India eyes low cost oil to refill strategic reserves amid geopolitical turmoil

India’s current SPR capability stands at 5.3 million tonnes, sufficient to fulfill simply 9.5 days of the nation’s crude oil wants. But as of October 2024, solely 3.6 million tonnes have been saved within the underground caverns, leaving a major hole.

Officials mentioned the federal government is now seeking to replenish the reserves, with Brent crude buying and selling close to a four-year low of round $65 per barrel.

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“This is the correct time to fill the reserves, as crude costs have softened significantly. It would end in vital financial savings for the exchequer,” mentioned one of many two individuals cited above.

The authorities can also be working to fast-track procurement, the second individual mentioned.

Indian Strategic Petroleum Reserves Ltd (ISPRL), a government-owned entity, manages crude procurement and storage primarily based on selections by an empowered authorities committee. While state-run oil corporations might help often, ISPRL largely handles purchases immediately.

Energy safety is crucial for India, which imports over 85% of its oil and 55% of its fuel necessities. Fluctuations in world costs can considerably impression the nation’s import invoice, stoke inflation, and widen the commerce deficit.

The urgency to refill the reserves has grown within the wake of a current India-Pakistan standoff following a lethal terror assault in Pahalgam, Jammu & Kashmir, which killed 26 individuals. India responded with Operation Sindoor, focusing on camps throughout the border. Although tensions have since eased, the episode underscored the significance of sustaining enough provide buffers.

The SPRs, positioned in Mangaluru, Padur and Visakhapatnam, mixed with industrial oil shares held by refiners and entrepreneurs, account for an estimated 70–72 days of crude stock.

However, this nonetheless falls wanting the International Energy Agency’s 90-day benchmark, required for full IEA membership.

Queries despatched to the petroleum ministry and ISPRL remained unanswered at press time.

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With crude costs low and new funds provisions in place, the federal government now goals to refill the reserves and broaden capability.

The Centre had initially allotted ₹5,000 crore in FY24 for crude procurement by ISPRL, however the finance ministry deferred the spending. No provision was made in FY25 both. The quantity has now been reallocated to FY26.

In an October 2024 submission to the parliamentary standing committee on vitality, the petroleum ministry had mentioned, “There isn’t any provision for ISPRL’s crude oil reserves this monetary yr. We will hold a provision for it within the subsequent monetary yr,” the ministry mentioned.

Crude oil costs fell sharply in April and early May, touching a low of $60.23 on 5 May earlier than rebounding modestly. Brent crude was hovering round $65.5 per barrel in current weeks, down 25% from its January peak, in line with J.P. Morgan Research.

In a 16 May report, the financial institution projected Brent costs would common $66 a barrel in 2025 and will fall additional to $58 in 2026, noting that oil costs will stay beneath stress amid ongoing macroeconomic and commerce coverage uncertainty.

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India final tapped its reserves in November 2021, releasing 5 million barrels as a part of a coordinated effort with different main oil customers to chill hovering costs. It had purchased crude at $19 a barrel throughout the 2020 crash to fill its reserves, saving ₹685.11 crore within the course of.

To bridge the present 18–20 day shortfall and meet IEA requirements, India can also be working to broaden its SPR community. In July 2021, the cupboard authorised two extra commercial-cum-strategic services: a 4 million tonne cavern at Chandikhol in Odisha and a 2.5 million tonne facility at Padur, Karnataka, beneath ISPRL Phase-II.

However, land is but to be allotted by the respective state governments. The tendering course of for the Padur facility is at present underway, with bids invited in February this yr, in line with the ISPRL web site.

India’s SPR programme has additionally attracted overseas curiosity. During Phase-I, Abu Dhabi National Oil Company (Adnoc) saved 5.86 million barrels of its crude in Mangaluru. In 2018, it signed one other settlement to retailer crude at Padur. Kuwait Petroleum Corp. can also be reportedly evaluating the choice of storing oil in India beneath Phase-II.

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The thought behind permitting overseas corporations to carry inventory in India’s SPR is that they will retailer oil on the market to home refiners, as within the case of Adnoc. However, the Indian authorities retains the primary proper to the oil in case of an emergency.

Meanwhile, the standing committee on petroleum and pure fuel, chaired by lawmaker Dattatrey Tatkare, not too long ago urged the federal government to maneuver quicker. “The committee… recommends the Ministry to stay proactive in direction of arranging cheaper crude oil for strategic storage, significantly holding in view the present geopolitical issues,” its March 2025 report mentioned.