Streamlining Hydrocarbon Development: The PNG Rules 2025 Explained

Introduction

In 2025, the government announced the Petroleum and Natural Gas Rules, 2025, which set out a framework for the exploration, development and production of oil and gas resources. These rules implement changes under the Oilfields (Regulation and Development) Act, 2025. The PNG Rules 2025 replace licensing regulations from the mid-twentieth century with a system in which one petroleum lease covers all stages of exploration, development and production. The rules also define lease durations and procedures for approvals and compliance.

Explanation

The new rules establish one petroleum lease that covers all phases of a project. Under this lease, a company can explore, drill, develop and produce any type of oil or gas resource. The lease also allows the company to pursue related energy projects at the same site, such as solar power, wind power or hydrogen production alongside petroleum operations. This replaces the earlier system that required a separate permit at each stage. It is intended to simplify approvals and allow companies to plan investment under one set of terms.

The rules set terms for leases. A lease may run for up to 30 years and can be extended for the economic life of the field. Lease conditions cannot be changed during the lease period, giving companies certainty. The rules clarify how to calculate the value of a lease for stamp duty purposes: the lease value is defined as the total rent payable over its term. An application for a petroleum lease must be decided within 180 days. If authorities do not act in that time, the application is deemed approved if the central government is responsible; or rejected if a state government is responsible. These deadlines are meant to prevent delays in approvals.

Dispute resolution is defined in the rules. When all parties to a petroleum contract are companies incorporated in India, arbitration is to be held in New Delhi. If any party is a foreign company, the parties may choose a neutral international venue. The rules remove most criminal penalties for operational breaches and replace them with financial penalties. For example, a violation of lease conditions may attract a fine of ₹25 lakh and an additional ₹10 lakh for each day the violation continues. The rules also expand compliance requirements: companies must notify any new hydrocarbon discoveries, submit field development plans by deadlines, and report regularly on production and development activities.

The rules introduce new requirements on infrastructure and the environment. Companies must file annual statements of their installed pipelines, processing units and storage capacity, and must note any unused capacity. They must make unused infrastructure available to others on fair terms by mutual agreement. This is intended to improve utilization of existing assets and lower costs. Environmental provisions require companies to prepare plans to end routine flaring of gas and to reduce greenhouse gas emissions. Companies must measure and report emissions and comply with environmental regulations. The Oil Industry Safety Directorate is designated as the authority for offshore safety audits and standards in exploration and production.

Compared to earlier rules, the 2025 rules bring several changes. The older rules required a separate permit for each stage of exploration, development and production, and allowed lease terms to change over time. They also imposed criminal sanctions for some violations and left issues like lease valuation undefined. The new rules remove these features. They combine all permissions into one petroleum lease and set fixed terms and durations. Criminal penalties are replaced by specified financial penalties. For example, the rules explicitly define the value of the lease as the total rent payable over its term, resolving an ambiguity about stamp duty under the older rules.

These changes aim to support production and streamline regulation. By reducing the number of permits and setting clear deadlines, the rules should help companies move faster from discovery to production. Leases that last for decades and cannot be changed give companies’ confidence to invest in new fields. Faster approvals and clear arbitration provisions should help attract investment. Mandatory infrastructure sharing can reduce costs and help smaller operators. The environmental and safety provisions are intended to ensure that development proceeds under required standards. Overall, the new procedures should make the sector more efficient and transparent.

Conclusion

In summary, the 2025 Petroleum and Natural Gas Rules create one licensing framework for oil and gas. They replace the earlier system of separate permits with one lease covering all operations. The rules set fixed terms for leases, deadlines for approvals and compliance requirements, including environmental and safety standards.