Parliament panel flags rising PSU oil capex amid falling domestic crude output

Oil and Gas

A parliamentary panel has highlighted that capital expenditure by petroleum and natural-gas central public sector undertakings (CPSUs) has increased over the years even as domestic crude oil production has continued to decline. Presenting its twenty-first report on the performance of oil and gas CPSUs, the Committee on Public Undertakings said the trends point to structural challenges such as ageing fields and long project cycles.

According to the report, the capital expenditure of the petroleum and natural gas CPSUs increased from Rs 1.33 lakh crore in 2020–21 to around Rs 1.69 lakh crore in 2024–25. At the same time, the committee noted that "overall crude oil production has declined from 34.20 million metric tons (MMT) in 2018–19 to 28.70 MMT in 2024–25 (provisional)", while natural gas production has shown "limited growth from 32.87 billion cubic meters (BCM) in 2018–19 to around 36.11 BCM in 2024–25 (provisional)".

In its recommendations, the committee urged the government and CPSUs to accelerate exploration, reduce approval delays and prioritise enhanced recovery at mature fields. "The Ministry (petroleum and natural gas) and CPSUs should intensify efforts for augmenting domestic production through improved recovery techniques, faster execution of projects and better coordination with State authorities," it added.

It further advised closer monitoring of expenditure efficiency, stating that "capital investment must translate into tangible production gains wherever feasible

The committee said that despite significant spending, domestic output continues to be constrained by multiple operational and geological hurdles. It observed that "the long project cycles of oil and gas sector projects, ageing fields and past disruptions have contributed to stagnant or declining domestic production despite high capital expenditure".

Pointing to India's continued dependence on imported crude, the report stated, "India currently imports about 89 percent of its crude oil requirement which makes the country vulnerable to global price fluctuations and geopolitical shifts.” It also detailed the status of the strategic petroleum reserves, noting that “Indian Strategic Petroleum Reserves Limited (ISPRL) has created underground rock caverns of total capacity of 5.33 MMT at Visakhapatnam, Mangaluru and Padur."

The panel also flagged delays in major projects. Reviewing 21 projects costing more than Rs 500 crore, it noted that several projects have been delayed on account of land acquisition issues, statutory clearances and cost escalations.

India's petroleum and natural gas sector is dominated by large CPSUs such as ONGC, OIL, IOC, BPCL, HPCL, GAIL and Engineers India Limited, which together account for most of the country’s upstream production, refining capacity and gas transmission infrastructure.