides support for drilling deepwater/ultra-deepwater wells where the domestic Upstream sector has limited experience and technical expertise and exploitation of the same remains highly capital intensive and risky," he said.
"The scheme aims to add incremental annual production of 10-15 million tonne of oil equivalent which would reduce the dependence on imports of oil and gas but only to the extent of 3-5 per cent," he added.
Where the money goes
The scheme's Rs 84,084-crore outlay is weighted heavily toward the riskiest part of the exploration chain.
More than half -- Rs 43,200 crore -- will be deployed over five years through 2031 specifically to support deep-sea drilling, working out to roughly Rs 650 crore for each of the 60 wells planned -- the clearest signal of the state's willingness to fund exploration risk directly rather than wait for the private sector to absorb it alone.
Beyond the wellhead, the government has set aside Rs 10,000 crore to help fund the common infrastructure needed to move any discovered reserves into actual production -- pipelines, processing facilities and the like, without which even a successful discovery cannot reach the market.
Of the remainder, Rs 28,534 crore has been allocated for offshore data acquisition, the seismic and geological surveying work that identifies promising basins before a single well is sunk, while Rs 2,000 crore is earmarked for developing oil and gas manufacturing and services zones -- the industrial ecosystem needed to support a growing offshore sector.
Sharing the infrastructure burden
A central piece of the programme is its Common Hub Infrastructure (CHI) component, designed to fast-track the commercialisation and pooling of offshore discoveries made by multiple operators -- removing the need for every small or isolated find to build its own standalone infrastructure.
Officials said the shared-infrastructure model has the potential to reduce development costs and improve project economics, optimise marine engineering and offshore resources, enable more efficient pooling and evacuation of hydrocarbons, streamline offshore logistics, accelerate the monetisation of smaller and marginal discoveries, and enhance the viability of projects in challenging deepwater and ultra-deepwater environments.
The import problem it's designed to solve
The scheme responds to a trend line that has been moving in the wrong direction for a decade.
India's reliance on imported crude oil -- the essential input for fuels such as petrol and diesel -- has climbed from 77 per cent to 88 per cent over the past 10 years.
The country also imports roughly half of its natural gas needs, a resource that feeds directly into fertiliser production, power generation, compressed natural gas for vehicles, and piped cooking gas supplies to households.
That vulnerability was thrown into sharp relief by the recent conflict in West Asia, which disrupted energy supplies and sharpened the case, in the eyes of policymakers, for building out domestic production capacity rather than remaining exposed to global supply shocks.
The big bet
Officials expect the scheme to accelerate exploration activity across India's offshore basins, draw in the investment and technical expertise of international energy majors, and ultimately help unlock hydrocarbon potential that has so far gone untapped beneath Indian waters.
It is, by design, a long-horizon wager -- deep-sea exploration rarely pays off quickly, and not every well drilled under the scheme will find oil or gas.
But by moving, for what officials describe as perhaps the first time by any government worldwide, from funding only proven development to underwriting genuine exploration risk directly from the budget, India is making a qualitatively different bet than it has before, they said.
India has overhauled its oil and gas exploration policy three times since 1997, moving away from production sharing contracts (PSCs) that let companies recover costs before splitting profits with the government, toward a system based on revenue sharing and exploration commitments.
The Hydrocarbon Exploration and Licensing Policy (HELP), adopted in 2016, replaced PSCs with Revenue Sharing Contracts (RSCs), under which the government's take is based on gross revenue rather than costs, eliminating cost-recovery disputes.
HELP also introduced the Open Acreage Licensing Policy (OALP), letting companies propose blocks year-round instead of waiting for bid rounds, along with a uniform licence, and marketing and pricing freedom.
The government later introduced a hybrid model to boost exploration in under-commercialised basins: unexplored areas within producing basins are still bid out on a revenue-sharing basis but with greater weight given to companies' proposed work programmes, while blocks in basins with no commercial production are awarded purely on work commitments, with no revenue share to the government beyond royalties.
The framework was consolidated under the Oilfields (Regulation and Development) Amendment Act, 2025, which took effect in April, delinking petroleum operations from mining law and introducing a single petroleum lease, graded royalties and legal stability provisions -- underpinning the 50 new exploration blocks the government put up for bidding across OALP, small-field and coal-bed-methane rounds in December 2025.
