India’s Capacity To Build a Strategic Fuel System – Explained

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• Disruptions linked to West Asia have exposed vulnerabilities in India’s energy security, prompting the government to consider a decade-long strategic fuel programme to significantly expand crude, LNG and LPG storage.

The Core Vulnerability

• India can import large quantities of crude oil, LNG and LPG. What differs sharply by fuel is its ability to store, transport and release these fuels during a prolonged disruption.
• India already operates underground strategic crude-oil storage and two underground LPG caverns. It has no operating underground natural-gas storage facility at all.
• Against this background, the government is considering a programme that would add roughly 28 MT of crude-oil storage, 9 MT of LNG storage and 4 MT of LPG storage over a decade. 
• The reserves are intended to provide nearly two months of crude and LNG demand and about six weeks of LPG demand.

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India’s Present Condition

• Crude Oil
  • Crude is the most mature component. Phase-I of the Strategic Petroleum Reserve provides 5.33 MT of underground capacity across Visakhapatnam, Mangaluru and Padur, with actual storage of about 3.37 MT, roughly 63-64% utilisation.
  • A further 6.5 MT has been approved under Phase-II at Chandikhol and Padur.
• LPG
  • The underground footprint here is far smaller. The Visakhapatnam and Mangaluru caverns together provide about 0.14 MT of capacity. 
  • A proposed 4 MT strategic reserve would represent roughly a 30-fold increase in underground LPG capacity.
• Natural Gas
  • This is the largest gap. India has no operational underground gas-storage facility. Its gas-security system instead depends on domestic production, LNG imports, import terminals, commercial inventories and pipelines.

Capacity Is Not the Same as Inventory

• An important distinction runs through this debate. A facility has a physical capacity, but the fuel it actually holds can vary. Not all inventory is immediately accessible either.
• During a crisis, the critical measure is therefore not simply how many tonnes can be stored, but how much fuel is available and at what withdrawal rate it can reach consumers.
• LNG is particularly prone to confusion because India already has substantial import and regasification infrastructure. 
• A regasification terminal can receive LNG and convert it into natural gas, but its regasification capacity does not constitute strategic inventory.
• LNG is stored as a cryogenic liquid at around -162°C, requiring specialised insulated tanks and boil-off gas management. Underground gas storage works differently: LNG is first regasified, and the resulting natural gas is injected into a depleted reservoir or cavern.

Building Underground Storage Is Not Simple

• India could eventually combine surface LNG tanks with underground natural-gas storage.
• A separate Petroleum Ministry proposal would require LNG import terminals to maintain storage capacity 10% above normal operating needs, with the surplus available to the government during supply or price disruptions.
• For longer-duration needs, depleted oil and gas reservoirs, 74% of global working gas volume, could offer much larger storage. Salt caverns, by contrast, allow faster injection/withdrawal and more frequent cycling.
• However, a depleted field isn’t automatically storage-ready: reservoir characteristics, cap-rock integrity, pressure behaviour, existing wells, cushion-gas needs and pipeline connectivity must all be assessed. 
• India’s sedimentary basins (Krishna, Godavari, Cambay, Mumbai Offshore, Rajasthan) show potential, but converting geological promise into usable storage requires subsurface study, engineering, construction, testing, filling and pipeline integration.
• Salt caverns face similar scrutiny, Rajasthan’s salt formations have been studied, but suitability hinges on depth, thickness, purity, geometry, groundwater and mechanical properties.

Storage as an Infrastructure System

• The US Strategic Petroleum Reserve shows the scale salt caverns can reach: 714 million barrels of authorised capacity across 60 caverns, functioning as an integrated network of caverns, pipelines, marine terminals and refineries.
• Storage is thus fundamentally an infrastructure system, not just underground space.
• LPG illustrates the scaling challenge: a proposed 4 MT reserve would need extensive new caverns plus import terminals, pipelines, pumping systems and bottling infrastructure.
• The Mangaluru cavern highlights the complexity, geological and hydrogeological investigation, rock-mechanics analysis, and groundwater management alongside active surface facilities.

Shipping and Pipelines

• Since energy security relies heavily on maritime logistics, including vulnerable chokepoints like the Strait of Hormuz, India is diversifying both import sources and shipping capacity.
• State-run refiners and the Shipping Corporation of India plan to invest $1.5-2 billion in a joint venture for 59 ships, cutting reliance on foreign vessels.
• Pipelines link storage to inland consumers. PNGRB has authorised about 1,800 km of new LPG pipelines across six states (~$0.7 billion investment), improving deliverability and cutting road dependence, but not adding strategic storage itself.
• This principle spans fuels: underground storage only helps if it can inject/withdraw from the gas grid at the needed rate; LNG tanks need regasification and downstream pipelines; LPG caverns need bottling and distribution links.

The Financing Question

• The reported $42 billion programme, unconfirmed by the government, combines infrastructure capex with the cost of buying and maintaining strategic inventories. Over half may go to storage infrastructure, the rest to purchasing and filling reserves. The government has denied reports of a funding cess.
• The financial commitment continues beyond construction: billions in fuel must be purchased, financed and maintained, and crisis-released stocks would need replenishing, potentially at higher commodity and freight prices.
• Policy must therefore define who owns and finances the inventory, minimum stock obligations, emergency-release authority, and who bears replenishment and price risk. 
• A commercial-cum-strategic model could ease the public burden, provided commercially used capacity stays available during emergencies.

Source: TH