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In a fresh push for energy security, India is planning to set up strategic petroleum reserves (SPRs) at six new locations to guard against global oil supply shocks, Mint reported, citing people familiar with the development.
The government has tasked Engineers India Ltd (EIL), a public sector engineering consultancy, to prepare detailed feasibility reports for the proposed reserves, which are aimed at expanding the country’s crude oil backup capacity. The initiative comes at a time when geopolitical instability in West Asia, particularly the recent Israel-Iran conflict, has put global oil flows at risk.
According to Mint, one of the proposed sites is in the Mangalore Special Economic Zone in Karnataka, while another is in Bikaner, Rajasthan, where salt caverns are being explored for underground storage. The remaining four sites are located near coastlines and refineries to ensure easy access and transport, and the feasibility reports are expected to be submitted by year-end.
“The plan is to take India’s reserve capacity to 90 days. That’s the basic requirement,” one of the people told Mint, requesting anonymity.
Moneycontrol could not independently verify this report.
Why this matters
India imports around 85 percent of its crude oil and consumes nearly 5.5 million barrels per day. Any disruption, such as a potential closure of the Strait of Hormuz, which handles about 20 percent of global oil shipments and a large chunk of India-bound crude, can severely impact energy supplies and the economy.
During the recent West Asia flare-up, this vulnerability was once again in focus. “The information sought is confidential in nature, considering the present environment,” Indian Strategic Petroleum Reserves Ltd (ISPRL) managing director L.R. Jain told Mint via email.
EIL confirmed to Mint that feasibility studies are in the advanced stages and that the Mangalore and Bikaner sites are part of the plan. “Above information is correct to our knowledge,” a company spokesperson said.
Current status and expansion plan
India’s existing SPRs, located at Visakhapatnam (1.33 mmt), Mangaluru (1.5 mmt), and Padur (2.5 mmt), hold a total of 5.33 million metric tonnes of crude oil. This covers just about 9.5 days of the country’s needs. Including oil maintained by state-run refiners, total strategic reserves currently cover around 77 days of net imports. For comparison, International Energy Agency (IEA) member nations maintain at least 90 days of emergency reserves.
The second phase of India's SPR programme, also underway, includes new storage facilities of 6.5 mmt in Chandikhol (Odisha) and an expansion in Padur (Karnataka), both in a public-private partnership mode. The six newly planned locations will be in addition to these.
Global tie-ups and costs
India is also looking to partner with more global energy majors. The UAE’s ADNOC has already leased capacity in the Indian reserves. According to Mint, building a 1 million tonne reserve requires about Rs 2,500 crore in capital expenditure.
India had previously tapped into its SPR during global oil shocks. In November 2021, it released 5 million barrels to help cool international prices, coordinating with countries like the US, China, and Japan. During the 2020 crash, the government bought crude at just $19 a barrel, saving nearly $685 million by filling its reserves.
Exploring alternate oil routes
Given the fragile security of the Strait of Hormuz, India is also developing alternate sourcing strategies. These include tapping two major pipelines that bypass the strait, one operated by ADNOC (Habshan-Fujairah pipeline with 1.5 mbpd capacity) and the other by Saudi Aramco (East-West pipeline with 5 mbpd capacity).
The idea, according to government sources cited by Mint, is to de-risk the crude supply chain while continuing to buy from around 39 oil-exporting countries.
