Global consulting firm Ernst and Young has said oil and gas companies in India face unstable policy regime on top of business risk arising from volatile crude oil prices.

Instability in policy regime makes the business scenario uncertain for both national oil companies and international oil firms, Ernst and Young said in its business risk report.

"A fragmented energy policy creates ambiguity, forcing oil and gas companies to repeatedly make decisions in uncertain environment and deters long-term planning. The policy requires review in order to balance competing goals of security of supply, affordability, meeting demand growth and climate change considerations," it said.

The oil and gas sector has been impacted globally by the economic downturn, which has created new risks for the industry threatening the near-term survival and prospects of a number of oil and gas companies, according to The 2009 Ernst & Young business risk report.

On key risks faced by Indian oil and gas majors, it said: "Crude oil price volatility is among the largest business risk that oil and gas companies in India face. This is followed by unstable policy regime, managing costs and risks emerging from technological advancements."