Siddharth Roy
(siddharth001.roy@gmail.com)
Assam’s decision to approve the Assam Hydrocarbon Exploration, Production and Upstream Ecosystem Development Policy, 2026 is significant not because it promises another oil boom, but because it confronts a structural problem that has been ignored for too long: the State’s petroleum economy is increasingly dependent on mature discoveries while exploration in new, riskier areas remains inadequate.
Chief Minister Himanta Biswa Sarma has said Assam produces around four million metric tonnes of crude oil annually, largely from old discoveries, and warned that production could begin declining within a decade without fresh reserves. The Cabinet’s response is to alter the economics of exploration. Companies venturing into new and potentially high-risk areas will receive incentives, including support for new drilling rigs and modern exploration equipment, GST-related relief and concessions on land. If exploration fails, the initial land premium need not be paid; if hydrocarbons are discovered, the applicable premium can subsequently be collected.
This is a sensible intervention because exploration is fundamentally different from production. A producing field generates predictable cash flows; a frontier well can consume capital without yielding a commercially viable discovery. Private companies, therefore, prefer known geological structures. Public-sector producers such as Oil India and ONGC face investment constraints and competing priorities. By sharing part of the downside risk, Assam can make marginal exploration commercially more attractive.
The case for doing so is substantial. Assam remains one of India’s most important hydrocarbon provinces. Government energy statistics show that Assam accounted for about 22% of India’s estimated crude-oil reserves as of April 2024, the second-largest share after western offshore resources. It also held about 15% of the country’s natural-gas reserves. Yet reserves are not the same as production capacity. The Directorate General of Hydrocarbons recorded India’s total crude-oil production at 28.70 million tonnes and natural-gas production at 36.11 billion cubic metres in 2024-25. Assam’s contribution is significant, but production from mature fields faces natural decline.
Recent operational data underline the challenge. In June 2025, ONGC’s Assam gas output was 27.62 million cubic metres, 5.22% below the corresponding month a year earlier and 20.61% below its target. Oil India’s Assam gas production was 233.55 million cubic metres, 4.92% below June 2024 and 15.27% below target. Such shortfalls cannot be interpreted simply as evidence of geological exhaustion; they also demonstrate why sustained investment in appraisal, enhanced recovery and new exploration is essential.
The policy could therefore deliver four economic gains.
First, it can extend Assam’s hydrocarbon production horizon. New discoveries would replenish the reserve base and reduce the risk of a decline in output. This matters for the State’s industrial ecosystem, which includes refineries, petrochemicals, pipelines, oilfield services, transport and engineering.
Second, it can crowd in investment and technology. Exploration depends on advanced seismic imaging, directional drilling, digital reservoir modelling and equipment. Incentivising companies to bring modern rigs and technologies into Assam could create capabilities that extend beyond individual wells. Local contractors, engineering firms and skilled workers could benefit from a larger upstream ecosystem.
Third, successful exploration can strengthen energy security. India remains heavily dependent on imported crude oil. Every additional domestic barrel does not eliminate import dependence, but it improves the trade balance and provides insurance against global supply disruptions and price shocks. Assam’s geographical position also gives the Northeast strategic importance in India’s energy network.
Fourth, exploration can support regional development if the value chain is retained locally. The State should use this opportunity to develop training programmes, technical institutes, logistics facilities and specialised service clusters around Dibrugarh, Sivasagar and other energy-producing areas. A hydrocarbon policy should not merely extract resources; it should build an upstream knowledge economy.
But the policy’s success cannot be measured by the number of wells drilled. Assam’s experience with hydrocarbon extraction contains a difficult environmental and social history. The Baghjan blowout of 2020 demonstrated the potentially costs of operational failure. Assam’s wetlands, forests, agricultural land and densely settled communities cannot be treated as externalities in an economic calculation.
Consequently, incentives should be conditional on stringent environmental safeguards, transparent monitoring, emergency-response capacity and community consultation. A GST concession or land incentive must never become a subsidy for weak environmental governance. The State should publish exploration blocks, incentive structures, environmental conditions and post-exploration obligations in a transparent framework.
There is also a fiscal question. Assam must avoid assuming that every exploration incentive will automatically generate revenue. Hydrocarbon discoveries may take years to commercialise, and many wells will fail. The policy should therefore be evaluated through measurable indicators: exploration expenditure mobilised, new wells drilled, seismic coverage, discoveries, commercialisation time, local employment, state revenue and environmental compliance.
Most importantly, Assam should view the policy as a bridge rather than a destination. Oil and gas will remain economically relevant for years, but the global energy transition is accelerating. The State should use today’s hydrocarbon revenues and capabilities to finance tomorrow’s diversification into natural gas, petrochemicals, renewables, compressed biogas, energy services and cleaner industrial technologies.
The new policy is thus welcome, provided Assam gets the balance right. The objective should not be to maximise drilling at any cost. It should be to make responsible exploration economically viable, renew the reserve base, deepen local capabilities and prepare the State for an energy system that will be less oil-dependent. Assam’s historic advantage is its geology. Its future advantage must be the ability to convert that geology into investment, jobs, energy security and sustainable development.