India is making a major push to unlock oil and gas reserves beneath its offshore waters as it looks to reduce its heavy dependence on imported crude oil. The move has gained fresh momentum with Oil India Limited (OIL) planning to invest around ₹15,000 crore over the next three years in deepwater exploration, with plans to drill up to eight wells, depending on the interpretation of seismic data. The company is also looking to partner with foreign firms for upcoming exploration licensing rounds.

The timing is significant. India’s crude oil production has been declining for years, while domestic consumption continues to rise. In FY2025-26, India’s crude oil production fell 2.5% to around 28 million tonnes, marking the 11th consecutive year of decline. At the same time, India’s oil import dependence reached approximately 89%, highlighting the country’s vulnerability to international energy prices and geopolitical disruptions.

The government is therefore attempting to change the equation through large-scale offshore exploration. In August 2026, the Union Cabinet approved the ₹84,084-crore Samudra Manthan National Offshore Exploration Scheme, which aims to accelerate offshore exploration, improve geological data, support drilling and unlock India’s deep-water hydrocarbon potential.

But can deep-sea oil exploration really become an economic game-changer for India? The answer depends not only on how much oil and gas is discovered, but also on whether those discoveries can be commercially developed at competitive costs.

Why India Needs More Domestic Oil

India is the world’s third-largest consumer of crude oil, while domestic production covers only a small portion of its total requirements. According to the government, India’s annual crude oil import bill is around $144 billion, making energy imports one of the country’s largest external vulnerabilities.

This dependence creates several economic risks. When global crude prices rise, India’s import bill increases. Since crude oil is a critical input for transportation, manufacturing, petrochemicals, aviation and several other industries, higher oil prices can feed into inflation across the economy.

A sharp increase in crude prices can also put pressure on the Indian rupee because oil companies need more dollars to purchase imports. A weaker rupee can, in turn, make imported commodities more expensive.

The geopolitical dimension has become particularly important. Recent disruptions linked to the West Asia conflict and the Strait of Hormuz demonstrated how quickly global energy markets can come under pressure. The Indian government has said that around 45% of India’s crude imports had previously transited the Hormuz route, although diversification has subsequently increased the share of crude sourced through non-Hormuz routes to around 70%.

Increasing domestic production would not eliminate India’s dependence on imports, but it could provide an additional layer of energy security.

What Is Deep-Sea Oil Exploration?

Deep-sea or deep-water exploration involves searching for oil and natural gas deposits beneath the seabed in offshore areas where water depths can be hundreds or thousands of metres.

The process is significantly more complicated than conventional onshore drilling. Companies first conduct seismic surveys to identify underground geological structures that could potentially contain hydrocarbons. If the geological data indicates a promising prospect, an exploration well is drilled.

This requires specialised drilling rigs, advanced subsea equipment, sophisticated seismic technology and highly skilled personnel.

The financial risk is also considerable. Drilling an offshore exploration well can cost substantially more than drilling an onshore well, and there is no guarantee that commercially viable oil or gas will be discovered.

That is why the government’s decision to support offshore exploration through Samudra Manthan is important.

₹84,084 Crore Samudra Manthan Scheme

The government has approved an outlay of ₹84,084 crore up to FY2030-31 under the National Offshore Exploration Scheme, known as Samudra Manthan.

The scheme aims to accelerate exploration, develop shared infrastructure, deploy advanced technologies and strengthen India’s offshore energy ecosystem. The government says the programme is designed to help unlock more than 600 million tonnes of oil equivalent (MMTOE) of hydrocarbon resources.

An important feature of the initiative is government support for high-risk deep-water drilling.

According to reports, the government plans to bear up to half of the drilling costs for deep-water wells under the programme. This is designed to reduce the financial risk faced by exploration companies and encourage both domestic and international players to participate.

This is particularly relevant because offshore exploration requires huge upfront investment before a company knows whether a project will generate commercial returns.

Oil India’s ₹15,000-Crore Deepwater Bet

Oil India’s latest investment plan shows that the government’s policy push is already translating into corporate exploration activity.

The company plans to invest approximately ₹15,000 crore over three years in deep-water exploration and intends to drill eight wells, subject to the interpretation of seismic data and identification of viable prospects.

Oil India also plans to collaborate with international companies while participating in upcoming exploration licensing rounds.

This could bring more than capital into India’s offshore sector. International partnerships can provide access to advanced drilling technology, geological expertise and project-management capabilities that are essential for complex deep-water operations.

If successful discoveries are made, the impact could extend beyond Oil India to equipment suppliers, engineering companies, offshore service providers, shipping businesses and infrastructure developers.

India’s Offshore Exploration Potential

India’s offshore basins represent an important but relatively underexplored part of the country’s energy resources.

The government says that since 2014, around 81% of India’s active exploration acreage has been awarded, while 172 blocks covering nearly 3.8 lakh square kilometres have been awarded under the Open Acreage Licensing Policy (OALP). Committed investments in these blocks exceed $4.3 billion.

Exploration activity is also increasing. During FY2025-26, approximately 674 wells were drilled, with five new discoveries reported and seven discoveries monetised, according to government data.

The Mahanadi offshore basin has also entered a new phase. In July 2026, drilling began on the first appraisal well in the basin, with four deep-water wells planned as part of the programme.

These developments indicate that India’s offshore strategy is moving beyond simply awarding exploration blocks towards actual drilling and appraisal.

Could Domestic Oil Reduce India’s Import Bill?

This is where the potential economic impact becomes significant.

India currently imports close to 89% of its crude oil requirements. Even a meaningful increase in domestic production could reduce the volume of crude that needs to be purchased from international markets.

However, it is important not to assume that every new discovery will immediately reduce imports. A successful exploration well is therefore only the beginning.

The discovery must contain enough recoverable reserves to justify development costs. Infrastructure must then be constructed, production systems installed, and pipelines or other transportation arrangements developed.

This means the economic benefits of today’s deep-water investment may take several years to materialise.

Impact on the Indian Economy

1. Lower Energy Import Vulnerability

The biggest potential benefit is greater energy security.

Higher domestic production could reduce India’s exposure to international crude price shocks. This would be particularly valuable during geopolitical crises that disrupt global energy supply.

However, India would still remain a major importer even if offshore production increases significantly.

2. Potential Improvement in the Current Account

Crude oil imports account for a significant portion of India’s merchandise import bill.

If domestic production replaces a portion of imported crude, fewer dollars would need to be spent overseas. Over time, this could help reduce pressure on India’s current account and foreign exchange requirements.

The impact would depend on the scale and economics of future discoveries.

3. Employment and Industrial Development

Deepwater exploration requires specialised equipment and services, including drilling rigs, subsea systems, engineering services, logistics, marine transportation and geological expertise.

Greater domestic exploration could therefore create opportunities for Indian engineering and manufacturing companies.

It could also encourage the development of an offshore services ecosystem, reducing India’s dependence on imported equipment and expertise.

4. Government Revenue

Successful commercial oil and gas production can generate revenue through taxes, royalties and other payments.

The government could therefore benefit from successful discoveries while also gaining greater energy security.

However, the fiscal benefits depend on production volumes, oil prices, project costs and the applicable contractual and tax framework.

The Risks: Why Deepwater Exploration Is Not a Guaranteed Jackpot

Despite its potential, deep-water exploration carries significant risks.

• High Capital Requirements – Offshore drilling requires expensive equipment and specialised technology. A failed exploration well can result in substantial financial losses.
• Geological Uncertainty – Seismic surveys can identify promising geological structures, but they cannot guarantee commercially recoverable oil.
• Long Development Cycles – Even successful discoveries can take years to reach commercial production.
• Oil Price Volatility – A project that looks commercially attractive when crude is trading at a high price may become less attractive if global oil prices fall significantly.
• Environmental Risks – Offshore drilling carries environmental risks, including potential oil spills and damage to marine ecosystems. Strong safety and environmental standards are therefore essential as exploration expands.

Can Deepwater Exploration Become an Economic Game-changer?

India’s deep-sea exploration push has the potential to become an important component of its long-term energy strategy, but it should not be viewed as an immediate solution to the country’s oil-import dependence.

The ₹15,000-crore Oil India investment, combined with the government’s ₹84,084-crore Samudra Manthan programme, represents a major increase in the resources being directed towards offshore exploration.

The real economic impact will ultimately depend on what lies beneath India’s offshore waters.

If exploration produces large, commercially viable discoveries, India could benefit through lower import dependence, stronger energy security, improved foreign exchange management, new industrial activity and additional government revenues.

But if discoveries are limited or production costs prove too high, the economic impact could be considerably smaller.

Conclusion

India’s deep-sea oil exploration strategy comes at a critical time. With crude oil import dependence at around 89%, declining domestic production and continuing geopolitical risks, increasing indigenous energy production has become an important economic and strategic priority.

The government’s Samudra Manthan scheme, along with Oil India’s planned ₹15,000-crore deep-water investment, signals a stronger commitment to unlocking offshore resources.

However, exploration is inherently uncertain. The success of this strategy will not be measured by the amount of money invested or the number of wells drilled, but by the quantity of commercially recoverable resources ultimately brought into production. For India, therefore, deep-water exploration is best viewed as a long-term energy-security investment rather than an immediate replacement for imported crude. If technological capabilities, private and international participation, government support and successful discoveries come together, India’s offshore oil sector could become an important contributor to the country’s next phase of economic and energy development.

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