India may expand LNG storage to manage future supply crisis

Why in the News?

The disruption of Liquefied Natural Gas (LNG) supplies due to tensions in the Strait of Hormuz has revived concerns about India’s energy security. India, which depends heavily on LNG imports for nearly half its gas requirements, lacks adequate storage infrastructure. This has prompted discussions on expanding LNG storage capacity to cushion future supply shocks.

Why is India considering expanding LNG storage capacity now?

1. Geopolitical Disruption: Closure of the Strait of Hormuz halted LNG cargo flows; no shipment reached India for over two months.
2. Critical Dependence: Around 50% of India’s natural gas demand is met through LNG imports.
3. Chokepoint Vulnerability: Nearly 60% of LNG imports pass through the Strait of Hormuz, exposing supply chains to geopolitical risks.
4. First Major Shock: This disruption was earlier considered “extremely improbable” but has now materialised.
5. Policy Shift: Moves away from minimal storage model toward strategic reserves, similar to crude oil reserves.

What is the current status of LNG storage infrastructure in India?

1. Limited Storage Capacity: India has only 23 LNG tanks across terminals.
2. Company Share: Petronet LNG accounts for 10 tanks, indicating concentrated capacity.
3. Terminal Distribution: Dahej terminal (Gujarat) has 8 tanks; Kochi has 2 tanks.
4. Operational Limitation: Tanks designed for regasification operations, not long-term storage.
5. Consumption Ratio: One LNG tank holds approximately one LNG shipment, while daily consumption equals 1.25 tanks/day.

Why is LNG storage expansion challenging in India?

1. Cryogenic Requirement: LNG must be stored at extremely low temperatures (-162°C), increasing complexity.
2. High Capital Cost: Construction is significantly more expensive than conventional fuel storage.
3. Time-Intensive Projects: New tanks require at least 3 years for completion.
4. Land Constraints: Coastal land availability limits expansion of terminals.
5. Regulatory Delays: Multiple approvals slow down infrastructure development.

How does LNG storage compare with India’s crude oil reserves?

1. Strategic Oil Reserves: India maintains strategic petroleum reserves (SPR) for crude oil.
2. LNG Gap: No equivalent strategic LNG reserves exist.
3. Policy Asymmetry: Oil security planning is institutionalised; gas security remains market-driven.
4. Operational Focus: LNG storage currently supports continuous supply, not emergency buffering.
5. Need for Transition: Shift required toward strategic LNG stockpiling model.

What are the economic and sectoral implications of LNG disruptions?

1. Supply Prioritisation: Gas diverted to transportation and households, industries faced rationing.
2. Industrial Impact: Reduced gas availability affected manufacturing output.
3. Price Volatility: LNG shortages lead to increased global spot prices.
4. Import Diversification Limits: India attempted alternative sourcing but faced constraints.
5. Energy Transition Risk: Gas-based economy plans disrupted due to unreliable supply.

What role are key institutions like Petronet LNG playing?

1. Capacity Expansion Plans: Petronet LNG plans to increase storage capacity by ~70%.
2. New Infrastructure: Proposal to add two additional tanks at Dahej terminal.
3. Land Assessment: Ongoing feasibility checks for expansion.
4. Strategic Awareness: Industry stakeholders acknowledging need for resilience.
5. Execution Timeline: Projects remain in planning phase; timelines uncertain.

Conclusion

India’s LNG vulnerability highlights a structural gap in energy security architecture. Expanding LNG storage capacity is essential to reduce exposure to geopolitical disruptions, ensure industrial stability, and support long-term energy transition goals. A strategic shift toward integrated gas security planning is required.

PYQ Relevance

[UPSC 2018] Access to affordable, reliable, sustainable and modern energy is the sine qua non to achieve Sustainable Development Goals (SDGs). Comment on the progress made in India in this regard.

Linkage: LNG storage gaps highlight India’s vulnerability in ensuring reliable and affordable energy access, a core component of SDG-linked energy security. Expanding LNG storage strengthens energy infrastructure resilience, directly aligning with UPSC focus on energy security and sustainable growth.