Oil breakthrough: Assam to become first state in India to produce and profit from crude

Assam is set to become the first state government in India to take a direct role in oil production, marking a significant turning point in the country’s energy sector. The move follows a hydrocarbon discovery in the Namrup Borhat-1 well, located in the Dibrugarh district, a project in which the Assam government holds a “significant stake” alongside Oil India Limited (OIL).

Chief Minister Himanta Biswa Sarma called the development a “major step forward in energy security and economic resilience.”




In a post on X, he declared, “This discovery makes Assam the first state govt to be a direct oil producer, makes exploration efforts successful, empowers Assam with revenue & royalty, and ensures steady availability of energy for the country.”

He also described it as a “proud moment” for the state.

Assam’s role in oil is no longer passive

For decades, Assam has played a key role in India's oil story. Home to the country’s first oil well at Digboi, it has long been a vital source of crude.

Decades on, it remains a heavyweight in domestic crude production. In 2023–24, the state produced 4,361 thousand metric tonnes (TMT) of crude oil, ranking third after Rajasthan and Gujarat, according to the Ministry of Petroleum and Natural Gas.

Over the past three financial years (2021–22 to 2023–24), India’s total crude oil output stood at 88,223 TMT. Assam’s contribution was 12,518 TMT, making it one of the top onshore producers. Rajasthan led with 15,380 TMT, followed by Gujarat with 14,425 TMT. Tamil Nadu (985 TMT), Andhra Pradesh (688 TMT), Arunachal Pradesh (147 TMT), and West Bengal (a negligible 0.06 TMT) followed at a distance. Offshore production, meanwhile, dominated the landscape with 44,078 TMT over the same period.

Until now, Assam’s role had been limited to supplying resources and collecting royalties. But with its new direct stake in upstream oil operations, the state is no longer just a crude supplier, it’s a partner in production, entitled to a share of both revenue and risk.

Understanding the "significant stake"

"Oil India Limited has discovered hydrocarbon presence in Namrup Borhat-1 well, a well where Govt of Assam holds a significant stake," the Chief Minister posted on X.

While the state government hasn’t disclosed the exact size of its stake in the Namrup Borhat-1 well, a December 2020 Economic Times report offers a likely clue.

It refers to a memorandum of understanding signed between Oil India Limited (OIL) and the Assam Hydrocarbon and Energy Company Limited (AHECL), a state-owned entity.

Under that agreement, AHECL was granted a 10% participating interest in the Namrup Block, which spans 125 square kilometres.

Since the Borhat-1 discovery falls within that block, it's reasonable to assume that Assam, through AHECL, holds the same 10% stake in the well. That’s more than symbolic ownership.

A participating interest gives Assam a share in both the risks and revenues of exploration and production, earnings from crude oil sales, not just royalties or taxes.

However, Economic Times could not independently verify the precise shareholding structure specific to the Borhat-1 well.

Investing, not just facilitating

This isn’t the only example of the state building long-term equity positions in the energy sector. In April 2023, the Assam Gas Company Limited (AGCL), also state-owned, signed a joint venture agreement with OIL to roll out city gas distribution networks in parts of Assam and Tripura.

The JV company is majority-owned by AGCL with a 51% stake, while OIL holds the remaining 49%. The plan includes laying pipelines, setting up CNG stations, and supplying piped gas to homes and businesses in districts like Lakhimpur, Dhemaji, Darrang, Udalguri, Sonitpur, Biswanath Chariali, and select parts of Tripura.

With an authorised capital of ₹500 crore and an initial paid-up capital of ₹100 crore, the Chief Minister described the venture as a milestone that will help strengthen the state’s economy.

Additionally, in December 2024, the state cabinet cleared a 40% equity stake in the Namrup-IV Fertilizer Plant, part of the Brahmaputra Valley Fertilizer Corporation Limited (BVFCL). It’s another example of the state stepping in not just as a facilitator, but as a co-owner with skin in the game.