India Strategic Fuel Reserves: 120m Barrels Target

Energy shock revives focus on emergency buffers

India is moving to expand strategic energy reserves after the Middle East conflict exposed how quickly supply risks can spill over into prices and domestic availability. The country is import-dependent and was hit by disruptions linked to restrictions and near-total closure of the Strait of Hormuz during the conflict between the United States and Iran. India is the world’s third-largest importer of oil and the second-largest buyer of liquefied petroleum gas (LPG), making it particularly sensitive to shipping route disruptions. Petroleum and Natural Gas Minister Hardeep Singh Puri said the energy crunch provided fresh impetus to expand domestic supplies, including domestic crude exploration. Alongside upstream plans, officials are looking at larger inventories and additional storage so the country has a bigger cushion when shocks emerge.

What India is planning after the Iran war disruption

India is studying a major expansion of strategic reserves across crude oil, LPG and liquefied natural gas (LNG), sized to meet as much as a month of domestic demand. The push follows the supply shock created by the war in the Persian Gulf and renewed concerns about the security of energy flows through the Strait of Hormuz. Bloomberg reported India plans to build larger oil inventories, expand storage capacity and deepen supply partnerships to hedge against the kind of price volatility seen during the conflict. The idea is not to prevent global price swings, but to create more time and flexibility for procurement when markets tighten.

Strategic crude storage capacity is already being expanded through underground caverns on India’s east and west coasts. People familiar with the plan said the new caverns will add more than double existing reserves and the target is to eventually reach at least 120 million barrels. The plan is expected to be achieved in about five years. Separate workstreams are also being evaluated for dedicated LPG and LNG stockpiles, reflecting the wider energy-security objective of building buffers beyond crude.

LPG reserve plan gathers urgency

State-run oil marketing companies are working on a plan to build a 30-day strategic LPG reserve as the Centre looks to strengthen energy security after the Middle East conflict highlighted India’s vulnerability. The push gained urgency because India imports nearly 60% of its LPG, and about 90% of those imports pass through the Strait of Hormuz. After the conflict broke out on February 28, the government directed domestic refineries to maximise LPG production and imposed booking restrictions to manage supplies.

As part of the LPG storage expansion, Bharat Petroleum Corporation Ltd (BPCL) is preparing to invest about Rs 5,000 crore to almost double its LPG storage capacity. The planned capacity would rise to 340 thousand metric tonnes (TMT) from around 200 TMT, according to three oil marketing company executives cited by ET. The focus on LPG storage reflects the role of cooking fuel in household energy security and the speed at which supply disruptions can translate into domestic stress.

Why the Strait of Hormuz remains the central risk

The Strait of Hormuz is one of the world’s busiest energy shipping routes, and the conflict underscored how quickly restrictions can disrupt flows and elevate risk premiums. India’s dependence on Middle Eastern energy imports makes this chokepoint particularly important. Even when supplies do not stop completely, war fears can push prices higher as traders react to perceived risk. For a large importer, even a small move in crude prices can raise the import bill sharply in rupee terms, creating a direct policy problem.

India’s reliance on imported crude is repeatedly highlighted in the policy debate. The article cites that India imports about 85% of its crude oil, and separately notes India relies on imports for nearly 88% of crude requirements. Either way, the core vulnerability is the same: disruptions or price spikes can transmit quickly into the domestic economy. That is why the current reserve cover being limited to only a small number of days has become a key argument for building a larger buffer.

How current stockpiles compare with consumption

India’s existing strategic petroleum reserves have been viewed as modest compared with other major economies. The article notes India’s storage of about 39 million barrels of oil, roughly about a week of its consumption of around 5 million barrels per day. This low cover meant refiners had to scramble across global markets to keep refineries supplied during the crisis. A larger cushion can also improve negotiating position with suppliers by reducing urgency-driven purchases during a disruption.

Separate proposals in the text also outline how storage could be expanded further. From a storage perspective, the suggestion is to enhance strategic petroleum reserves from 17 to 45 days on land, with the possibility of another 10 to 15 days on sea on tankers. Another proposal mentions Phase 3 taking capacity from 17 days (87 million barrels) to at least 30 days (150 million barrels). These figures show the range of ideas under discussion, alongside the longer-term target of at least 120 million barrels in expanded underground storage.

Supply partnerships and the UAE angle

India is also deepening energy partnerships as it strengthens reserve infrastructure. New Delhi and Abu Dhabi have started implementing initiatives announced during Prime Minister Narendra Modi’s visit to the UAE last month, amid persistent geopolitical risks. Abu Dhabi National Oil Company (ADNOC) said any future expansion of its participation in India’s strategic petroleum reserves could involve existing storage facilities at Mangalore. ADNOC also pointed to potential new sites at Visakhapatnam and Chandikol on India’s eastern coast along the Bay of Bengal.

The broader logic is operational flexibility in procurement and inventory management during disruption periods. Closer collaboration on storage can help improve access to crude supplies during maritime disruptions and reduce dependence on any single route. Industry experts cited in the text described the agreements as a significant boost to India’s long-term energy security strategy.

Key facts snapshot

Market impact and why inventories matter

The immediate market impact described is the price volatility and supply anxiety that followed the conflict and the restrictions around the Strait of Hormuz. The text also notes a price retreat that may encourage nations to replenish strategic reserves used to cushion the initial shock. For India, replenishment and expansion are linked: larger reserves can reduce panic-driven buying and give officials more room to respond if supplies tighten again.

Beyond market pricing, the operational impact includes government directions to refineries to maximise LPG output and booking restrictions to manage availability after February 28. These steps underline that domestic supply management can become necessary quickly when imports face uncertainty. Expanding storage for crude, LPG and LNG is framed as a way to avoid a repeat of the scramble seen during the crisis.

Analysis: what changes if reserves are bigger

A larger strategic cushion does not eliminate global supply shocks, but it can slow the transmission into domestic shortages and extreme procurement decisions. The reporting also links bigger reserves to improved negotiating leverage, because buyers are not forced into urgent spot purchases. It also reduces reliance on a single route, especially during disruptions linked to the Strait of Hormuz.

The article also discusses a parallel idea of a “Strategic Pricing Reserves” corpus, funded by savings when crude is imported cheaply. A suggested model cites injections of $15 per barrel when crude is procured at $10 to $10, $10 per barrel for $10 to $10, and $1 per barrel for $10 to $10. Against a daily import of 5 million barrels, the proposal estimates $15 million per day and $1.2 billion in a month, building over time to $10 to $100 billion. The text suggests maintaining and investing the corpus through a government special purpose vehicle.

Conclusion

India’s reserve expansion plans have gained urgency after the Iran war disruption revealed the limits of current buffers and the risks around key shipping chokepoints. The government is studying month-long reserves across crude, LPG and LNG, while underground crude storage is being expanded toward an eventual target of at least 120 million barrels over about five years. On LPG, OMCs are working on a 30-day strategic reserve plan, and BPCL is preparing an investment of about Rs 5,000 crore to raise storage to 340 TMT from around 200 TMT. Next steps will centre on finalising storage capacity additions, replenishing reserves as prices retreat, and progressing supply partnerships linked to facilities such as Mangalore and potential new sites at Visakhapatnam and Chandikol.