Single petroleum lease regime, longer tenures and lighter compliance framework aim to improve ease of doing business

The Union government has notified the Petroleum and Natural Gas Rules, 2025, introducing a revised regulatory framework designed to attract investment and simplify operations in India’s oil and gas sector.

Issued under the Oilfields (Regulation and Development) Amendment Act, 2025, the new rules replace the earlier system of multiple licences with a single petroleum lease that covers exploration, development and production of all hydrocarbons, including shale and other unconventional resources. The changes are intended to reduce regulatory complexity and provide greater certainty to investors.

Under the new framework, petroleum leases can be granted for a period of up to 30 years and may be extended for the full economic life of a field. The rules also provide safeguards to protect lease terms from adverse regulatory changes, enabling companies to take long-term investment decisions with greater confidence.

In a significant shift, criminal penalties for regulatory violations have been removed. These have been replaced with financial penalties, including fines of up to Rs 25 lakh, along with an additional Rs 10 lakh per day for continuing non-compliance. The rules also allow operators to jointly develop or share infrastructure facilities by mutual agreement, a move expected to improve operational efficiency and lower costs.

The notification includes provisions aimed at environmental compliance. Lessees will be required to submit time-bound plans for achieving zero routine gas flaring and for reducing greenhouse gas emissions. Companies will also have to make annual disclosures on installed, utilised and surplus infrastructure capacity.

To speed up approvals, applications for petroleum leases must now be decided within 180 days. The rules introduce an expedited dispute resolution mechanism, including arbitration. Where all parties are Indian companies, New Delhi will serve as the arbitration seat, while a neutral location may be chosen in cases involving foreign entities.

The Oil Industry Safety Directorate has been designated as the competent authority for offshore safety oversight, audits and the formulation of operational standards for exploration and production activities.

The government has described the reforms as a major step towards improving ease of doing business and strengthening India’s energy security. Industry participants have welcomed the move, noting that the simplified licensing regime and longer lease tenures could help unlock India’s untapped hydrocarbon potential, boost domestic production and reduce reliance on imports.

The new rules also allow lessees to undertake decarbonisation initiatives and integrated energy projects within oilfields, signalling a gradual alignment of the hydrocarbons sector with broader energy transition goals.