Petroleum and Natural Gas Rules, 2025, mark a noteworthy step in rebuilding India’s regulatory framework for the petroleum and natural gas industry. Issued under the Oilfields (Regulation and Development) Amendment Act, 2025, the rules replace multiple licences with a single petroleum lease covering exploration, development, and production of all hydrocarbons, including distinctive resources and Authority can now grant lease for up to 30 years and increase them for the full economic life of a field, while ensuring safeguards opposed adverse regulatory changes.
Key Features of the Rules, 2025:
- Faster Approvals: To expedite sector operations, petroleum lease applications must be decided within 180 days.
- Criminal Penalties to Fines: To encourage compliance, the rules remove criminal penalties for violations. Instead, companies may face fines of up to Rs 25 lakh, with additional Rs 10 lakh per day for ongoing non-compliance.
- Additionally, standardised lease formats will ensure uniformity and ease of administration across the sector.
- The Oil Industry Safety Directorate has been designated as the competent authority for offshore safety, audits and standard-setting in exploration and production operations.
- Environmental provisions have mandated time-bound plans for zero gas flaring and reduced greenhouse emissions.
- With a broader spectrum of rights under one petroleum lease, the lessees will have the right to carry out all types of mineral oil operations under one petroleum lease, he said, adding that they may undertake decarbonisation and comprehensive energy projects at oilfields.
- Long-term leases of up to 30 years may be granted and may be extended up to the economic life of the field, allowing the lessee to make a planned investment decision.
- Lessees will make an Annual Declaration to the government of the installed, utilised and excess capacity of the infrastructure facilities owned by it.
- Permit lessees to jointly develop or share infrastructure facilities by mutual agreement
- Seat of Arbitration of lease and contractual disputes, where all lessees or contractors are companies incorporated in India, will be New Delhi. Where any member is a foreign company as defined in the Companies Act, a neutral seat of arbitration may be opted for.
- Rules require NOCs to promptly notify all existing and new discoveries.
- Holder of Lease shall submit field development plans within prescribed time limits.
- Holder of Mining Lease shall obtain central government approval for development areas.
- Holder of Mining Lease shall regularly report development and production activities.
Comparation of Petroleum and Natural Gas Rules 1959 and Petroleum and Natural Gas Rules 2025
| Basis | Petroleum and Natural Gas Rules 1959 | Petroleum and Natural Gas Rules 2025 |
|---|---|---|
| Overall Approach | Highly government-controlled and paperwork-heavy | Business-friendly, streamlined and time-bound |
| Type of Permission | Different licences are needed at different stages | Single unified petroleum lease covering the entire upstream lifecycle |
| Lease Duration | Short-term (up to 4 years) | Long-term (up to 30 years), extendable till field is viable |
| Operational Flexibility | Limited strictly to oil & gas | Allows renewables and low-carbon energy projects within lease area |
| Environmental Focus | Basic conservation rules | Strong focus on emissions control and flaring reduction |
| Nature of Penalties | Criminal liability is possible for violations | No criminalisation – financial penalties instead |
| Penalty Amount | Up to ₹ 1000 | Higher fines – up to ₹ 25 lakh |
| Enforcement | Prosecution or cancellation | Lease suspension or termination and recovery of dues |
Conclusion
The Petroleum and Natural Gas Rules, 2025, shown a clear shift towards progressive regulation. By enhancing safety and environmental safeguards, simplifying penalties, and easing compliance, Rules, 2025 strike a balanced approach between regulatory oversight and ease of doing business, supporting the sustainable growth of the sector.
The reform will accelerate domestic exploration and production activities by reducing procedural delays and providing regulatory clarity. The introduction of long-term leases and standardised formats is expected to attract structured investments in the sector.
Disclaimer
The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. The content of this article is not intended to create and receipt of it does not constitute any relationship. Readers should not act upon this information without seeking professional legal counsel.
