India’s Energy Security: Strategic Petroleum Reserves and Policy

India imports nearly 88% of its crude oil and over 50% of its natural gas requirement, making it vulnerable to international price spikes and supply chain disruptions. To safeguard the national economy against geopolitical conflicts and trade route blockages, the Indian government established a dedicated Strategic Petroleum Reserve (SPR) program. Governed by the Indian Strategic Petroleum Reserves Limited (ISPRL), these subterranean reserves act as an emergency supply buffer, operating alongside the storage capacity maintained by state-owned oil marketing companies.

Strategic Petroleum Reserves: Infrastructure and Expansion

The Indian Strategic Petroleum Reserve project relies on unlined underground rock caverns. Hydrocarbon storage in deep rock caverns uses natural groundwater pressure to trap crude oil inside unlined geological formations without leakage.

Phase I Storage Facilities

The government completed Phase I of the SPR program with a total storage capacity of 5.33 million metric tonnes (MMT), equivalent to approximately 9.5 days of crude oil requirement:

• Visakhapatnam (Andhra Pradesh): Possesses a total capacity of 1.33 MMT. It features a compartmentalized cavern where 1.0 MMT is allocated to ISPRL and 0.33 MMT is leased to Hindustan Petroleum Corporation Limited (HPCL).
• Mangaluru (Karnataka): Possesses a total capacity of 1.5 MMT. The facility is split into two distinct compartments, allowing foreign national oil companies to store crude under commercial lease agreements.
• Padur (Karnataka): Represents the largest Phase I facility with a total capacity of 2.5 MMT, divided into four separate underground caverns.

Phase II Expansion Framework

To raise India’s strategic crude buffer, the Union Cabinet approved Phase II of the SPR program in July 2021. Phase II adds 6.5 MMT of underground storage:

• Chandikhol (Odisha): Planned storage capacity of 4.0 MMT in underground rock caverns.
• Padur Phase II (Karnataka): Planned storage capacity of 2.5 MMT adjacent to the existing Phase I site.
• Public-Private Partnership (PPP) Model: Phase II utilizes a Design, Build, Finance, Operate, and Transfer (DBFOT) arrangement. Private concessionaires can trade crude commercially while binding themselves to release stocks to the government during emergency shortages.

Operational Framework and Policy Governance

The policy and administrative framework governing India’s strategic crude reserves balances commercial flexibility with state emergency control.

Institutional Administration

• Indian Strategic Petroleum Reserves Limited (ISPRL): Established as a Special Purpose Vehicle (SPV) in 2004 under the Oil Industry Development Board (OIDB), operating under the Ministry of Petroleum and Natural Gas (MoPNG).
• Commercialization Policy: In 2021, the government permitted ISPRL to commercialize up to 30% of its stored crude to Indian companies and re-export up to 20% to regional markets, reducing central maintenance expenditure.
• Emergency Stock Release Mechanism: The Empowered Committee under the Ministry of Petroleum and Natural Gas retains sole authority to order crude releases during global supply shocks or armed conflicts.

Hydrocarbon Policy Interventions

• Hydrocarbon Exploration and Licensing Policy (HELP): Replaced the New Exploration Licensing Policy (NELP) in 2016. It features a Uniform Licensing System, Open Acreage Licensing Policy (OALP), and a Revenue Sharing Contract model.
• National Gas Grid Initiative: Aims to expand the natural gas pipeline network to 33,500 km, targeting an increase in natural gas in the primary energy mix from 6% to 15%.
• Biofuel and Ethanol Blending Policy: The Ethanol Blended Petrol (EBP) Programme mandated a 20% ethanol blending target (E20) for petrol across India.

Strategic Petroleum Reserves at a Glance

Key Energy Security Facts

• Indian Strategic Petroleum Reserves Limited (ISPRL) operates as a wholly owned subsidiary of the Oil Industry Development Board (OIDB).
• Underground rock cavern technology provides lower maintenance costs, higher safety against air strikes, and zero surface evaporation compared to above-ground storage tanks.
• Phase I reserves provide 9.5 days of crude coverage, while commercial oil marketing companies hold an additional 64 days of storage, giving India a total crude cover of nearly 74 days.
• Abu Dhabi National Oil Company (ADNOC) was the first foreign entity to store crude oil in India’s Mangaluru strategic reserve under a commercial lease.
• India participated in a coordinated strategic stock release with International Energy Agency (IEA) member states during global oil price instabilities.
• The Open Acreage Licensing Policy (OALP) allows exploration companies to submit expression of interest for any unallocated oil block twice a year.
• Under HELP, companies enjoy complete pricing and marketing freedom for natural gas and crude oil produced from new discoveries.