Explained | The prospect of energy exploration at Andaman 

The story so far: In an interview to media platform The New Indian, Union Minister for Petroleum Hardeep Singh Puri said that it is a “matter of time” before a Guyana-like oil basin is discovered in the Andaman Sea. Mr. Puri held that India was now “serious” about oil exploration and production enumerating the present government’s change in approach. The Union Minister further stated the smaller discoveries, facilitated by the change in approach, alongside a bigger Guyana-like discovery could help Indian economy scale up from being a $5-7 trillion economy to a $20 trillion economy “straight away”.

Why is Andaman Nicobar basin significant for oil exploration?

At the centre of the renewed interest for oil exploration in the region is a string of gas and condensate discoveries in the adjacent basins along North Sumatra (Indonesia) and Irrawaddy-Margui (Myanmar). Additionally, the Ministry of Petroleum and Natural Gas (MoPNG) whilst putting forth the latest set of basins for auction this April, held Andaman Nicobar region housed “excellent potential for large hydrocarbon accumulations” in “one of the last undrilled frontiers in the world”.

The Andaman Basin. Source: India’s Hydrocarbon Outlook 2022-23.

The Standing Committee on Petroleum and Natural Gas in their report concerning Demand for Grants (2025-26) stated the Andaman Basin, measuring 2.25 lakh square kilometre located in the southeastern part of the Bay of Bengal, comprised of a major chunk of “unappraised (unexplored)” area of the offshore sedimentary basins of India.

The report elaborated data about the wells in the basin was “scanty” with data coverage being “moderate to sparse”. Further, the area was not thoroughly explored because most it was designated as a ‘No-Go’ zone or areas where drilling and production is barred. The paradigm was altered when the government launched the Deep Andaman Offshore Survey.

The project was implemented through state-owned Oil India Ltd in 2020. The observations were recorded in the National Data Repository in 2023. Gathering from multiple geophysical surveys, the portal enumerates about mud volcanoes bearing indications of the presence of oil and gas from the outcrops of the Baratang formations of the Middle and South Andaman.

What was the change in approach that helped the paradigm?

Introduced in 2016, the Hydrocarbon Exploration and Licensing Policy (HELP) provided the real fillip in intensifying investment and exploration activity in the basin. Two of its provisions were of particular importance, that is, bidding as part of the Open Acreages Licensing Policy (OALP) and a transition away from the erstwhile production-sharing regime to a revenue-sharing regime. Additionally, HELP also introduced a uniform licensing framework for all hydrocarbon exploration and production – striving to further ease and streamline the process.

OALP allows potential investors to study and bid for any block of their choice leveraging their competitive advantage utilising data from the National Data Repository. Thus, when combined with revenue-sharing regime, it housed the potential to attract foreign investment and collaboration. For perspective, ONGC in 2023 finalised a collaboration with French giant TotalEnergies for exploring deep-water blocks in the offshore, especially Mahanandi and Andaman. Essential to note, the survey and thereafter OLAP were of considerable importance to OMCs wanting to explore the region considering ONGC had drilled six wells off the Andaman shores during FY 2013-14 without any commercial success or production. Poignant to note, Oil India in the 2020 survey also explored shallow waters in addition to deep waters that ONGC had ventured into.

Eight rounds of biddings under OALP have awarded a total of 144 exploration blocks with a total anticipated investment of $3.37 billion. An additional 28 blocks spanning an area of more than 1.37 lakh sq. km. were offered in the ninth round. The tenth round announced in April would put on offer 25 blocks across 13 sedimentary basins spanning 1.92 lakh sq. Km. Oil India and ONGC have bagged two basins each in the region in the first eight rounds. Four more basins – all in the Eastern Andaman region – would be put for bidding in the tenth round.

Map indicating blocks up for bid in Eastern Andaman basin in OALP X. Source: India’s Hydrocarbon Outlook 2023-24.

What could be potentially determining factors in the paradigm?

Higher costs associated with offshore activities (exploration/production beneath seas and oceans) and currents leading to fluctuating prices of oil might contribute unfavourably to the ambitions in the Andaman Nicobar basin. Also essential to note, exploring a basin and thereafter commercial production take several years to fall through.

Offshore oil and natural gas production is much more expensive than onshore, or land-based production. This is primarily because the former’s inter-connected production and processing sites are more expensive to build than onshore shale. Although, as explained by consultancy firm Rystad Energy to Reutersthat once the sites are up and running, they can turn profits at lower prices than other forms of production. This paradigm however is fuelled when there is an increase in oil prices for it would offer continued incentive to upstream companies to explore and continue investing.

Thus, a crash in prices could for a sustained period could potentially not bear better prospects for the region being explored. An essential point in case could be Guyana and their rapidly expanding offshore oil production. IMF’s latest assessment attributed the Latin America’s newest oil producer to have clocked an average 47% real GDP growth rate since 2022. The highest real GDP growth rate in the world is primarily lead by real oil GDP which increased about 58% in 2024. However, among other things, it warned, “Commodity price volatility in a highly uncertain global environment, including from trade policy and climate shocks could also adversely affect inflation and alter the (presently highly favourable) macroeconomic outlook.”

Contrastingly though, the prospect of discovering oil in the basin is of much importance to India’s energy security. At present, India meets 90.6% of its energy needs through imports.