Can India build a strategic fuel system? | Explained

The story so far:West Asia-related disruptions have exposed a vulnerability in India’s energy-security system. India can import large quantities of crude oil, LNG and LPG, but its ability to store, transport and release these fuels during a prolonged disruption differs sharply by fuel. India already operates underground strategic crude-oil storage and two underground LPG caverns, but has no operating underground natural-gas storage facility.Against this background, the government is considering a decade-long strategic-fuel programme that would add about 28 MT of crude-oil storage, 9 MT of LNG storage and 4 MT of LPG storage. Reuters reports that the proposed reserves are intended to provide nearly two months of crude and LNG demand and about six weeks of LPG demand. The programme remains under consideration and should therefore be treated as a proposed target, not committed capacity.How much storage does India have today?India’s position varies considerably by fuel. For crude oil, Phase I of the Strategic Petroleum Reserve provides 5.33 MT of underground capacity, with actual storage of about 3.37 MT, or roughly 63-64% utilisation, across Visakhapatnam, Mangaluru and Padur. A further 6.5 MT has been approved under Phase II at Chandikhol and Padur.However, execution on the Chandikhol project remains protracted amid ongoing land acquisition requirements and finalisation of commercial PPP frameworks.LPG has a much smaller underground footprint. The Visakhapatnam and Mangaluru caverns together provide about 0.14 MT of capacity. A proposed 4 MT strategic reserve would therefore represent roughly a 30-fold increase in underground LPG capacity.Natural gas presents the largest storage gap. India currently has no operational underground gas-storage facility. Its gas-security system instead depends on domestic production, LNG imports, import terminals, commercial inventories and pipelines.These figures also highlight an important distinction between storage capacity and inventory. A facility has a physical capacity, but the fuel it holds can vary. Not all inventory is necessarily immediately accessible either. During a crisis, the critical measure is therefore not simply how many tonnes can be stored, but how much fuel is available and at what withdrawal rate it can reach consumers.What does the proposed 9 MT of LNG storage mean?LNG is particularly prone to confusion because India already has substantial LNG import and regasification infrastructure. A regasification terminal can receive LNG and convert it into natural gas, but its regasification capacity does not constitute strategic inventory.LNG is stored as a cryogenic liquid at around –162°C, requiring specialised insulated tanks and boil-off gas management. Underground gas storage is different: LNG is first regasified and the resulting natural gas is injected into a depleted reservoir or cavern.The PNGRB–ICF study provides a useful but narrowly defined stress test. Its 2030 scenario examined how much additional LNG infrastructure would be required to supply priority consumers for 20 days under stress conditions. It estimated a requirement of about 0.56-0.6 MT of LNG equivalent, achievable with roughly eight additional LNG tanks. The combined cost of the tanks and the associated strategic inventory was estimated at around $1 billion. This was a scenario-specific estimate, not an assessment of India’s overall strategic LNG requirement.The proposed 9 MT strategic inventory is an order of magnitude larger. Against the ICF projection of roughly 58 MT of annual LNG imports, 9 MT represents about 56 days of imports — hence the description of approximately two months of LNG import cover. It does not mean two months of India’s total gas consumption.The difference is important. A 0.6 MT requirement addresses a 20-day priority-sector stress scenario; 9 MT represents a much broader strategic objective of buffering India against prolonged LNG-import disruption. The associated investment would therefore be substantially larger.Does all the gas have to be stored as LNG?No. India could eventually use a portfolio of surface LNG tanks and underground natural-gas storage.Additional LNG tanks would hold inventory directly at import terminals. A separate proposal from the Ministry of Petroleum and Natural Gas would require LNG import terminals to maintain storage capacity 10% above their normal operating requirement, with the additional capacity available to the government during supply or price disruptions.For longer-duration requirements, depleted oil and gas reservoirs, which account for 74% of global working gas volume, could provide much larger volumes of underground gas storage. Salt caverns offer different advantages: faster injection and withdrawal and the ability to cycle inventory more frequently, potentially making them useful for shorter-duration balancing.But a depleted field cannot simply become a storage site because production has ended. Reservoir characteristics, cap-rock integrity, pressure behaviour, existing wells, cushion-gas requirements and pipeline connectivity must all be assessed. India’s sedimentary basins — including Krishna, Godavari, Cambay, Mumbai Offshore and Rajasthan — offer potential locations, but moving from geological potential to usable storage requires subsurface investigation, site selection, engineering, construction, testing, filling and pipeline integration.Salt caverns face a similar qualification process. Rajasthan’s salt-bearing formations have been investigated for solution-mined caverns, but suitability depends on depth, thickness, purity, geometry, groundwater and mechanical properties.Can India scale its crude and LPG experience?Crude is the most mature component. India already operates underground crude caverns and has developed the associated engineering capabilities. The U.S. Strategic Petroleum Reserve illustrates the scale possible with salt caverns, with authorised capacity of 714 million barrels across 60 caverns. But the U.S. system works as an integrated network of caverns, pipelines, marine terminals and refineries. Storage is therefore fundamentally an infrastructure system, not simply an underground space.LPG is technically proven in India but presents a much larger scaling challenge. A proposed 4 MT reserve would require a substantial network of new caverns or other storage facilities, together with import terminals, pipelines, pumping systems and bottling infrastructure.The Mangaluru cavern illustrates the complexity. Underground construction requires geological and hydrogeological investigation, rock-mechanics analysis and groundwater management, particularly where work takes place alongside operating surface facilities. Scaling the system would require sustained capabilities in geophysics, geomechanics, tunnelling, reservoir engineering and project execution.What happens if the fuel cannot reach India?Because energy security relies heavily on maritime logistics, including vulnerable chokepoints such as the Strait of Hormuz and long-distance routes from the U.S., India is proactively diversifying both its import sources and shipping capabilities. To reduce reliance on foreign vessels, State-run oil refiners and the Shipping Corporation of India plan to invest $1.5 to $2 billion in a joint venture to acquire 59 ships. Simultaneously, Indian Oil is expanding sourcing through new 2027 agreements with Algeria and increased U.S. purchases, while exploring direct stakes in Very Large Gas Carriers to secure greater control over its supply chain.What about pipelines?Pipelines provide the final link between imported or stored fuel and inland consumers. PNGRB has recently authorised approximately 1,800 km of new LPG pipelines across six States, involving investment of around $0.7 billion. These pipelines improve connections between supply sources and inland markets and reduce dependence on road movement, but they do not themselves add strategic storage. Their value lies in improving deliverability.The same principle applies to natural gas. Underground storage is useful only if it can inject into and withdraw from the gas grid at the required rate. LNG tanks are useful only when regasification and downstream pipelines can move the gas. LPG caverns require connections to bottling and distribution systems.Who pays for the strategic reserves?The reported $42 billion programme, which has yet to be confirmed by the government, combines infrastructure CAPEX with the cost of purchasing and maintaining strategic fuel inventories. Reuters reported that more than half could go towards storage infrastructure, with the balance used to purchase and fill the reserves. Financing would be a challenge and the government shot down reports that a cess would be charged to pay for the reserves.The financial obligation does not end with construction. Billions of dollars of fuel would need to be purchased, financed and maintained. Stocks released during a crisis would then have to be replenished, potentially when commodity and freight prices are higher. The policy therefore needs to establish who owns and finances the inventory, minimum stock obligations, emergency-release authority, and who bears replenishment and price risk. A commercial-cum-strategic model could reduce the public burden, provided commercially used capacity remains available during emergencies.Is storage enough to make India energy-secure?Building 41 MT of combined storage is only part of the equation. A strategic reserve is effective only if India can seamlessly access fuel, transport it inland, and replenish stocks after a release.Ultimately, energy security relies on an integrated framework: reserves buy time, shipping brings the next cargo, pipelines deliver fuel inland, and governance dictates emergency execution. The ultimate test of India’s strategic fuel programme will be its ability to coordinate all these elements simultaneously when a crisis hits.(The author is an Energy and Emerging Technologies expert)