India isn't quite the next Russia of natural gas, but with energy giant British Petroleum (NYSE: BP) investing in India's Reliance Industries (RIL) , it seems the big names in E&P are finally realizing the huge potential in India's oil and gas industry.

To those who might not be aware of recent deals in this space (which is understandable given the huge focus on the effect Middle East unrest is having on oil prices), BP has bought a 30% stake in 23 oil and gas blocks belonging to RIL, including the D6 block off the east coast of India. The deal, in which BP will pay RIL an aggregate consideration of $7.2 billion, has the potential to climb to $20 billion based on performance payments and combined investments. This would then make it the single largest foreign direct investment in India and certainly one of the most significant energy investments in the Indian subcontinent to date.

What's the big deal?
The D6 block in the Krishna-Godavari Basin is India's largest natural gas reserve discovered to date. In fact, it was the world's largest gas discovery back in 2002, when it was initially discovered with estimated reserves of 11.5 trillion cubic feet (Tcf). BP sees over 15 Tcf of gas resources in RIL's blocks. For perspective, as of January 2010, India had identified approximately 38 (Tcf) of proven natural gas reserves, and there is every possibility that these figures will grow.

The government of India has been going out of its way to attract major E&P companies. Exploration of hydrocarbons in India is covered under the framework of New Exploration Licensing Policy (NELP), which was launched in 1999. Unlike everything that is going on in the States right now, with policies restricting drilling in the Gulf and in Alaska, this policy has accelerated the pace of hydrocarbon exploration in the country.

What next
Though difficult to estimate, the unproven reserves found in India's gas fields are huge. RIL is also said to be sitting on another huge gas reserve -- the D4 block on the KG basin -- estimated to be double the size of D6. This spells good times for BP, especially as the world starts paying more attention to cheaper alternatives to crude oil being extracted in volatile regions of the world.

But exportation may not be the primary mission here. The hard fact is that India still requires more natural gas than it produces, which, in the eyes of an investor, is a good thing. This reality will only act as an impetus for more E&P multinationals to join the race. State-run enterprise Oil and Natural Gas Corp. (ONGC) is in talks with energy majors like ExxonMobil (NYSE: XOM), Eni (NYSE: E), and BHP Billiton (NYSE: BHP) for a strategic tie-up for its Krishna-Godavari basin gas block.

ONGC has a 65% working interest in the KG-DWN-98/2 block, which sits next to the D6 block. The KG-DWN-98/2 block is assessed to hold 14 Tcf of gas reserves. Cairn India, the Indian arm of Cairn Energy, holds 10% interest in the block.

As investments in India's natural gas fields expand, pay close attention to all the ancillary investment that is required along with it. This includes the various products and services sold to energy giants like BP from Schlumberger (NYSE: SLB) and Halliburton (NYSE: HAL), as well as machine parts and products from National Oilwell Varco (NYSE: NOV). All of these companies and more could be highly involved players in India's energy boom.

Some creases to iron out 
Things are looking pretty attractive for those investors looking to get a piece of India's newest energy craze. Yet in a highly regulated market like India's, one should certainly have concerns as well, like pricing. There has been a significant lack of clarity in this area and others. But to second fellow Fool Nick Kapur, the investment climate in India is slowly turning in favor of investors. My instinct tells me that this is just the beginning.

Keep your eye out for more spending and investment in India related to domestic energy extraction. Never known as a rich source of hydrocarbons, India's reputation is quickly evolving. This could be the start of something big.

Isac Simon does not own shares of any of the companies mentioned in the article. National Oilwell Varco is a Motley Fool Stock Advisor recommendation. The Fool owns shares of ExxonMobil and Schlumberger. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.