Summary
India’s Strategic Petroleum Reserve (SPR) expansion represents a pivotal effort to enhance the country’s energy security by increasing crude oil storage capacity to cover 90 days of consumption. Initiated in 1998 following vulnerabilities exposed during the 1990 Gulf War, the SPR program seeks to safeguard India’s oil supplies against global market volatility and geopolitical risks, particularly those affecting the critical Strait of Hormuz, a major transit route for oil imports. The existing SPR facilities, located along India’s east and west coasts, currently provide 5.33 million metric tons (MMT) of underground crude oil storage, supplementing industry-held stocks and ensuring a combined coverage of approximately 74 days.
To meet rising energy demands and align with International Energy Agency (IEA) standards, India is undertaking an ambitious expansion plan involving the development of new storage caverns at Chandikhol (Odisha), Padur (Karnataka), and potentially six additional sites including Mangalore and Bikaner. These projects are being executed through a public-private partnership (PPP) model to attract private investment while maintaining government priority access during emergencies. The expansion aims not only to increase storage capacity to nearly 11.83 MMT but also to enable commercial leasing of storage space, marking a significant shift toward operational flexibility and market integration.
Economically, the strategic reserves have already yielded substantial benefits; India capitalized on low crude oil prices in 2020 to fill its SPR facilities, resulting in estimated savings of around INR 5,000 crore. Furthermore, expanded reserves reduce dependency on volatile international markets and mitigate risks arising from geopolitical disruptions in West Asia. Complementary initiatives include diversifying import routes and developing natural gas storage facilities, reflecting a broader strategy to fortify India’s energy infrastructure.
Despite these advancements, the expansion faces challenges related to environmental safeguards, operational risk management, and confidentiality concerns. Maintaining the integrity and safety of underground storage requires sophisticated risk-based inspection and maintenance protocols, while regulatory frameworks must balance energy security objectives with environmental protection. Nevertheless, India’s concerted efforts to build a robust strategic petroleum reserve underscore its commitment to long-term energy resilience in an increasingly uncertain global landscape.
Background
India’s dependence on imported crude oil has made energy security a critical concern for the country. As one of the largest oil importers globally, India relies heavily on imported petroleum to meet its growing energy demands. In fiscal year 2023, petroleum, oil, and petroleum products accounted for about 30 percent of the country’s major imports, with crude oil imports totaling approximately 172.39 million metric tons and petroleum product consumption reaching around 164 million metric tons. India ranked third worldwide in oil consumption and second in oil imports, importing 4.6 million barrels per day by 2023, up from 4.2 million barrels per day in 2021.
The vulnerability of India’s energy supply was starkly highlighted during the Gulf War in 1990 when the country’s existing oil reserves were sufficient for only three days. Although India averted a crisis at that time, the risk of supply disruptions persisted. Recognizing this, the administration led by Atal Bihari Vajpayee proposed the establishment of strategic petroleum reserves in 1998 to safeguard against external shocks.
These strategic reserves, located on India’s east and west coasts, are designed to complement the existing storage capacities of oil companies and provide a buffer in response to supply disruptions. Given India’s rising energy consumption and the volatility of global oil markets, the development and expansion of these reserves have become increasingly vital. The government’s recent budget allocation of Rs 408 crore for Phase II construction of underground caverns reflects a continued commitment to strengthening India’s energy security infrastructure.
Overview of the Expansion Plan
India is undertaking a significant expansion of its strategic oil reserves to enhance energy security and increase its crude oil backup capacity. The government has received in-principle approval for the development of two major strategic reserve projects: Padur-II with a capacity of 2.5 million tons and Chandikhol with 4 million tons. These projects are planned to be executed on a public-private partnership (PPP) model, with additional sites to be considered in subsequent phases.
To facilitate this expansion, the central government has directed Engineers India Ltd (EIL), a state-run enterprise, to prepare detailed feasibility reports (DFRs) for six new reserve locations. Among the proposed sites are the Mangalore Special Economic Zone in Karnataka and salt caverns near Bikaner in Rajasthan. These locations have been selected strategically for their proximity to the coast and existing refineries, though final decisions on all sites remain pending. The overarching goal is to extend India’s strategic reserve capacity to cover 90 days of crude oil requirements.
The country leveraged a period of low crude oil prices in April and May 2020 to fill its existing SPR facilities to full capacity, resulting in notional savings estimated at around INR 5000 crore. The current expansion plan aims not only to increase storage capacity but also to integrate commercial-cum-strategic facilities to optimize resource utilization.
Capacity and Locations of Strategic Oil Reserves
India’s Strategic Petroleum Reserves (SPR) were initially developed to ensure energy security by providing a buffer against external supply disruptions and oil shocks. The first phase involved the construction of underground rock caverns with a total storage capacity of 5.33 million metric tons (MMT) across three key locations: Visakhapatnam in Andhra Pradesh (1.33 MMT), Mangaluru in Karnataka (1.5 MMT), and Padur in Karnataka (2.5 MMT). These facilities were built at an investment of approximately $600 million and serve refineries located along the east and west coasts of India, ensuring easy accessibility and rapid response during emergencies.
Currently, Indian refiners maintain crude oil stocks sufficient for about 64.5 days of consumption, and combined with the SPR, India’s overall crude storage capacity amounts to approximately 74 days. This strategic reserve acts as a supplement to the industry-held inventories and is crucial for stabilizing domestic fuel supply amid global price volatility.
In the 2017-18 budget, the government announced a second phase of expansion which includes establishing additional caverns in Chandikhole, Odisha, and Bikaner, Rajasthan, alongside plans to double the capacity at the existing Padur facility. This expansion aims to raise the total SPR capacity to nearly 11.83 MMT. The Chandikhole site is expected to provide 4 MMT of storage, while Padur-II will add around 2.5 MMT. These projects are being developed under a public-private partnership (PPP) model, allowing private entities to trade oil locally while ensuring government priority access in times of shortage.
Further expansion plans include proposals for strategic crude oil storage at Rajkot in Gujarat and other coastal locations, such as the Mangalore Special Economic Zone and salt caverns in Bikaner. The government has commissioned detailed feasibility reports to finalize these sites, targeting an ambitious goal to increase India’s reserve capacity to 90 days of crude consumption.
In addition to crude oil, India is exploring the establishment of strategic natural gas storage facilities modeled after the SPR framework to enhance preparedness for gas supply disruptions. Overall, India’s ongoing and planned expansions in strategic reserves underscore a comprehensive approach to energy security through diversified storage infrastructure across multiple states and key coastal locations.
Timeline and Phases of Development
India’s strategic petroleum reserve (SPR) initiative began in 1998 under the administration of Atal Bihari Vajpayee as a response to growing energy insecurity and the need to secure crude oil supplies amid rising consumption. Since then, the development of SPRs has evolved through multiple phases, marked by expansion, modernization, and increasing commercial participation.
The initial phase saw the establishment of three SPR facilities in southern India with a combined capacity of 36.7 million barrels. These facilities were primarily government-controlled, allowing only partial commercialization and leasing of storage capacity. In July 2021, the Union Cabinet approved the commercialization of the Indian Strategic Petroleum Reserves Ltd (ISPRL), permitting the leasing or renting of up to 30% of the caverns’ storage capacity to Indian or foreign companies. However, the government retained the first right to access the oil in emergencies and maintained restrictions on sale and purchase to Indian firms only.
Simultaneously, the government sanctioned the construction of additional SPR capacities totalling 6.5 million metric tonnes (MMT) across two locations—4 MMT at Chandikhol in Odisha and 2.5 MMT at Padur in Karnataka—under a Public-Private Partnership (PPP) model. These projects include the development of dedicated Single Point Moorings (SPMs) and associated pipelines to streamline import and distribution. The PPP model aims to reduce the fiscal burden on the government while attracting private investment and operational efficiency.
Looking ahead, India plans to build two new SPRs with increased capacities: an 18.3 million barrels cavern at Padur and a 29.3 million barrels reserve in Odisha. These new facilities are expected to be operational by 2029-30 and will be the country’s first fully privately managed SPRs, granting operators the freedom to trade the stored crude oil commercially while ensuring government priority access during shortages. This approach aligns with international models, such as those in Japan and South Korea, which have allowed private lessees to manage and trade strategic reserves.
Furthermore, feasibility studies are underway for six additional potential sites, including locations in the Mangalore Special Economic Zone (Karnataka) and salt caverns in Bikaner, Rajasthan. These sites are strategically chosen near coastlines and refineries to facilitate easy access and transportation. The government’s goal is to expand India’s total reserve capacity to cover 90 days of consumption, enhancing energy security amid global geopolitical risks, particularly those affecting West Asian oil flows.
Infrastructure and Technologies
India’s strategic petroleum reserves (SPR) infrastructure primarily consists of underground storage facilities utilizing natural rock caverns. These caverns, often mined into rock formations such as limestone, chalk, or granite, offer a secure and efficient means of storing crude oil. The storage relies on the principle of hydrodynamic containment, where unlined caverns are located at depths that allow natural water flow in surrounding rock to prevent leakage, thus ensuring tight containment of the stored hydrocarbons.
The existing SPR facilities were developed in three key underground locations: Mangaluru, Visakhapatnam, and Padur, with a combined storage capacity of 5.33 million metric tons (MMT). These were constructed following the 1998 proposal by the Atal Bihari Vajpayee administration as a strategic measure to manage oil market volatility. The project, which involved an investment of approximately $600 million, includes provisions to supply crude oil to refineries either via pipelines or a combination of pipeline and coastal movement. Notably, the Visakhapatnam facility’s capacity was later enhanced to 1.33 MMT, with additional capacity allocated for Hindustan Petroleum Corporation Limited (HPCL) through cost-sharing agreements.
India is expanding its strategic reserves by commissioning new underground storage caverns, including proposed sites at the Mangalore Special Economic Zone in Karnataka and salt caverns in Bikaner, Rajasthan. These sites have been chosen for their proximity to the coast and refining hubs to optimize logistics and supply chain efficiency. The expansion aims to increase India’s crude oil backup capacity to cover 90 days of consumption.
Technologically, the underground storage infrastructure incorporates surface equipment such as well-heads, compression units for gaseous products, processing and metering facilities, as well as monitoring systems including piezometers and seismic sensors to ensure safety and operational integrity. Additionally, lined rock caverns (LRC) are employed for storing cryogenic and high-pressure gaseous products like CO₂, ammonia, natural gas, and hydrogen, highlighting India’s advancement towards diversified underground storage technologies.
To complement physical infrastructure, India is also adopting risk-based inspection and maintenance (RBI&M) methodologies. These strategies aim to optimize maintenance schedules by assessing the probability and consequence of equipment failure, thereby improving safety, reliability, and cost-effectiveness in refinery operations and related storage facilities. This approach is supported by expert panels and utilizes systematic algorithms for failure data management, which enhances decision-making processes within the petroleum infrastructure.
Operational Procedures and Risk Management
The management of failure analysis holds strategic importance within refinery operations from organizational, engineering, and economic perspectives. Implementing a methodical and as automated as possible algorithm for managing failure data can significantly enhance work organization and decision-making processes. To this end, a panel comprising academicians and refinery operators was established to develop a Risk-Based Inspection and Maintenance (RBI&M) procedure aimed at optimizing operational reliability and safety.
Petrochemical facilities require continuous maintenance to sustain high reliability and safety standards. The Risk-Based Maintenance (RBM) strategy serves as an effective tool to design cost-efficient maintenance schedules by focusing on reducing the overall operational risk. This approach evaluates both the probability and consequences of failures or accidents, allowing for informed prioritization of maintenance activities.
Specifically, the Risk-Based Inspection (RBI) methodology has been applied in industrial processes such as those at the Fujian Oil Refinery ISOMAX unit. Utilizing the classic risk definition, the methodology assesses the likelihood and impact of potential failures, supported by risk-specific codes, to guide maintenance strategies effectively.
In the context of India’s strategic petroleum reserves, the Indian Strategic Petroleum Reserves Limited (ISPRL), a wholly owned subsidiary of the Oil Industry Development Board (OIDB), oversees the operational procedures and risk management practices related to the country’s emergency crude oil storage. Since its ownership transfer to OIDB in 2006, ISPRL has been responsible for maintaining underground rock cavern storage facilities with a combined capacity of 5.33 million metric tonnes across Visakhapatnam, Mangalore, and Padur. The operational protocols at these sites incorporate rigorous risk management measures to ensure the reliability and safety of the strategic reserves, which are critical for mitigating disruptions in the global crude oil supply chain.
Economic and Strategic Implications
India’s efforts to expand its Strategic Petroleum Reserve (SPR) reflect both economic prudence and strategic foresight in addressing the country’s energy security challenges. Historically, India faced acute vulnerabilities such as during the 1990 Gulf War, when its oil reserves were sufficient for only three days, underscoring the need for a robust strategic buffer. Since then, the government has progressively enhanced the SPR capacity, with Phase I establishing three storage facilities totaling 5.33 million metric tons (MMT), capable of meeting approximately 9.5 days of national demand. By capitalizing on the low crude oil prices in April-May 2020, India fully stocked these reserves, leading to estimated savings of around INR 5,000 crore.
Economically, these strategic moves have translated into significant cost savings on oil imports. According to various analyses, India saved between $10.5 billion and $25 billion in FY 2023 and FY 2024 due to strategic procurement and reserve management, although these savings remain modest relative to the country’s GDP and current account deficit. Expanding the SPR is also expected to help India meet International Energy Agency (IEA) membership requirements, which mandate a minimum of 90 days’ worth of net oil imports in emergency reserves. Currently, India’s combined reserves—including those maintained by state-run refiners—cover around 77 days of net imports, with ongoing projects aiming to bridge the gap to the IEA standard through new storage facilities in Chandikhol (Odisha) and Padur (Karnataka) under public-private partnerships.
Strategically, the SPR expansion reduces India’s vulnerability to geopolitical risks, such as potential disruptions at the Strait of Hormuz, which handles about 20 percent of global oil shipments and a significant portion of India-bound crude. In response, India is also pursuing alternative crude supply routes by tapping pipelines that bypass the Strait of Hormuz, including the ADNOC-operated Habshan-Fujairah pipeline and the Saudi Aramco East-West pipeline, thereby de-risking its crude supply chain and diversifying sources across approximately 39 oil-exporting countries.
Beyond energy, experts advocate for building strategic buffers in other critical sectors like defense and arms to enhance resilience not only during conflicts but also in peacetime. Reflecting this, India
Environmental and Regulatory Aspects
The establishment and expansion of strategic petroleum reserves (SPR) in India have significant environmental and regulatory implications. From an environmental perspective, the development of underground storage facilities, such as those in Mangaluru, Visakhapatnam, and Padur, requires careful consideration to minimize ecological disruption and ensure the safety of surrounding ecosystems. These sites are typically chosen for their geological stability and minimal environmental sensitivity to reduce risks associated with petroleum storage.
Regulatory frameworks governing the SPR are designed to balance energy security with environmental protection. The government oversees stringent guidelines related to the construction, operation, and maintenance of these reserves to prevent contamination and manage any accidental spills effectively. Additionally, the involvement of private entities like the Abu Dhabi National Oil Company (ADNOC) in using and storing petroleum at existing SPR sites indicates a collaborative regulatory environment where public and private sectors work within established norms to enhance energy security.
The rising energy demand in India, coupled with domestic production limitations, has intensified the need for regulatory policies that support the augmentation of strategic reserves while adhering to environmental standards. Experts emphasize that developing these reserves is crucial for mitigating the volatility of global oil prices and ensuring a stable supply, which further reinforces the importance of robust regulatory oversight in the sector.
As India plans to add six new strategic oil reserves to achieve a 90-day energy security buffer, regulatory authorities face the challenge of integrating sustainable practices with the country’s energy goals. This involves continuous monitoring, impact assessments, and compliance with national and international environmental regulations to safeguard public health and natural resources throughout the lifecycle of the SPR projects.
Stakeholders and Partnerships
India’s Strategic Petroleum Reserve (SPR) programme involves a diverse set of stakeholders and partnerships aimed at enhancing the country’s energy security. The Ministry of Petroleum & Natural Gas plays a central role in overseeing the development and management of the reserves, providing policy direction and regulatory support. The implementation of the SPR facilities is designed to operate under a Public-Private Partnership (PPP) model, allowing private concessionaires to build, operate, and maintain storage infrastructure before transferring it back to the Government of India at the end of a 60-year concession period.
Key state-owned enterprises are also deeply involved in the planning and execution stages. Engineers India Ltd (EIL), a government-run engineering consultancy, has been tasked with preparing detailed feasibility reports (DFRs) for new SPR sites. These include potential locations such as the Mangalore Special Economic Zone in Karnataka and salt caverns near Bikaner in Rajasthan. This involvement underscores the role of public sector expertise in ensuring technical viability and alignment with national priorities.
Indian Strategic Petroleum Reserve Ltd (ISPRL), a government-backed entity, acts as the custodian of the core sovereign crude oil reserves. It coordinates the release and replenishment of strategic stocks during supply disruptions, functioning under the guidance of an empowered government committee. ISPRL also manages crude oil storage for other entities designated by the government, highlighting its role as a key operational stakeholder in the SPR ecosystem.
The PPP approach has been explicitly adopted to reduce the financial burden on the government while accelerating the development of critical infrastructure. For instance, the Union Cabinet has granted in-principle approval for the establishment of SPR facilities at Chandikhol, Odisha (4 million tons), and Padur, Karnataka (2.5 million tons), including dedicated Single Mooring Points (SPMs), under this model. This approach encourages private sector investment and expertise, enabling scalable expansion aligned with India’s strategic objectives.
Progress and Current Status
India has been steadily advancing its strategic petroleum reserves (SPR) program since its inception in 1998, when the Atal Bihari Vajpayee administration initiated the development of underground storage facilities as a long-term measure to manage oil supply risks. The first phase saw the construction of three caverns with a combined capacity of 5.33 million metric tons (MMT) located in Mangaluru, Visakhapatnam, and Padur, with an investment of approximately $600 million. By April and May 2020, India capitalized on low crude oil prices to fill its existing SPR facilities to full capacity, resulting in significant notional savings estimated at around INR 5,000 crore.
In 2021, the government approved the commercialization of the Indian Strategic Petroleum Reserves Limited (ISPRL), allowing it to lease or rent 30% of the total storage capacity to domestic and foreign companies under the condition that the government retains first rights over the stored crude in emergencies. Concurrently, the Union Cabinet sanctioned the second phase of SPR expansion, approving the establishment of an additional 6.5 MMT capacity across two new locations: Chandikhol in Odisha (4 MMT) and Padur in Karnataka (2.5 MMT), along with dedicated Single Point Moorings (SPMs) and associated pipelines under a Public Private Partnership (PPP) model.
Looking forward, detailed feasibility reports are being prepared by Engineers India Ltd (EIL) for six proposed new sites aimed at further expanding India’s crude oil backup capacity. Among these, the Mangalore Special Economic Zone in Karnataka and salt caverns in Bikaner, Rajasthan have been highlighted as potential locations. The remaining sites are strategically situated near coastlines and refineries to facilitate easy access and transportation, with feasibility assessments expected to be completed by the end of the year. This expansion initiative aligns with the government’s goal to increase India’s strategic oil reserve capacity to cover 90 days of consumption, thereby enhancing energy security amid geopolitical uncertainties in West Asia that threaten global oil flows.
Future Prospects and Challenges
India’s strategic oil reserve expansion reflects a critical move towards bolstering the country’s energy security amid growing geopolitical uncertainties, particularly in West Asia. The initiative to add six new strategic petroleum reserve (SPR) sites—including locations in Mangalore, Karnataka, and Bikaner, Rajasthan—aims to increase India’s reserve capacity to a 90-day buffer, thereby mitigating risks associated with potential disruptions like the closure of the Strait of Hormuz, which channels about 20 percent of global oil shipments. This expanded capacity will complement the existing 5.33 million tonnes of storage, significantly enhancing India’s ability to withstand external supply shocks.
The selection of proposed sites is strategic, focusing on proximity to coastlines and refineries to facilitate efficient transport and operational integration. Salt caverns in Rajasthan and special economic zones such as the one in Mangalore have been identified for their geological suitability for underground storage. The government has tasked Engineers India Ltd (EIL) with conducting detailed feasibility reports, with submissions expected by year-end, underscoring the methodical approach towards expansion.
From a fiscal perspective, India’s prior experience in filling SPR facilities during periods of low crude oil prices—in April and May 2020—resulted in substantial notional savings estimated at around INR 5000 crore. This precedent demonstrates the potential economic advantages of strategic timing in reserve accumulation. Additionally, the expansion aligns with broader energy diversification goals, including increasing renewable energy capacity to reduce dependency on fossil fuels, though the SPR remains a crucial hedge against volatility in global oil markets.
Despite these promising prospects, several challenges remain. The confidentiality of sensitive information regarding storage locations and capacities, especially amidst heightened geopolitical tensions, poses transparency and coordination challenges. Furthermore, maintaining the operational reliability and safety of petrochemical and storage facilities demands rigorous, risk-based maintenance strategies. The implementation of risk-based inspection (RBI) methodologies, such as those trialed in industrial refineries, could prove essential in optimizing maintenance schedules and minimizing accident risks within these critical infrastructures.
The content is provided by Sierra Knightley, Fact-Nest
