ONGC Set to Surge India's Strategic Oil Reserves as Nation Aims for Critical Energy Buffer

ONGC Set to Surge India's Strategic Oil Reserves as Nation Aims for Critical Energy Buffer​

The government has directed the Oil and Natural Gas Corporation (ONGC) to undertake a critical mandate: constructing India's next strategic petroleum reserve (SPR). This move comes as a direct response to geopolitical volatility, particularly following the recent Iran war crisis. The new facility is intended to significantly strengthen the country's energy security cushions.

The proposed underground storage cavern in Mangaluru will be managed by ONGC and is earmarked to hold 1.75 million metric tonnes (MMT) of crude. This project, which sources indicate will cost close to ₹5,000 crore to build, represents a major step toward bolstering national energy independence.

Assessing India's Current Strategic Oil Cushion​

India consumes approximately 5 million barrels of oil daily, yet its current strategic storage capacity remains modest compared to other consuming global economies. The existing emergency reserves stand at 5.33 MMT, equivalent to about 39 million barrels. This total is often insufficient and is not consistently kept full.

Globally, India's stockpile pales in comparison to major energy consumers. US Energy Information Administration data indicates that China holds 1,397 million barrels while the United States maintains 413 million barrels, and Japan possesses 263 million barrels.

The State of Strategic Petroleum Reserves​

India currently operates three dedicated SPR sites managed by Indian Strategic Petroleum Reserves Ltd (ISPRL). These reserves are located at Visakhapatnam (1.33 MMT), Mangaluru (1.5 MMT), and Padur (2.5 MMT).

These initial reserves were funded entirely by the government, designed purely as emergency stockpiles. In 2021, however, the mandate for these sites began to shift, allowing partial commercialization of storage capacity. This included leasing 30% to refiners and traders while using 20% for active crude trading.

Future Expansion Models Under Partnership​

The future expansion phase includes facilities at Chandikhol (4 MMT) in Odisha and another site in Padur, each holding 2.5 MMT. The government approved a public-private partnership (PPP) model for this second stage of growth.

Megha Engineering &frastructures Ltd has secured the mandate to build and operate the Padur facility. This contract was awarded based on securing the lowest viability gap funding (VGF), which is capped at 60% of the project's ₹5,700 crore cost. Under this PPP structure, the developer can recover investment through commercial trading and leasing capacity.

Why Larger Reserves Are Geopolitical Imperatives​

Geopolitical shocks, such as those recently experienced during the Iran war, clearly illustrate the necessity of robust strategic reserves. During that crisis, China, possessing vast holdings, was able to reduce crude imports by approximately a third amid price spikes.

Indian refiners, with significantly thinner buffers, faced immediate scramble across global markets to maintain their supply chains. This demonstrated the acute vulnerability stemming from limited national stock reserves.

A comprehensive and large strategic reserve cushion is vital for improving India's negotiating power with international suppliers. It also reduces an economy's urgency-driven dependence on any single source or critical maritime route, such as the Strait of Hormuz.

The addition of the new ONGC facility at Mangaluru will provide 1.75 MMT of storage, representing a 33 percent boost to the current capacity. When combined with the ongoing PPP projects (Chandikhol and Padur), total reserves are projected to surpass 13 MMT once all planned phases are complete.