Subject: International Relations

Why in the News

Disruptions related to West Asia have exposed a vulnerability in India’s energy security system. India imports large quantities of crude oil, liquefied natural gas (LNG) and liquefied petroleum gas (LPG), but its ability to store, move and release these fuels during a prolonged disruption differs sharply by fuel. Against this, the government is considering a decade long strategic fuel programme that would add about 28 MT (million tonnes) of crude oil storage, 9 MT of LNG storage and 4 MT of LPG storage. The programme remains under consideration and should be treated as a proposed target rather than committed capacity.

What is India’s proposed strategic fuel storage programme?

1. Scale of the proposal: The decade long programme would add about 28 MT of crude oil storage, 9 MT of LNG storage and 4 MT of LPG storage, roughly 41 MT of combined new capacity.
2. Purpose: The reserves are intended to provide nearly two months of crude oil and LNG demand cover and about six weeks of LPG demand cover during a prolonged supply disruption.
3. Status: The programme remains under consideration and is a proposed target, not committed capacity.

How much strategic fuel storage does India already have?

1. Crude storage is the most developed: 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 to 64 percent utilisation, across Visakhapatnam, Mangaluru and Padur. A further 6.5 MT has been approved under Phase II at Chandikhol and Padur.
2. Execution has lagged on Chandikhol: Work on the Chandikhol project remains slow amid ongoing land acquisition requirements and the finalisation of commercial public private partnership frameworks.
3. LPG storage is a fraction of the proposed target: The Visakhapatnam and Mangaluru caverns together provide about 0.14 MT of capacity, so a proposed 4 MT reserve would represent roughly a thirty fold increase in underground LPG capacity.
4. Natural gas has no underground storage at all: India currently has no operational underground gas storage facility, and its gas security instead depends on domestic production, LNG imports, import terminals, commercial inventories and pipelines.
5. Capacity is not the same as usable inventory: A facility has a physical capacity, but the fuel it actually holds can vary, and not all inventory is immediately accessible. During a crisis, the critical measure is how much fuel is available and at what withdrawal rate it can reach consumers.

What does the proposed 9 MT of LNG storage actually mean?

1. Regasification capacity is not the same as strategic inventory: India already has substantial LNG import and regasification infrastructure, but a regasification terminal’s capacity to convert LNG into natural gas does not itself constitute strategic inventory.
2. LNG storage and underground gas storage work differently: LNG is stored as a cryogenic liquid at around 162 degrees Celsius below zero, requiring specialised insulated tanks and management of boil off gas. Underground gas storage instead regasifies the LNG first and injects the resulting natural gas into a depleted reservoir or cavern.
3. A narrower stress test already exists: A study by the Petroleum and Natural Gas Regulatory Board (PNGRB) and the International Copper and Fertiliser (ICF) group examined how much additional LNG infrastructure would be needed to supply priority consumers for a stress period of 20 days by 2030, estimating a requirement of about 0.56 to 0.6 MT of LNG equivalent, achievable with roughly eight additional LNG tanks at a combined cost of about 1 billion dollars.
4. The proposed reserve is an order of magnitude larger: Against the same study’s projection of roughly 58 MT of annual LNG imports, the proposed 9 MT works out to about 56 days of import cover, which is the basis for describing it as nearly two months of LNG import cover, not two months of India’s total gas consumption.

Does all of India’s gas storage have to take the form of LNG tanks?

1. A portfolio approach is possible: India could eventually use a combination of surface LNG tanks and underground natural gas storage rather than LNG tanks alone.
2. A parallel proposal targets import terminals directly: A separate proposal from the Ministry of Petroleum and Natural Gas would require LNG import terminals to maintain storage capacity 10 percent above their normal operating requirement, with the additional capacity available to the government during supply or price disruptions.
3. Depleted reservoirs offer the largest potential volumes: Depleted oil and gas reservoirs, which account for 74 percent of global working gas volume, could provide much larger volumes of underground gas storage, while salt caverns allow faster injection and withdrawal, making them more suited to shorter duration balancing.
4. India has candidate geology but not yet usable storage: 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. Rajasthan’s salt bearing formations have similarly been investigated for solution mined caverns, with suitability depending on depth, thickness, purity, geometry, groundwater and mechanical properties.

What does the United States Strategic Petroleum Reserve show about storage as a system?

1. Scale achieved through salt caverns: The United States Strategic Petroleum Reserve holds an authorised capacity of 714 million barrels across 60 salt caverns.
2. Storage works only as part of an infrastructure system: The American reserve functions as an integrated network of caverns, pipelines, marine terminals and refineries, showing that strategic storage is fundamentally an infrastructure system and not simply an underground space.

How mature are India’s crude and LPG storage systems?

1. Crude is the most mature component: India already operates underground crude caverns and has developed the associated engineering capabilities.
2. LPG presents a much larger scaling challenge: LPG storage is technically proven in India, but 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.
3. The Mangaluru cavern illustrates the complexity involved: Underground construction requires geological and hydrogeological investigation, rock mechanics analysis and groundwater management, particularly where work takes place alongside operating surface facilities.

How is India strengthening the logistics that move fuel once it is stored?

1. India is investing to reduce reliance on foreign shipping: State run oil refiners and the Shipping Corporation of India plan to invest 1.5 to 2 billion dollars in a joint venture to acquire 59 ships.
2. Sourcing is being diversified too: Indian Oil is expanding sourcing through new 2027 agreements with Algeria and increased purchases from the United States, while exploring direct stakes in Very Large Gas Carriers to secure greater control over its supply chain.
3. New pipelines are expanding delivery, not storage: The PNGRB has authorised approximately 1,800 km of new LPG pipelines across six States, involving investment of around 0.7 billion dollars. These pipelines improve connections between supply sources and inland markets and reduce dependence on road movement, but they do not themselves add strategic storage.
4. Every storage form depends on connectivity to be useful: Underground gas 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 onward, and LPG caverns require connections to bottling and distribution systems.

Who pays for building and running the strategic reserves?

1. The reported cost remains unconfirmed: A reported 42 billion dollar programme, which the government has yet to confirm, combines infrastructure capital expenditure with the cost of purchasing and maintaining strategic fuel inventories, with more than half expected to go towards storage infrastructure and the balance towards purchasing and filling the reserves.
2. A cess has been ruled out: Financing is a genuine challenge, and the government has rejected reports that a cess would be charged to pay for the reserves.
3. Replenishment carries its own cost and risk: Stocks released during a crisis would need to be replenished, potentially when commodity and freight prices are higher, so the policy needs to settle who owns and finances the inventory, minimum stock obligations, emergency release authority, and who bears replenishment and price risk.
4. A mixed commercial and strategic model could ease the burden: A model that combines commercial and strategic use of the same capacity could reduce the public financing burden, provided the commercially used capacity remains available during emergencies.

Is storage capacity alone enough for India’s energy security?

1. Building capacity is only part of the equation: A strategic reserve is effective only if India can access the fuel, transport it inland, and replenish stocks after a release.
2. Energy security depends on an integrated framework: Reserves buy time, shipping brings the next cargo, pipelines deliver fuel inland, and governance decides how emergency releases are executed, so the real test of the programme is its ability to coordinate all these elements at once when a crisis hits.

Conclusion

India’s existing storage differs sharply by fuel, with crude the most developed, LPG a limited underground footprint, and natural gas without any operational underground facility. The proposed 28 MT of crude, 9 MT of LNG and 4 MT of LPG storage would mark a major expansion, but the programme remains under consideration, and its value will depend as much on shipping, pipelines and financing arrangements as on the storage capacity itself.

Back2Basics: Petroleum and Natural Gas Regulatory Board (PNGRB)

1. Governing law: PNGRB was set up under the Petroleum and Natural Gas Regulatory Board Act, 2006.
2. Jurisdiction: It regulates the downstream petroleum and natural gas sector, including refining, processing, storage, transport, distribution, marketing and sale of petroleum products and natural gas, excluding production and exploration.
3. Mandate: It authorises and lays down technical and safety standards for gas and LPG pipelines and city gas distribution networks, and protects consumer interests while promoting competitive markets.
4. Relevance here: It is the regulator behind the LPG pipeline authorisations and the LNG stress test study referenced in this item.

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