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Manvendra Singh watched Royal Dutch Shell pack up and leave India. A decade ago, the Indian MP was told by an executive of the oil company, as he closed up his trailer near the arid city of Jaisalmer, that the quality of the oil beneath the Rajasthani desert was good, but there was not enough of it.

So the Anglo-Dutch oil group, after drilling four exploration wells, was going home. It could not have been more wrong. Today Rajasthan is on its way to becoming a mini-Texas, supplying the world’s fastest growing economy after China. Its 125,000 barrels a day of oil represents almost 20 per cent of domestically generated oil supplies to a country home to nearly a fifth of humanity.

Rajasthan’s transformation into an oil economy is part of a bigger struggle for India to secure its energy security. Energy weakness is a key vulnerability for the emerging power as it still imports more than 70 per cent of its oil. Its dependence has been highlighted in recent months by the threat of international sanctions against Iran, one of its main suppliers, and a weak local currency.

Supplying India’s power stations with coal and gas and securing oil supplies to refineries is causing increasing concern and will be the subject of a high-level meeting between the country’s industrialists and Manmohan Singh, the prime minister, in New Delhi on Wednesday. Mr Singh is likely to face a barrage of complaints about environmental restrictions on coal and slow approvals of power projects.

However, he can take heart from a reawakening domestic oil and gas sector. Ignored by the world’s big energy companies for most of India’s post-independence history, this sector is showing new life, with energy investments representing the lion’s share of India’s $19.43bn in foreign direct investment in 2011.

Two stand out: one by BP, the British oil group; the other by Vedanta Resources, the UK-listed resources company. India was traditionally sidestepped by the global energy giants. Exploration to the east held better prospects in countries such as Thailand, Indonesia and Malaysia, while smaller countries, such as Nepal and Sri Lanka, were left to the smaller explorers.

India, distrustful of western participation, turned to the Russians to help its state oil companies such as the Oil and Natural Gas Corporation, the developer of the Bombay High field, and the Indian Oil Corporation. Liberalisation in the early 1990s, under Manmohan Singh, the then finance minister, invited the private sector to develop what were considered small fields and catalysed a local industry, led by Reliance Industries in gas production and refining capacity.

But disputes and the threat of value destruction chased away others, such as Enron, and the wider US oil industry. Now the landscape is rapidly changing and Indian energy assets hold renewed international appeal. The shift started with Vedanta, headed by Anil Agarwal, walking into an Edinburgh office and launching a dazzling bid for Cairn India, the company developing the Rajasthan fields. The $6.5bn that Vedanta paid Cairn Energy for its controlling stake is the first step in a broader Vedanta strategy to marry an oil business with metals assets and turn itself into a group to rival BHP Billiton.

While Vedanta battled for approvals, Bob Dudley, BP’s chief executive, swept in to buy a 30 per cent stake worth $7.2bn in deepwater offshore gas production off India’s east coast with Reliance Industries, controlled by Mukesh Ambani. More has since come into play. BG, the oil and gas producer, has put up for sale its 62 per cent stake in Gujarat Gas, worth an estimated $600m, as it turns its attention more squarely to Brazil. A local and international bidding contest is now under way.

Simultaneously, Indian companies are trailing their Chinese counterparts in a search beyond home shores. Gail, the state-owned Indian gas company, and the overseas arm of ONGC are potential buyers of Cove Energy’s 10 per cent share in the Rovuma gas fields off Mozambique. The deal could be worth $1.2bn.

Mr Singh has to harness this dynamism quickly to strengthen his country’s energy profile and has already made significant moves to de-politicise and professionalise the petroleum ministry. However, challenges remain.

First, he must streamline the investment process to minimise interference by a lumbering bureaucracy to make it easier for transactions to take place. It took 18 months for Vedanta to buy Cairn Energy’s stake in its subsidiary, while BP mulled its India investment for three years.

Second, he needs to reinvigorate India’s New Exploration Licensing Policy, which rather than inviting foreign participation to find energy reserves, in recent rounds has acted as a powerful disincentive.

Finally, New Delhi needs to globalise its state-owned oil companies to capture foreign energy assets. The overseas arm of ONGC, seemingly unlucky in developing an international portfolio, would do well to partner a big global energy company.

India turned one unpromising desert into a productive resource. It needs to repeat the miracle to boost its local production from 650,000 barrels of local production a day to more than 1m to take it to higher rates of growth.