Winning Bizness Desk
Mumbai.The Centre has decided to build a new strategic emergency oil reserve in the aftermath of the oil supply concerns witnessed during the recent US-Iran conflict, a move aimed at strengthening India’s energy security during wars, geopolitical tensions and global crude disruptions. The underground reserve will be developed by Oil and Natural Gas Corporation (ONGC) at Mangalore in Karnataka and is expected to cost around ₹15,000 crore. Once completed, the facility will significantly enhance India’s emergency crude storage capacity and extend the country's ability to withstand supply shocks.
Energy security gains fresh policy focus
According to a report by The Economic Times, the proposed underground strategic crude oil storage facility will have the capacity to store about 1.28 crore barrels of crude oil. The project comes at a time when energy-importing nations are increasingly reassessing their preparedness against geopolitical crises and disruptions in global oil trade routes.
At present, India’s total strategic crude storage capacity stands at nearly 3.9 crore barrels. These reserves are maintained exclusively for emergency use and can be tapped only during extraordinary circumstances such as war, major supply disruptions or severe oil shortages.
Key highlights of the proposed project:
- Total estimated project cost: ₹15,000 crore
- Location: Mangalore, Karnataka
- Developer: ONGC
- Storage capacity: Around 1.28 crore barrels
- Construction cost: Approximately ₹5,000 crore
- Cost of filling crude oil: Around ₹10,000 crore
Reserve period likely to increase
India consumes nearly 50 lakh barrels of crude oil every day. Based on current strategic storage levels, the country can meet its crude oil requirements for around 8 to 9 days during an emergency. The addition of the new reserve is expected to increase this capacity by nearly 33%, effectively adding about three more days of coverage.
As a result, India’s emergency crude availability could rise to nearly 11 days in the event of war, international sanctions, shipping disruptions or a major global oil crisis. The expansion is being viewed as a critical step in reducing vulnerabilities arising from India’s heavy dependence on imported crude oil.
Understanding petroleum reserves and their role
Petroleum reserves refer to crude oil or fuel stocks maintained for future use. Countries generally maintain two types of reserves to ensure uninterrupted energy supplies.
Strategic petroleum reserves are government-controlled emergency stocks that remain untouched during normal times. They are used only when supplies are disrupted. India currently maintains strategic petroleum reserves at Mangalore, Padua and Visakhapatnam, where crude oil is stored in massive underground cavern facilities.
Commercial petroleum reserves, on the other hand, are maintained by oil marketing companies such as Indian Oil to ensure uninterrupted supply to petrol pumps and consumers. These stocks are meant for day-to-day operations and are generally stored in large above-ground tanks.
Funding model marks a significant shift
The financial structure of the proposed project marks a departure from past practice. According to the report, ONGC will spend nearly ₹5,000 crore on constructing the underground cavern, while another ₹10,000 crore may be required to fill the facility with crude oil at prevailing market prices and exchange rates.
Important points under discussion:
- Recovery model for ONGC investment remains unclear
- Commercial utilization of the facility is yet to be decided
- Government has not announced the final operational framework
- Revenue-generating options are being examined
Until now, all strategic petroleum reserve projects in India have been fully funded by the government and managed by Indian Strategic Petroleum Reserves Limited (ISPRL). The Mangalore expansion will be the first major strategic reserve project involving such a substantial investment by ONGC, signaling a new approach towards strengthening the nation’s long-term energy resilience.
