India is moving to dramatically expand its strategic fuel reserves after the Persian Gulf crisis, aiming to cover up to a month of domestic demand with crude, LPG, and LNG.
Current reserves cover only about eight days of imports, but new underground caverns and gas storage projects are planned to raise capacity to at least 120 million barrels of crude and introduce long-term LPG and LNG buffers.
India has decided to build strategic reserves of crude oil, liquefied petroleum gas and liquefied natural gas large enough to meet as much as a month of domestic demand. This initiative comes in response to the severe supply shock created by the war in the Persian Gulf, which nearly closed the Strait of Hormuz and exposed India’s heavy dependence on Middle Eastern energy imports. The oil ministry has formed a committee to examine potential locations, operating models and the division between overground and underground storage.
At present, India maintains strategic crude reserves of about 39 million barrels, which equates to roughly eight days of imports. This is far below the levels held by China, though combined inventories of refiners and fuel retailers can meet more than 70 days of oil demand.
The government is already expanding capacity with underground caverns on the east and west coasts, which are expected to more than double existing reserves within five years. The long-term target is at least 120 million barrels of crude storage.
Reserves of LPG and LNG are almost non-existent due to the technical challenges of storage. LPG must be kept under pressure as a liquid, while LNG requires super-cooled temperatures and strict safety protocols to prevent leaks or explosions.
India’s current long-term LPG storage capacity is only about 1,40,000 tons, located mainly in underground rock caverns, which is sufficient for just two days of national consumption. Although refineries and import terminals hold additional inventories, the country has largely relied on continuous imports and distribution rather than stockpiling.
The crisis earlier this year highlighted the risks of this approach. Following US and Israeli strikes on Iran, the Strait of Hormuz was nearly closed, disrupting shipments of crude, LNG and LPG. India, which imports nearly 90 per cent of its crude and 60 per cent of its LPG, faced soaring prices and supply uncertainty.
Brent crude spiked above $126 per barrel, while the Saudi Contract Price for LPG rose by nearly 46 per cent, pushing domestic cylinder costs above ₹1,600. War-risk insurance premiums for vessels transiting the Gulf multiplied, adding further costs to every cargo.
India’s response included diversifying crude imports, boosting domestic LPG production, and utilising existing reserves to cushion the shock. However, the episode underlined the inadequacy of current stockpiles.
The International Energy Agency recommends that countries maintain emergency oil reserves equivalent to at least 90 days of net imports, a standard India still falls far short of. Plans are now underway to build five new strategic petroleum reserves across Chandikhol in Odisha, Bina in Madhya Pradesh, Bikaner in Rajasthan, and Mangaluru and Padur in Karnataka. Once completed, these projects could raise India’s reserve capacity from 9.5 days to around 40 days of crude imports, though still below global benchmarks.
The government is also considering innovative models for gas storage, including floating LNG terminals and expanded underground caverns. Safety and cost remain major challenges, but officials argue that the crisis has made investment in such infrastructure unavoidable. Experts believe that strengthening reserves will not only protect consumers from future shocks but also enhance India’s bargaining power in global energy markets.
Agencies
