India's Oil Exploration Policy: Pricing Risk, Not Subsidizing It

India's dependence on imported crude oil poses significant macroeconomic and strategic vulnerabilities.

To mitigate this, increasing domestic exploration and production is crucial. The government-approved Samudra Manthan scheme aims to boost offshore oil and gas exploration by emphasizing modern seismic data, common infrastructure, and local capabilities.

However, the proposal to reimburse up to half of selected exploration well costs raises concerns about the allocation of uncertainty in upstream petroleum fiscal regimes.

A well-designed cost-recovery production-sharing contract would reflect project economics more naturally. Investors finance exploration, bear the full cost of failure, and recover legitimate costs from production, with profits shared progressively between the investor and the state.