The government will hold pre-emption rights over all domestically produced oil and natural gas during any declared national emergency, according to draft rules under a revised oilfields regulation framework. The newly passed Oilfields (Regulation and Development) Amendment Bill frames these rules, replacing outdated provisions from the 1948 law to stimulate domestic production, attract investment, and support India’s clean energy transition.
What Are Pre-Emption Rights?
A pre-emption right is a legal provision that allows a party—often a government—to claim access to a product, asset, or resource before others. In this case, the Indian government would have first rights over crude oil and natural gas produced within the country in emergency situations, overriding normal commercial sales and exports.
Protecting Public Welfare and National Interests
The government secures these rights to prioritize national interests, particularly during crises. Crude oil, refined into petrol, diesel, and other fuels, and natural gas, used for power generation, fertilizers, vehicle fuel (CNG), and household cooking, play a critical role in maintaining essential services and economic stability.
Fair Compensation Assured for Producers
The draft rules specify that the government will compensate oil and gas producers with the “fair market price prevailing at the time of pre-emption,” ensuring companies receive equitable payment for resources redirected to national use during emergencies.
Scope of Emergency and Force Majeure Explained
While the draft rules do not clearly define what qualifies as a “national emergency,” industry sources suggest that situations such as war, military conflict, or natural disasters could trigger such provisions. The government’s right would extend to crude oil, natural gas, refined petroleum, and mineral oil products, whether sold domestically or exported.
Additionally, the rules outline exemptions for oil and gas operators in cases of force majeure—events beyond the lessee’s control. These include natural disasters like floods, earthquakes, and lightning, as well as events such as war, insurrection, riots, explosions, pandemics, and other unforeseen disruptions.
Public Feedback Invited
The Ministry of Petroleum and Natural Gas has invited comments from stakeholders on the draft rules. As reported by deccanherald.com, this open consultation follows the legislative push earlier this year to modernize India’s energy laws and ensure energy security in uncertain times.
