India’s latest gas discovery in the under-explored Andaman-Nicobar Basin could prove to be a valuable stepping stone towards increased domestic upstream production and greater energy security for the country – but whether the basin can become a significant contributor to India’s domestic gas supply and pull in more long-term national and international oil company interest will hinge on several factors, not least the size of the reserves. The presence of hydrocarbons within the Oil India-led Sri Vijayapuram-2 well in the Andaman deepwater region was confirmed at last week’s Basin Analysis conference in Mumbai.

The well – part of a three-well exploration campaign that Oil India kickstarted last year within Andaman Block AN-OSHP-2018/1, awarded under the Open Acreage Licensing Policy (OALP) Bid Round II in 2019 – was drilled on the east coast of the Andaman Islands at a water depth of 295 meters and to a target depth of 2,650 meters. Hardeep Singh Puri, India’s Minister of Petroleum and Natural Gas, also confirmed that “initial production testing of the well in the range of 2,212 to 2,250 meters has established the presence of natural gas with intermittent flaring, with approximately 87% methane”.

This deepwater discovery and Oil and Natural Gas Corporation’s (ONGC) dual announcement last year – Konark and Utkal in the Mahanadi Basin, off the east coast of India – signal the maturing of India’s offshore exploration efforts, reflect policy success, collaborative efforts from governing bodies such as the Ministry of Petroleum and Natural Gas, the Directorate General of Hydrocarbons (DGH), and the national oil companies (NOC). However, how transformative these discoveries become will depend on the size of the reserves, how fast they can be developed, cost, environmental management, and how they fit within India’s long-term energy-transition strategy.

This new gas discovery in the Andaman basin could be transformative, both for the basin itself and for India’s broader energy strategy, as the country undertakes Prime Minister Narendra Modi’s ‘Samudra Manthan’ (‘Churning of the Ocean’) mission – an initiative to explore the unexplored deepwater oil and gas potential. The Andaman deepwater region, which includes many others such as Krishna-Godaveri and Mahanadi, remains under-explored primarily due to associated costs and technical challenges, and it is significantly crippled by the lack of high-quality deepwater seismic data. Despite its geological promise, and significant discoveries in the analogue basins, the Andaman-Nicobar Basin has seen only a handful of exploration wells over several decades. The sparse drilling activity underscores the historically limited industry interest, with operators reluctant to commit capital in the absence of proven success. This lack of sustained well campaigns highlights the basin’s frontier status and the cautious approach companies have taken toward its exploration.

However, the announcement of this discovery will help validate the hydrocarbon potential of India’s deepwater region and encourage further investments and exploration drilling, likely triggering the development of new offshore infrastructure, including production platforms, pipelines and possibly floating liquefied natural gas (LNG) facilities. This could turn the basin into a significant contributor to India’s domestic gas supply, but it remains to be seen whether the size of the reservoir and its production potential will make it economically viable.

As domestic production continues to slump, new gas discoveries are increasingly critical to India’s energy landscape. They offer a pathway to enhanced energy security, economic growth and a smoother transition to a low-carbon future – but, more importantly, can help move the country transition from its heavy reliance on imports. Moreover, natural gas serves as a relatively cleaner fossil fuel, supporting the country’s climate goals by enabling a shift away from coal in power generation and industrial use. Additionally, for a nation heavily dependent on its NOCs, the establishment of deepwater potential combined with relevant fiscal terms could help stimulate investment in infrastructure, technology, and offshore exploration, primarily attracting international oil companies (IOC) to invest in the nation’s under-explored basins.

Deepwater exploration is technologically demanding and capital-intensive, therefore continuous efforts by the NOCs could help attract IOCs with better technologies, which in turn could accelerate discovery and extraction. Additionally, the Andaman find will likely spur more high-quality 3D seismic surveys and exploration drilling, not just in the Andaman-Nicobar Basin but in other under-explored deepwater areas and help ramp up the country’s reserves base. Nonetheless, above-ground risk such as environmental challenges will play a key role as deepwater operations and exploration offshore Andaman-Nicobar will need to carefully manage environmental risks, including impacts on marine ecosystems, potential spill risks and greenhouse gas implications. Hence, beyond a supply of energy, the new gas reserves could provide a strategic buffer, strengthen negotiating power in global markets, and support industrial growth by ensuring stable feedstock for industrial growth and stable domestic supplies, laying the foundation for sustainable, secure and economically efficient energy development.

India continues to see a growing interest from IOCs – showcased by the July 2025 memorandum of understanding (MoU) between ONGC and BP to collaborate on drilling stratigraphic wells in the Indian offshore sedimentary basins of Andaman, Mahanadi, Saurashtra and Bengal – aiming to enhance geological understanding and unlock untapped hydrocarbon potential, thereby strengthening the country’s long-term energy security. As such partnerships continue to mature, announcements of new discoveries could act as a catalyst for an influx of foreign investments. However, India’s dependence on its NOCs, such as ONGC and Oil India, is undeniable and will continue to be a defining feature of its energy sector. Enticing IOCs to actively engage in exploring the nation’s frontier basins will require a significant upgrade in the regulations and transparency in data sharing so, until then, these NOCs will remain indispensable partners in securing the country’s hydrocarbon future, even as collaborations with private and foreign entities expand.

Source: Rystad Energy