INDIA CEO SERIES: India to fast-track SPR expansion amid geopolitical risks, trade policy shifts

The India CEO Series by S&P Global Energy is a compilation of exclusive interviews by Asia Energy Editor Sambit Mohanty with some of the leaders of the biggest energy companies in India.

India will accelerate plans to boost strategic petroleum reserves, driven by the necessity to store greater oil volumes at crucial domestic locations amid volatile geopolitics and trade policies, ensuring resilience against potential supply disruptions, the Chief Executive Officer of Indian Strategic Petroleum Reserves Ltd. said.

In an exclusive interview with Platts, part of S&P Global Energy, L R Jain, who is also the managing director of ISPRL, said progress on the second phase of Strategic Petroleum Reserve expansion is on track, with discussions ongoing at multiple levels for private and international partnerships, highlighting the Indian government's heightened focus on energy security.

"Given all that we are seeing in the world in terms of geopolitics, conflicts, trade policies and oil flows, the best way to minimize the impact of these developments is by holding much larger volumes of oil at home. India has ambitions to enhance its strategic petroleum reserves capacity over the next decade," Jain said.

His comments come at a time when India is facing higher US tariffs on non-oil commodities as a penalty for buying Russian oil.

Analysts at Energy have said India's vulnerability to supply disruptions is evident, as the world is witnessing escalating geopolitical tensions, disruptions on key sea routes, in addition to disruptive trade policies. The fluid scenario means there is a need for strategic initiatives and investments to bolster India's energy resilience and reduce risks linked to external factors.

"The next decade will be very crucial to pull in all the required investments needed for the sector. We are dependent on imported oil for the bulk of our needs. With India seen as a key center for oil demand growth, the key would be to have a large SPR capacity, Jain said.

Second phase expansion

In its first phase, India set up SPRs at three locations with a combined capacity of 5.33 million mt: 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, India is looking to augment storage capacity further by creating an additional 6.5 million mt of SPRs at two locations: 4 million mt at Chandikhol in the eastern state of Odisha and another 2.5 million mt at Padur. They will be set up on a public-private partnership model -- called design, build, finance, operate and transfer, or DBFOT.

"The land acquisition work for most of the projects in the second phase is going as per plan. ISPRL has already received possession of land at Padur, while land at Chandikhol is expected to be acquired shortly. This should help to expedite work," Jain said.

ISPRL has invited bids from foreign and domestic companies for the second phase of the project at Padur. The Indian government would consider providing subsidies of up to 60% of the construction cost of the project, Jain said.

"We are in talks with various potential domestic and international partners for the second phase of expansion. We are seeing growing interest as India has made its SPR policy much more flexible and investor-friendly -- both for holding oil in the caverns and for partnering in building the project. We are hopeful of finalizing deals with some key partners soon," Jain added.

India's SPRs currently provide reserves of about 9.5 days of net oil imports. State-run oil companies hold storage facilities for crude oil and petroleum products for 64.5 days of total net imports, bringing the current total national storage capacity of crude and petroleum products to 74 days of total net imports. On the other hand, IEA member countries are required to ensure oil stock levels equivalent to no fewer than 90 days of their net imports.

In 2024, ministers from member countries of the International Energy Agency pledged to start discussions with India for its full membership in the organization, highlighting the South Asian nation's strategic importance in tackling global energy and climate challenges. India first joined the IEA as an associate member in 2017.

Investor-friendly policies

Highlighting some of the recent reforms, Jain added that New Delhi had implemented policies under which 50% of the oil in SPRs would be kept for strategic use, while 30% of the capacity has been permitted to be rented out. The remaining 20% would be used for trading. However, the government would still retain the first right to use the entire volume of the caverns in case of any emergency.

The UAE's ADNOC is currently the only overseas company that stores oil in India's caverns. It holds about 5.86 million barrels at the Mangalore facility. During the COVID-19 pandemic, ADNOC had urged the Indian government to allow it to export some volumes from the caverns.

As a result, India's petroleum ministry facilitated permission to ADNOC, which now is the only overseas producer that has oil stored in the caverns in India, to re-export the crude to other countries. The policy change to allow re-exports by ADNOC brought India's SPRs in line with major Asian oil storage countries like Japan and South Korea, where international oil producers store oil as well as re-export from the facilities.

Jain said that while ISPRL was in talks with other international oil producers to take space in the caverns, it was also looking to expand its presence in the gas segment.

"While oil is our key focus area, we are also doing some feasibility studies for strategic gas reserves. Rajasthan is one of the venues we have shortlisted for the project," he added.