Taking stock: India’s energy resilience in sharp focus

This is a thought leadership report issued by the S&P Global Institute. This report does not constitute a rating action, neither was it discussed by a rating committee.

Global oil and gas supply has grown and diversified over the past 100 years, and major producing countries span the globe. So why did the effective closure of the Strait of Hormuz come as a global shock and trigger an energy crisis affecting oil and gas-importing countries such as India?  

The largest energy shock in modern times

The effective closure of the Strait of Hormuz has caused the largest disruption in energy supplies since World War II, reducing crude oil and refined product supplies by 20% and LNG supply by 16%. The impact has been most severe in Asia, especially in emerging and developing Asia, where oil, refined products and gas reserves are low and the economic capacity to absorb price shocks is limited.

Advanced economies such as South Korea, Japan and Taiwan can purchase oil and LNG in the spot market, but developing economies lack similar financial wherewithal. Instead, they have implemented measures to reduce demand, including school closures, work-from-home policies and load shedding. Companies have stopped operating, and jobs have been lost. Gasoline and diesel rationing were implemented in some countries. India faced an LPG crisis at the start of the Middle East conflict, leading to restaurant closures and flight cancellations because meals could not be supplied to passengers.  

The crisis has highlighted the need to strengthen energy security in Asia by diversifying supply sources and to create strategic reserves for crude oil, refined products and, where feasible, gas. 

Looking forward, India will add substantial refining capacity from the commissioning of a major greenfield, in the form of a 180,000 barrels/day HPCL Rajasthan Refinery Ltd. refinery in Barmer, Rajasthan, alongside a series of major brownfield expansions, creating more demand for crude oil. Expansion projects at three Indian oil refineries and the Numaligarh Refinery should contribute roughly 450,000 b/d of additional crude distillation unit capacity over the coming quarters. While India has demonstrated considerable resilience during the Hormuz disruption, a prolonged obstruction of the Strait would be increasingly challenging as this new tranche of refining demand comes online. 

India’s central and state governments have traditionally used oil and gas sector revenue to alleviate fiscal concerns. This dichotomy between domestic oil and gas as a revenue security provider and as a source of energy security has been a challenge for India’s energy strategy. The Hormuz crisis has worked in favor of energy security. The traditional understanding that upstream sector support should focus on nonmonetary measures is giving way to aggressive and ambitious monetary support. Government-to-government cooperation has yielded positive results, with the Oil and Natural Gas Corp. (ONGC) getting approval from the US administration to resume operations in Venezuela. This signals a resumption of growth through internationalization for Indian national oil companies.

Central to the government’s push for upstream energy security is the Samudra Manthan program — allocating a sizable $2.2 billion annually, or $8.8 billion cumulatively, until 2031 — to unlock the deepwater and ultra-deepwater potential of India’s offshore basins. The program is intended to showcase the attractiveness of the 18 deepwater blocks offered under the 10th and 11th Open Acreage Licensing Policy (OALP-X and OALP-XI) licensing rounds, with bidding extended to Sept. 17, 2026. This represents a shift from the traditional assumption that India’s oil and gas demand is the primary unique selling point for international upstream investors to an approach that puts India in competition with other jurisdictions, leaving both reforms and risk mitigation essential to attracting investors. It will be interesting to see the results of the upstream bidding rounds. If new and exploration-focused names (such as the global integrated oil companies) participate, then India will emerge as an exciting frontier to watch in 2027. Key concerns will be the ease of execution of the Samudra Manthan program, approvals from other partner ministries and departments, and support from coastal provinces such as Maharashtra, Andhra Pradesh and Gujarat.

Integrated energy resilience: Storage and beyond  

India’s energy resilience must extend beyond managing individual supply disruptions to building the capacity to absorb and respond to energy shocks across the economy. Rising and volatile energy prices, alongside the cost of integrating renewables, will influence the competitiveness of energy-intensive sectors such as steel, road freight, mining, aviation, cement, aluminum, shipping and data centers. Energy expenditures already account for more than one-third of operating costs in several of these sectors, meaning energy resilience must be considered at strategic and board levels. 

Building resilience requires businesses and policymakers to assess vulnerabilities throughout the energy value chain and adopt a portfolio approach across fuels, technologies and time horizons. This is particularly important for India as it aims to build an advanced economy by 2047 while progressing toward net-zero by 2070. It must balance affordability, energy access, emissions reduction and economic growth while strengthening the energy system’s ability to withstand future shocks.

Storage will be critical to this resilience. India has accelerated investments across conventional fuels and electricity storage. ONGC has received approval in principle to develop a 1.75 million-metric-ton crude oil storage facility in Mangaluru, of which 50% will be reserved for strategic use, with an estimated investment of $1.6 billion. This adds to India’s existing 5.33 million tons of strategic petroleum reserve capacity. The government is evaluating strategic natural gas storage options, including depleted fields and LNG infrastructure, while also exploring ways that gas customers can provide funding. India is considering a 30-day strategic reserve for LPG, while a broader $42 billion program could expand strategic reserves across crude, LNG and LPG. Aviation fuel resilience is being strengthened through additional aviation turbine fuel infrastructure, while the adoption of sustainable aviation fuel is creating an additional pathway to diversify the aviation fuel mix.

Electricity storage is also expanding. In July, the Solar Energy Corp. of India awarded 1.34 GW of long-duration energy storage capacity, including pumped hydro, while national planning envisages 47.24 GW/236 GWh of battery energy storage system and 26.69 GW/175 GWh of pumped hydro by 2031-32.  

These developments demonstrate meaningful progress across individual fuels and technologies. Connecting them offers another opportunity. Deep energy markets depend on access to strategic and commercial stocks to manage seasonal and cyclical variations in demand and respond to energy shocks. India needs to move toward an integrated storage policy spanning electrons and molecules. 

An electrons-to-molecules approach could connect batteries and pumped hydro with conventional fuel inventories and, over time, hydrogen and ammonia, enabling energy to be stored and converted across time horizons and applications. Such an integrated framework could strengthen long-term energy resilience while improving capital allocation across India’s evolving energy system.

The Strait of Hormuz crisis has exposed the energy system’s vulnerabilities and brought energy resilience to the fore. Tactical moves were made at the outset, followed by a more strategic view of domestic exploration, laying the foundation for more comprehensive energy storage. The moment to reset and the momentum to sustain reforms are greatest in a continuing crisis. India’s energy security requires aboveground policy and regulatory reforms to enable greater energy system flexibility, along with an integrated storage policy and belowground efforts supporting the opportunities presented by India's landmark exploration effort, Samudra Manthan.