Subject: GS Paper 3: Energy Security
Context: West Asia-related disruptions have exposed gaps in India’s ability to store, transport and release crude oil, LNG and LPG during prolonged supply disruptions.
- In this scenario, the government is considering a decade-long strategic-fuel program.
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About the Proposed Strategic-Fuel Program
- Strategic fuel storage involves maintaining emergency reserves of critical fuels to provide a buffer against prolonged supply disruptions.
Strategic Significance of Energy Reserves
- Energy Security: Creates a buffer against wars, sanctions, geopolitical tensions and maritime chokepoint disruptions, giving India time to arrange alternative supplies.
- Supply Continuity: Emergency stocks help maintain supplies to refineries, power generation, transport and other critical sectors during temporary disruptions.
- Import Resilience: Greater storage, diversified sourcing and stronger logistics reduce vulnerability to disruptions in international energy markets and supply routes.
- Crisis Response: Greater control over energy inventories, shipping, storage and distribution improves India’s ability to respond to external supply shocks.
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- Proposed Capacity: 28 MT crude oil, 9 MT LNG, and 4 MT LPG storage.
- Demand Coverage: Could cover nearly 2 months of crude and LNG demand and around 6 weeks of LPG demand.
India’s Existing Strategic Storage Capacity
- Crude Oil (Most Developed):
- Phase I Strategic Petroleum Reserve (SPR): 5.33 MT underground capacity at Visakhapatnam, Mangaluru and Padur.
- Actual inventory is around 3.37 MT.
- Phase II: An additional 6.5 MT capacity has been approved at Chandikhol and Padur.
- However, the Chandikhol project has faced delays related to land acquisition and finalisation of the PPP framework.
- LPG (Limited Underground Capacity): Existing underground LPG storage at Visakhapatnam and Mangaluru is around 0.14 MT.
- The proposed 4 MT strategic reserve would therefore represent a substantial expansion of India’s underground LPG storage capacity.
- Natural Gas (Strategic Storage Gap): India has LNG storage tanks at import terminals, but these are primarily commercial/operational inventories rather than a dedicated strategic reserve.
- India currently has no operational underground natural-gas storage facility and no dedicated strategic gas reserve.
- Hence, gas security currently depends on domestic production, LNG imports, terminal inventories, regasification capacity and pipeline networks.
Why is Strategic Liquefied Natural Gas (LNG) Storage Important?
- Cryogenic Storage: LNG is stored at around minus 162 degrees Celsius, requiring specialised insulated tanks and boil-off gas management.
- Import Capacity is Not Strategic Inventory: LNG import and regasification capacity does not ensure emergency stocks, as terminals may have high regasification capacity without adequate stored LNG.
- Storage Options: LNG can be stored in surface cryogenic tanks, while regasified natural gas can potentially be stored in underground formations.
- Emergency Requirement: A Petroleum and Natural Gas Regulatory Board and Infrastructure and Consulting Engineers stress that a scenario estimated around 0.56 to 0.6 million tonnes LNG equivalent could meet priority demand for about 20 days.
- Strategic Significance: The proposed 9 million tonnes reserve would provide a broader buffer against prolonged disruptions in LNG imports and supply chains.
Possible Options for Strategic Liquefied Natural Gas (LNG) Storage
- Surface LNG Tanks: LNG can be stored directly at import terminals, enabling rapid access to emergency stocks during short-term supply disruptions.
- Depleted Oil and Gas Reservoirs: These can provide large-scale underground storage, subject to cap-rock integrity, pressure behavior, cushion-gas requirements and pipeline connectivity.
- Salt Caverns: Salt caverns allow rapid injection and withdrawal, making them suitable for short-duration balancing and frequent inventory cycling.
- Krishna-Godavari, Cambay, Mumbai Offshore and Rajasthan have geological potential, but actual storage capacity depends on detailed assessment, engineering feasibility and pipeline connectivity.
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Key Challenges in Building India’s Strategic-Fuel System
- Technical Feasibility: Limited suitable geology and complex requirements for underground storage, including cap-rock integrity, pressure management and cushion gas.
- Infrastructure Readiness: Gaps in supporting infrastructure can limit the actual withdrawal and delivery of stored fuel.
- Financial Sustainability: High costs of facility construction, inventory purchase, maintenance and replenishment.
- Implementation Delays: Land acquisition and PPP-related issues can slow projects such as Chandikhol.
- Institutional Framework: Lack of clarity over ownership, emergency release, financing and replenishment can weaken the system.
Way Forward
- Adopt an Integrated Planning Approach: Plan storage capacity alongside import requirements, withdrawal rates and downstream demand.
- Prioritise Strategic Fuel Mix: Determine the optimal balance between crude, LNG and LPG reserves based on import dependence and disruption risks.
- Create a Sustainable Financing Model: Develop commercial-cum-strategic arrangements to reduce the fiscal burden while ensuring emergency access.
- Strengthen Project Execution: Streamline land acquisition, PPP frameworks and regulatory clearances to accelerate capacity creation.
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