India Expands Strategic Oil Reserves by ₹14,527 Cr

India has commenced the second phase of its Strategic Petroleum Reserve (SPR) initiative, committing ₹14,527 crore to substantially increase its emergency crude oil storage. This critical expansion, approved in July 2021, will introduce an additional 6.5 million tonnes of commercial-cum-strategic crude oil storage capacity.

The new facilities will be developed in Odisha, adding 4 million tonnes, and Karnataka, contributing 2.5 million tonnes. These projects are slated for execution under a public-private partnership (PPP) model.

Understanding the Expansion Model

Under the public-private partnership framework, the government is prepared to provide a significant portion of the funding. This support will come as viability gap funding, covering up to 60% of the total project cost.

The current Phase-I of India’s strategic petroleum reserves holds 5.33 million tonnes of crude oil. These existing reserves are strategically located in Visakhapatnam, Mangaluru, and Padur.

Addressing Global Energy Volatility

This expansion is a direct response to rising global uncertainties impacting energy supplies. Geopolitical conflicts, particularly in West Asia, and disruptions to vital shipping routes like the Strait of Hormuz and the Red Sea, highlight the need for greater resilience.

By increasing its strategic reserves, India aims to create a buffer against short-term supply shocks. This measure is intended to mitigate the economic impact of sudden spikes in crude oil prices, thereby strengthening national energy security.

Key Figures in India’s SPR Expansion

The total investment for Phase-II stands at ₹14,527 crore.

An additional 6.5 million tonnes of crude oil storage capacity will be added.

The government will contribute up to 60% of the project cost as viability gap funding.

Current Phase-I reserves total 5.33 million tonnes.

A 750,000-tonne crude storage cavern at Mangaluru is part of an agreement with ADNOC.

Broader Energy Strategy and Diversification

Beyond expanding physical reserves, India is actively diversifying its sources for crude oil and LNG imports. The nation currently procures crude from 41 countries and LNG from 15 countries, reducing reliance on any single region or transit route.

Complementing these efforts, the government is also promoting various alternative energy sources and efficiency measures. These initiatives aim to further decrease dependence on imported crude oil.

Such measures include:

Promoting natural gas, Compressed Natural Gas (CNG), and Piped Natural Gas (PNG).

Encouraging the use of ethanol, compressed biogas, and biodiesel.

Improving refinery efficiency and fostering energy conservation practices.

Boosting domestic oil and gas production.

International Collaborations

In a move to enhance its storage capabilities, India has finalized an agreement with the Abu Dhabi National Oil Company (ADNOC). This agreement facilitates the use of a 750,000-tonne crude storage cavern located in Mangaluru.

Furthermore, a non-binding Memorandum of Understanding (MoU) has been established with ADNOC. This MoU signals broader strategic cooperation between the two entities in the energy sector.

This comprehensive strategy underscores India’s commitment to building robust energy resilience. The expansion of strategic reserves, coupled with diversification and alternative fuel promotion, aims to safeguard the nation against global energy market volatilities.