Six more locations for monster reserves to stock up crude oil for India

India Bolsters Energy Security: A Six-Fold Expansion of Strategic Petroleum Reserves

India is significantly expanding its strategic petroleum reserves (SPR) to bolster energy security in an increasingly volatile global landscape. The country, the world's third-largest energy consumer, currently imports 85% of its crude oil needs. This ambitious plan involves developing six new SPR locations, a move driven by recent geopolitical instability and the need to safeguard against supply disruptions.

The initiative has commissioned Engineers India Ltd (EIL), a state-run engineering and consultancy firm, to conduct detailed feasibility reports (DFRs) for these new sites. Two prominent locations under consideration are:

• Mangalore Special Economic Zone (Karnataka): Leveraging existing infrastructure near a major refinery.
• Salt caverns in Bikaner (Rajasthan): Utilizing the natural geological features for secure underground storage.

The remaining four locations are yet to be publicly disclosed. EIL is expected to finalize its reports by the end of the year. The ultimate goal is to increase India's reserve capacity to 90 days of consumption, aligning with International Energy Agency (IEA) standards.

A Vital Shield Against Geopolitical Uncertainty

The recent conflict in West Asia, highlighting the vulnerability of oil shipments through the Strait of Hormuz, underscored the critical need for enhanced SPR capacity. With India consuming 5.5 million barrels of crude oil daily, the potential disruption of a significant portion of its imports through this vital waterway fueled this strategic expansion.

While officials at ISPRL (Indian Strategic Petroleum Reserves Ltd) and EIL have confirmed the initiative, details remain confidential. The existing SPR system, comprising locations in Visakhapatnam, Mangaluru, and Padur, currently holds 5.33 million metric tonnes (mmt), sufficient for only 9.5 days of consumption.

Expansion Plans and Future Collaborations

Further expansion is planned in two phases:

• Phase 1 (Completed): Existing reserves totaling 5.33 mmt capacity.
• Phase 2 (Public-Private Partnership): An additional 6.5 mmt capacity planned for Chandikhol (Odisha) and Padur (Karnataka).
• Phase 3 (Proposed): The six new locations detailed above will add further capacity beyond these initiatives.

The government is actively seeking partnerships with global energy majors like Adnoc (UAE) to share both investment and expertise in this significant undertaking.

Expert Perspectives and Economic Implications

Prashant Vasisht of Icra Ltd emphasizes the importance of SPRs given India's dependence on oil imports and the ongoing growth in petroleum product demand. Amit Kumar of Grant Thornton Bharat highlights the substantial investment required but also notes the benefits of attracting global partners to mitigate risk and share costs.

Industry estimates peg the capital expenditure for building a 1 mmt reserve at ₹2,500 crore. The economic benefits of securing oil at lower prices during periods of low demand and releasing reserves to stabilize prices during crises are readily apparent, given India's previous success in this area.

This strategic investment aims not only to safeguard India's energy supply but also to enhance its position in the global energy market and contribute to greater macroeconomic stability. The ambitious project underscores India's commitment to securing its energy future amidst a complex and evolving geopolitical landscape.