The Petroleum Paradox: India’s Export Dip and Domestic Production Push

India's energy sector is grappling with a wave of complexities–on one side, there is a visible decline in refined petroleum exports, and on the other, an effort to revive domestic crude production amidst volatile global dynamics and geopolitical turmoils. This paradox floated to the surface in June 2025, as export volumes reduced while domestic exploration and production (E&P) intensified under evolving policy frameworks.

Current Status of Petroleum Product Exports

According to Kpler, a global data analytics provider, India's export of petroleum products dropped by nearly 10% in June 2025 to 1.19 million barrels per day (bpd), down from 1.32 million bpd in May. On a year-on-year basis, exports reduced by 3.7% from June 2024's figure of 1.24 million bpd.

Countries like the UAE, Australia, and Singapore still continue to depend on India's export basket, but the fluctuation in demand and supply hints at deeper structural issues. Specifically, exports to the UAE surged to 115,944 bpd from 81,673 bpd in May, exports to Australia increased to 70,746 bpd from 50,500 bpd, and exports to Europe saw a doubling jump to 360,000 bpd from 60,474 bpd, while exports to Singapore dropped by 42% month-on-month basis. Correspondingly, shipments to the US fell to 54,309 bpd from 84,099 bpd, despite the renewed attempts between Washington and New Delhi to strengthen their energy partnership. 

These asymmetrical patterns of trends reveal both countries' strengths and vulnerabilities. India's geographical diversification strategy has partly protected it from sharp downturns, yet dependency on volatile routes like the Red Sea has added layers of logistical complexity and cost. Geopolitical tensions in West Asia and disruptions in the Suez Canal or Strait of Hormuz area have extended Asia-Europe delivery times by up to 10 days, which rose freight costs and delivery risks.

Geopolitical Shocks and the Price Challenges

After recent US bombing on Iran's nuclear infrastructure and an uncertain ceasefire between Tehran and Tel Aviv, crude briefly touched $81 per barrel before stabilising around $67. Market volatility could persist, as the Organisation of Petroleum Exporting Countries (OPEC) is expected to raise output in July and August.

India is a country that is highly dependent on imported crude oil, up to 88%, making it more sensitive to these shocks. As global superpowers like the US pivot toward energy autonomy with slogans like “drill, baby, drill,” India’s vulnerability underscores the urgency for energy independence. President Donald Trump’s call to ramp up drilling reveals a broader trend: even the world’s largest producers are on high alert. For India, the stakes are exponentially higher.

Boosting Domestic Output

In response, India is shifting its focus to its long-stalled efforts to boost domestic oil production. Since FY12, the output has experienced a steady fall due to several challenges like ageing oil fields, high taxation, outdated technology, and a stringent regulatory framework.

The enactment of the Oilfields (Regulation and Development) Amendment Act, 2025, can be a turning point, which aims at revitalising the upstream oil sector. Hardeep Singh Puri, the Union Minister of Petroleum, has committed to expanding exploration acreage to 1 million sq km by 2030, by focusing particularly on the previously declared 'no-go zone'. In the ninth round of the Open Acreage Licensing Policy, nearly 38% of the bids were for these challenging but promising terrains.

This policy pivot has already shown results. In FY25, Oil and Natural Gas Corporation (ONGC) drilled 578 wells—the highest in 35 years—comprising 109 exploratory and 469 development wells. With a capital expenditure of $7.2 billion, ONGC has also partnered with British Petroleum to enhance oil recovery in the Mumbai High basin. Meanwhile, Cairn Oil & Gas plans to triple its output and contribute to 50% of India’s total oil production with an investment of $3-4 billion over the next five years.

Challenges on the Road to Energy Independence

The challenge persists, despite these efforts. Uncompetitive tax structure is one ot the major bottlenecks. India imposes taxes of up to 65% on revenues from oil operations, where the global average is 35%. Add to that operating costs (20-25%), and the financial case for large-scale Exploration and Production (E&P) becomes weaker. Moreover, the lack of major hydrocarbon discoveries and limited deep-water exploration capability continue to hamper growth.

Foreign Direct Investment (FDI) in petroleum and natural gas stood at a modest $8.2 billion from April 2000 to September 2024. If India mitigates its policy environment, then it might attract global oil majors, streamlining approval processes, and adopt a more facilitative tax regime that incentivises long-term commitment over short-term gain.

Balancing Exports and Self-Sufficiency

Kpler’s analysts remain cautiously optimistic. Despite the current dip, India’s refined product exports are expected to remain resilient in the near term, supported by elevated refinery utilisation and demand from Southeast Asia, Europe, and Australia. Several brownfield expansions, including at Koyali, Barauni, and Panipat, are set to be operational by late 2025 or early 2026, potentially increasing India’s crude processing capacity and export readiness.

Yet, for long-term energy security, exports alone won’t suffice. The need to balance outbound trade with inward capacity building has never been more urgent. The goal isn’t merely to be a reliable refiner and exporter but to build a self-reliant energy ecosystem that can withstand geopolitical tremors and price volatility.

As Sumit Ritolia from Kpler aptly notes, “India’s product trade flows will continue to be shaped by operational agility and global price signals.” But as the nation drills deeper—both literally and figuratively—into its energy strategy, the future will depend on how effectively it can integrate domestic ambition with global opportunity.

What lies ahead?

India’s twin energy narratives—the recent export slump and the domestic production surge—reflect a nation in transition. For MSMEs and industry stakeholders, this is a moment to watch closely. Whether it's rising fuel costs from Red Sea disruptions or new opportunities from expanded domestic supply, the implications will ripple across sectors.

In a world of uncertain oil geopolitics, India must continue to “drill, baby, drill”—but do so with foresight, flexibility, and firm policy support.

| Ministry of Petroleum |