Oil India Stocks Surge as Government Clears Oilfield Amendment Bill 2024

Shares of Oil India surged by 4% to ₹382 during the March 13 trading session after the government approved a long-pending reform of India’s oilfield regulations.

The positive development also lifted other major players in the sector, including ONGC and Reliance Industries Limited (RIL).

The market’s reaction reflects renewed investor confidence following the introduction of the Oilfield Amendment Bill, 2024, which aims to modernize India’s petroleum laws and create a more efficient regulatory environment.

Oilfield Amendment Bill: A Game-Changing Reform

The Oilfield Amendment Bill, 2024, seeks to update petroleum laws that have remained unchanged since 1948.

It introduces key structural changes designed to streamline operations and attract investment in India’s oil and gas sector.

One of the most significant changes is the introduction of a separate ‘petroleum lease,’ replacing the existing ‘mining lease’ framework.

This shift separates oil and gas exploration from general mining regulations, potentially reducing bureaucratic hurdles and speeding up project approvals.

The bill also expands the definition of ‘oils’ to cover a broader range of hydrocarbons, including crude oil, natural gas, condensate, coal bed methane, shale gas, and oil.

However, coal, lignite, and helium remain excluded as they are governed under the Mines and Minerals (Development and Regulation) Act, 1957. By broadening the scope of exploration, the government aims to unlock untapped hydrocarbon reserves and increase domestic production.

New Penalties and Dispute Resolution Mechanisms

The bill introduces updated penalties for violations, replacing the previous criminal provisions with financial penalties. Under the earlier Oilfields Act of 1948, violations could lead to imprisonment for up to six months or a fine of ₹1,000.

The new bill eliminates imprisonment and increases the maximum fine to ₹25 lakh. In cases of continuing violations, an additional penalty of up to ₹10 lakh per day may be imposed.

This shift from criminal to financial penalties reflects a more business-friendly approach, aiming to encourage compliance without discouraging investment.

To address disputes more efficiently, the bill introduces new resolution mechanisms, including the option for arbitration outside India.

This provision aligns with international standards and is expected to enhance investor confidence by offering a reliable and transparent legal framework for resolving conflicts.

Market Response and Company Performance

Following the bill’s approval, the market responded positively, with key oil exploration companies witnessing gains.

Oil India, a state-owned enterprise under the Ministry of Petroleum and Natural Gas, closed at ₹375 per share on March 13, reflecting a 2.37% increase from the previous day’s close of ₹367.

Despite this gain, Oil India’s shares have fallen over 12% since the beginning of the year and currently trade 51% below their all-time high of ₹768.

ONGC, India’s largest oil and gas producer, saw its shares rise to ₹229.75, marking a 1.91% increase from the previous close of ₹225.45. ONGC remains a key player in both domestic and international oil and gas production, including downstream refining and petrochemicals.

Reliance Industries, which has a significant presence in hydrocarbon exploration, refining, and renewables, saw a marginal dip in its stock price, closing at ₹1,242.60, down 0.38% from the previous close of ₹1,247.40.

Despite the decline, RIL remains one of India’s largest and most influential conglomerates, with a market capitalization of ₹16.81 lakh crore.

Government’s Vision and Strategic Goals

Petroleum Minister Hardeep Singh Puri emphasized that the bill aims to improve the ease of doing business, attract fresh investment, and unlock India’s hydrocarbon reserves.

He highlighted that while renewable energy sources are growing in importance, conventional energy remains vital for India’s energy security.

The bill’s reforms are expected to encourage new exploration efforts without creating an imbalance between public and private sector participation.

Puri also noted that India currently imports over 85% of its crude oil and nearly 50% of its natural gas, making domestic production a strategic priority.

Strengthening India’s domestic oil and gas output could reduce dependency on imports, enhance energy security, and support long-term economic stability.

Challenges and Concerns

Despite the positive market reaction, the bill raises several concerns. One key issue is the potential impact on state revenues.

Critics argue that replacing mining leases with petroleum leases may affect state governments’ taxation powers under Entry 50 of the State List in the Indian Constitution.

The Supreme Court’s ruling in Mineral Area Development Authority vs Steel Authority of India reaffirmed that states have exclusive authority to tax mining activities.

The new framework could create tensions over jurisdiction and revenue-sharing between the central and state governments.

Environmentalists have also voiced concerns about the shift from criminal penalties to financial fines. They argue that the reduced accountability for environmental violations and safety lapses could weaken regulatory oversight and compromise environmental protection standards.

Additionally, some opposition parties have criticized the bill for potentially increasing private sector dominance in the oil and gas sector, which they fear could undermine the role of state-owned enterprises like ONGC.

Future Outlook

Minister Puri defended the bill, calling it a “constructive and positive step” toward enhancing India’s oil and gas production capabilities.

He underscored the government’s commitment to opening up new exploration areas, including those previously designated as ‘no-go zones.’

The bill aligns with the government’s broader energy security strategy, which includes the 10th Open Acreage Licensing Policy (OALP) bidding round launched on February 11, 2025, with a focus on offshore exploration.

India’s domestic crude oil demand is expected to rise from the current 5.5 million barrels per day (bpd) to 6.5–7 million bpd in the coming years.

The government’s goal is to strengthen domestic production capacity to meet this growing demand and reduce vulnerability to global market fluctuations.