India likely to adopt twin strategy in pursuing SPRs both at home and overseas

India will increasingly adopt a twin strategy of tapping international expertise and investment to expand strategic petroleum reserves at home while aiming for oil storage overseas to ensure access to a larger pool of supplies in the event of supply disruptions, oil industry experts and analysts said July 8.

While investments from countries like Japan and the UAE in domestic SPRs are future possibilities, India has also been considering countries like Oman and the US to hold oil storage overseas, they added.

"India has been exploring opportunities to expand SPR relations with the US and Oman for some time now. And recently we saw talks with the UAE and Japan. The strategic push by India to strengthen ties with countries having a lot of experience in oil storage will turn out to be a good move in the long run," HPS Ahuja, former CEO of Indian Strategic Petroleum Reserves Ltd. said.

Earlier this month, Japan and India pledged to boost collaboration on a petroleum stockpiling mechanism. The move followed a meeting between Japanese Prime Minister Sanae Takaichi and Indian Prime Minister Narendra Modi.

Modi said the India–Japan Investment Partnership continues to strengthen. Over the past year, more than 100 new business agreements were concluded, paving the way for over $10 billion in Japanese investment in India. The objective is to attract 10 trillion yen ($61 billion) in Japanese investment into India over the next ten years and to double the number of Japanese companies operating in India.

"Both India and Japan have been exploring Japanese investment in Indian SPRs for some time now, but nothing has materialized yet. With the last round of bilateral discussions, there is a possibility that some of the investment could flow to domestic SPRs in India," said a senior industry source having knowledge on the subject.

Abu Dhabi National Oil Co is currently the only overseas company that has tied up with Indian SPRs. It holds about 5.86 million barrels of capacity at the Mangalore facility, according to company officials.

Under a deal announced on May 15, ADNOC said it aims to increase its crude holdings in India's SPRs to up to 30 million barrels amid wars in the Middle East and Russia, as well as growing domestic demand. Under a separate agreement, India will explore storing crude at Fujairah, the UAE's eastern oil hub, which will be part of India's SPRs.

"India's efforts to deepen SPR cooperation with countries, such as the UAE, US, Oman and Japan, are a step in the right direction, primarily because they address structural gaps in India's current strategic storage capacity," said Rajat Kapoor, managing director for oil and gas at Synergy Consulting.

"The proposed Fujairah component is arguably the more strategically significant development. Diversifying storage geographically outside India's immediate coastline, and closer to major global trading hubs, provides an additional layer of resilience against disruptions at chokepoints. However, international partnerships should complement, not substitute for, a more domestic SPR capacity program," Kapoor said.

Quick access to overseas SPRs

In 2020, India moved closer to leasing space in the US Strategic Petroleum Reserve to take advantage of rising US crude production. The countries signed a memorandum of understanding in July 2020 to begin cooperation on SPRs, covering both operations and management, and discussed the possibility of India storing crude in US SPRs. But the initiative has not moved forward since then.

"Freight is a big issue to be considered when you are holding oil stocks at such a distance. The other point is how quickly you can access those supplies when supply disruptions take place," the senior industry source said.

The US-based think tank Atlantic Council said in a June report that the US should aim to operationalize the 2020 US-India Strategic Petroleum Reserve memorandum of understanding. In addition, the US could support India's second-phase SPR expansion through technical cooperation and development finance.

SPRs is a medium-term project, better suited for when markets stabilize, but initiating formal planning now would position both governments to move quickly once that happens, the Council said.

In addition, India has been looking at Oman and other Middle Eastern countries as potential strategic oil storage options.

In June, India and Oman adopted the India–Oman Comprehensive Economic Partnership Agreement, which would expand strategic trade and investment cooperation between the two countries, including the energy sector.

"Securing oil, which can avoid the Strait of Hormuz, will be a massive geopolitical win for India. By bypassing this volatile chokepoint, New Delhi isn't just buying oil -- it is buying peace of mind against sudden maritime blockades and regional conflicts," said B. Anand, industry expert, and former CEO of Nayara Energy.

Exploring new locations

In its first phase, India established SPRs at three locations with a combined capacity of 5.33 million metric tons: 1.33 million mt at Visakhapatnam, 1.5 million mt at Mangalore, and 2.5 million mt at Padur in Karnataka. In the second phase, Indian Strategic Petroleum Reserves Ltd. plans to expand capacity by adding another 6.5 million mt of SPRs at two sites: 4 million mt at Chandikhol in Odisha and 2.5 million mt at Padur.

The SPRs cover about 9.5 days of net oil imports, while state-run oil companies hold crude oil and petroleum products in storage equivalent to 64.5 days of net imports. According to petroleum ministry data, this brings the country's total storage capacity for crude and petroleum products to roughly 74 days of net imports. That falls short of the 90-day minimum required for International Energy Agency member countries.

"Building domestic underground caverns is incredibly capital-intensive and takes years to complete. Leasing existing infrastructure overseas allows India to scale up its strategic safety net almost instantly, maximizing energy security without draining the immediate national budget. In addition to Fujairah, Saldanha Bay in South Africa is also a location which India can explore," said DLN Sastri, former director of refining at the Federation of Indian Petroleum Industry.

According to S&P Global Energy CERA, India's current approach, which focuses primarily on building physical storage capacity, is a necessary first step, but global experience shows that SPR effectiveness depends on a broader system design rather than infrastructure alone. India should therefore adopt a hybrid strategy that combines China's experience with scale and flexibility with Japan's efforts to build an institutional framework.