India to Add 6 Strategic Oil Reserves, Targeting 90-Day Energy Security Buffer Amid Global Volatility

India is stepping up its efforts to build new strategic petroleum reserves (SPRs) at six proposed sites, in a push for energy security amid mounting global uncertainty, Mint reported. India is the world's third-largest energy consumer and it imports 85% of its domestic crude requirements.

Two people familiar with the matter informed the newspaper that the centre has asked state-run Engineers India Ltd (EIL) to make detailed feasibility reports (DFRs) to build such new reserves at six locations. These are aimed at expanding the country’s crude oil backup capacity.

Notably, one of these proposed sites are believed to be at the Mangalore Special Economic Zone in Karnataka and the other at salt caverns in Rajasthan's Bikaner. Sources told Mint that these locations are close to the coast and refineries but yet to be finalised. The government is planning to take India’s reserve capacity to 90 days. According to Mint, building reserves of 1 mt requires capital expenditure of ₹2,500 crore.

These developments came at a time when escalating tensions in West Asia, especially the recent Israel-Iran conflict, have put global oil flow at risk. Especially after the US bombed three Iranian nuclear sites, Tehran threatened to block the crucial oil chokepoint Strait of Hormuz. A fifth of the global oil and gas supply flows through this chokepoint.

India is also dependent on this oil narrow point since about 2mn barrels per day (bpd) of crude oil out of its total import of 5.5mn bpd transits through it. Overall, India sources about 40% of its supplies from West Asian nations such as Iraq, Saudi Arabia, the United Arab Emirates and Kuwait. These countries export crude oil to India through the Strait of Hormuz route. Notably, crude oil reached nearly $80 per barrel as the Israel-Iran conflict broke out, marking a five-month high.

India currently holds emergency reserves of crude oil and petroleum products sufficient to cover 77 days of net imports. This includes both the capacity at strategic petroleum reserves (SPRs) and the inventories maintained by state-owned oil companies. On the other hand, India’s current SPR capacity of 5.3mn tonnes is enough to meet just 9.5 days of its oil needs. Hence, experts are also weighing in on having a strategic reserve since its domestic production has also not scaled up.