The Union government, Assam and Nagaland Thursday signed a memorandum of understanding (MoU) that paves the way for the resumption of oil and gas exploration along the resource-rich and contested boundary of the two states after three decades.The Northeast is considered the birthplace of India’s oil and gas industry and Assam is among India’s major oil and gas producing states.India depends on imports to meet over 88% of its crude oil needs and about half of its natural gas requirement, and the government has been pushing for more domestic exploration and production activities to reduce the heavy reliance on energy imports. This agreement is part of that effort, and comes as a time when the country is grappling with high prices of imported oil and gas, as well as supply constraints, owing to the effective closure of the Strait of Hormuz amid the West Asia war.High hydrocarbon imports have left the Indian economy vulnerable to international price and supply shocks. They also have a bearing on the country’s trade deficit, foreign exchange reserves, the rupee’s exchange rate and inflation, among other metrics. The government has implemented several policy reforms to encourage investments in India’s oil and gas exploration and production sector.Resumption of oil, gas exploration in contested boundary areasAlthough these “upstream” activities have long gestation periods, the agreement could augment the country’s domestic oil and gas production in the medium to long term. According to officials aware of the matter, the MoU specifically targets the disputed area belt, or DAB, along the Assam-Nagaland border. With the MoU in place, oil and gas exploration and production are expected to gather pace across more than 1,000 sq km along the Assam-Nagaland border.Oil, gas, and mineral exploration activities have remained suspended in the DAB for three decades owing to law and order issues amid boundary disputes between the two states. The DAB is expected to contain promising hydrocarbon prospects.According to the Ministry of Home Affairs (MHA), the MoU establishes a coordinated framework for facilitating mineral oil operations in the area, ensuring operational continuity, safety and security of personnel and assets, and effective coordination among all stakeholders. The framework is expected to support exploration and production activities, encourage investment in the upstream petroleum sector and contribute towards the country’s energy security objectives, it said.Story continues below this adAlso Read | India’s oil shock could have been much worse — but for ChinaThe MoU was signed in the presence of Home Minister Amit Shah, Petroleum Minister Hardeep Singh Puri, Assam Chief Minister Himanta Biswa Sarma and Nagaland Chief Minister Neiphiu Rio.The MHA said that both states decided that they would not allow any obstacle to India’s oil exploration, and would advance on the path of mutual cooperation, as these resources constitute national wealth. According to the MHA release, apart from six designated oil and gas fields, the Nagaland government has agreed to oil exploration across Nagaland.“He (Shah) stated that the Government of Assam is also in agreement, as this is a win-win situation for all stakeholders. The Home Minister said that this tripartite agreement will pave the way for mineral exploration and mining across the entire North-East region,” the release said.Govt sees significant oil, gas potential in region“Since Assam alone accounts for nearly 22% of India’s crude oil reserves and around 15% of the country’s natural gas reserves, while Nagaland possesses significant hydrocarbon potential in the Naga-Schuppen Belt of the Assam-Arakan Basin, resources where hydrocarbons flow naturally and those which have huge untapped resources, the outlook for E&P [exploration and production] activities in the North East is therefore extremely promising,” Petroleum Minister Hardeep Singh Puri posted on social media platform X, adding that the MoU paves the way for Nagaland to produce oil and gas after 31 years.Story continues below this adAlso Read | How energy tankers are using a shadow fleet ploy to slip out of HormuzAccording to the MHA release, Shah said that the MoU could potentially help increase oil production capacity from the Northeast from the current capacity of 1,000–1,500 barrels per day by more than tenfold, adding that the region also possesses “and immense wealth of minerals”. While it is difficult to predict exactly how soon this tripartite agreement would start bearing fruit, Shah emphasised that in due course, it will bring significant relief to India and enhance the country’s self-reliance.“Union Home Minister Shri Amit Shah expressed confidence that the extraction of oil and gas resources available in Nagaland would significantly reduce India’s dependence on foreign sources in this sector. He said that, in the absence of such an agreement and due to certain longstanding challenges, the economic development of both states had remained affected for a considerable period. However, he noted that the agreement signed today will open a major pathway for the economic development of both Assam and Nagaland,” the MHA release said.“By creating a framework for cooperation between the concerned Governments, this MoU signed in the presence of HM Sh @AmitShah Ji, provides certainty to investors, facilitates operational continuity, enables regulatory coordination and creates conditions necessary for long-term investment decisions,” Puri said. He also thanked Sarma and Rio “who rose above differences to chart the way forward for the region and the country”.