India eyes cheap oil to refill strategic reserves amid geopolitical turmoil
Summary
With Brent crude falling to multi-year lows, New Delhi is mulling replenishing its strategic oil stockpiles. Tensions with Pakistan and global demand uncertainty have also added fresh urgency to India’s energy security push.
New Delhi: India plans to take advantage of a drop in global crude oil prices to refill its strategic petroleum reserves (SPR), two people aware of the matter told Mint. The move comes amid renewed geopolitical risks and a fresh budgetary push to bolster the country’s energy security infrastructure.
India’s existing SPR capacity stands at 5.3 million tonnes, enough to meet just 9.5 days of the country’s crude oil needs. But as of October 2024, only 3.6 million tonnes were stored in the underground caverns, leaving a significant gap.
Officials said the government is now looking to replenish the reserves, with Brent crude trading near a four-year low of around $65 per barrel.
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“This is the right time to fill the reserves, as crude prices have softened considerably. It would result in significant savings for the exchequer," said one of the two people cited above.
The government is also working to fast-track procurement, the second person said.
Indian Strategic Petroleum Reserves Ltd (ISPRL), a government-owned entity, manages crude procurement and storage based on decisions by an empowered government committee. While state-run oil companies may assist occasionally, ISPRL largely handles purchases directly.
Energy security is critical for India, which imports over 85% of its oil and 55% of its gas requirements. Fluctuations in global prices can significantly impact the country’s import bill, stoke inflation, and widen the trade deficit.
The urgency to refill the reserves has grown in the wake of a recent India-Pakistan standoff following a deadly terror attack in Pahalgam, Jammu & Kashmir, which killed 26 people. India responded with Operation Sindoor, targeting camps across the border. Although tensions have since eased, the episode underscored the importance of maintaining adequate supply buffers.
The SPRs, located in Mangaluru, Padur and Visakhapatnam, combined with commercial oil stocks held by refiners and marketers, account for an estimated 70–72 days of crude inventory.
However, this still falls short of the International Energy Agency’s 90-day benchmark, required for full IEA membership.
Queries sent to the petroleum ministry and ISPRL remained unanswered at press time.
Crude bargains, budget resets fuel refill plan
With crude prices low and new budget provisions in place, the government now aims to refill the reserves and expand capacity.
The Centre had initially allocated ₹5,000 crore in FY24 for crude procurement by ISPRL, but the finance ministry deferred the spending. No provision was made in FY25 either. The amount has now been reallocated to FY26.
In an October 2024 submission to the parliamentary standing committee on energy, the petroleum ministry had said, “There is no provision for ISPRL's crude oil reserves this financial year. We will keep a provision for it in the next financial year," the ministry said.
Crude oil prices fell sharply in April and early May, touching a low of $60.23 on 5 May before rebounding modestly. Brent crude was hovering around $65.5 per barrel in recent weeks, down 25% from its January peak, according to J.P. Morgan Research.
In a 16 May report, the bank projected Brent prices would average $66 a barrel in 2025 and could fall further to $58 in 2026, noting that oil prices will remain under pressure amid ongoing macroeconomic and trade policy uncertainty.
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India last tapped its reserves in November 2021, releasing 5 million barrels as part of a coordinated effort with other major oil consumers to cool soaring prices. It had bought crude at $19 a barrel during the 2020 crash to fill its reserves, saving ₹685.11 crore in the process.
To bridge the current 18–20 day shortfall and meet IEA standards, India is also working to expand its SPR network. In July 2021, the cabinet approved two additional commercial-cum-strategic facilities: a 4 million tonne cavern at Chandikhol in Odisha and a 2.5 million tonne facility at Padur, Karnataka, under ISPRL Phase-II.
However, land is yet to be allocated by the respective state governments. The tendering process for the Padur facility is currently underway, with bids invited in February this year, according to the ISPRL website.
India’s SPR programme has also attracted foreign interest. During Phase-I, Abu Dhabi National Oil Company (Adnoc) stored 5.86 million barrels of its crude in Mangaluru. In 2018, it signed another agreement to store crude at Padur. Kuwait Petroleum Corp. is also reportedly evaluating the option of storing oil in India under Phase-II.
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The idea behind allowing foreign companies to hold stock in India’s SPR is that they can store oil for sale to domestic refiners, as in the case of Adnoc. However, the Indian government retains the first right to the oil in case of an emergency.
Meanwhile, the standing committee on petroleum and natural gas, chaired by lawmaker Dattatrey Tatkare, recently urged the government to move faster. “The committee… recommends the Ministry to remain proactive towards arranging cheaper crude oil for strategic storage, particularly keeping in view the current geopolitical considerations," its March 2025 report said.
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