A Resilient Energy Future: India’s Strategic Reserves Strategy Under Scrutiny

The recent US-Iran conflict has highlighted India’s vulnerability to global supply disruptions, underscoring the need for robust strategic reserves. With India’s crude oil consumption equivalent to roughly 9.5 days of its dedicated Strategic Petroleum Reserves (SPRs) capacity, the government’s efforts to expand these reserves are commendable.

The Phase II expansion of SPRs at Chandikhol and Padur, approved under the Public-Private Partnership model, is a step in the right direction. Upon completion, India will boast a total strategic petroleum reserves capacity of 11.88 MMT, bringing it closer to its ambitious 90-day reserve target. However, this development raises more questions than answers regarding the need for transparency in drawdown and release frameworks.

The current system relies on clearly defined triggers such as geopolitical conflicts or extreme price shocks, but what about other potential disruptions like shipping or supply outages? A comprehensive framework would provide a better safety net against unforeseen events. India should establish clear guidelines for accessing strategic reserves during such incidents to ensure timely response and minimize losses.

India’s energy security strategy appears reactive rather than proactive. The focus on building SPRs, while necessary, fails to address the underlying vulnerabilities in the system. For instance, the country’s reliance on imported LPG creates a significant vulnerability. Targeting 30-40 days of dedicated inventories through expanded terminal storage is a step in the right direction.

The government’s emphasis on establishing 15-30 days of strategic storage for LNG is crucial, given India’s growing gas consumption. However, this initiative should be accompanied by measures to enhance the country’s last-mile resilience, including improvements to bottling plants, rail connectivity, road logistics, and cylinder distribution networks.

India must focus on developing underground LPG caverns and exploring alternative storage options for crude oil and LNG. This will not only reduce the country’s reliance on imported fuels but also enhance its ability to respond rapidly in times of crisis. Underground storage facilities can provide a secure and efficient way to store fuel, reducing the risks associated with surface-based storage.

To further bolster energy security, India should revisit its minimum stockholding requirements and encourage reserve accumulation during periods of low global oil prices rather than relying on emergency purchases during crises. A counter-cyclical inventory build-up mechanism will reduce vulnerability to price shocks and provide a cushion against future supply disruptions.

Ultimately, India’s energy security strategy must be guided by a long-term vision that balances short-term needs with long-term sustainability goals. The government should adopt a more holistic approach, incorporating measures to enhance domestic production, improve energy efficiency, and promote renewable energy sources. By doing so, India can build a resilient energy future that is less susceptible to global supply disruptions.

As the country continues to navigate its complex energy landscape, it’s clear that a resilient energy future requires more than just robust strategic reserves. It demands a comprehensive strategy that addresses underlying vulnerabilities in the system and fosters a culture of transparency and preparedness.