India’s Strategic-Fuel Program: Crude Oil, LNG and LPG Reserves

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. 

UPSC Online Preparation

About the Proposed Strategic-Fuel Program

• Strategic fuel storage involves maintaining emergency reserves of critical fuels to provide a buffer against prolonged supply disruptions. 

• 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.

Best Online Coaching for UPSC

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.

Click to Know UPSC Offline Courses

Check Out UPSC CSE Books

Visit PW Store