India's Oil Storage Problem: A Nation of Enormous Appetite and Thin Reserves

THE GEOSTRATA
Jun 20
5 min read

India is one of the fastest-growing energy markets on the planet, while being the world’s third-largest consumer of crude oil and the second-largest importer. Yet for a country whose economy depends substantially on imported oil, the strategic reserves portray quite an alarming story, a vision where infrastructure has grown but not quite fast enough.

Illustration by The Geostrata

THE SCALE OF DEPENDENCE

To understand why India’s oil storage matters, it is imperative to first discover how deep its dependence runs. India’s domestic crude oil production has fallen from 36.94 million tons in 2015-16 to just 28.70 million tons in 2024-25, this is a decline of 22.3 percent over nine years. While crude oil imports have simultaneously risen to 243.22 million tons, making imports nearly 89.4 percent of the total crude supply. This figure is not just a short-term anomaly; rather, India’s oil import dependence hit an all-time high in the fiscal year ending March 2025, with imports accounting for 88.2 percent of all crude consumed between April 24 and February 25.

With half of the supply originating from the Gulf countries of Saudi Arabia, Iraq, and the UAE, the cost for India is enormous. India spent almost $100 billion in just 11 months of the current fiscal year importing approximately two to six million tons of crude oil. Most of the Gulf countries ship their oil through the narrow choke point of the Strait of Hormuz. Now in a stable world order, this is still a manageable vulnerability, but as the world saw in 2025 and 2026, active conflicts involving Iran and escalating tensions across West Asia have turned this vulnerability into a strategic crisis.

WHAT INDIA ACTUALLY HAS IN RESERVE

India’s Strategic Petroleum Reserve (SPR) is a framework that was established formally in 2004 through the Indian Strategic Petroleum Reserves Limited (ISPRL), a special-purpose company under the Ministry of Petroleum and Natural Gas. Visakhapatnam in Andhra Pradesh, Mangalore, and Padur in Karnataka are the three underground rock caverns that make up the SPR with a combined storage capacity of 5.33 million metric tons, which is almost enough to cover approximately 9.5 days of India’s crude oil requirements at full capacity.

But here is where the critical issue arises. As of early 2026, India’s SPR holds 3.37 million metric tons of crude oil, just about 64 percent of total capacity, as was confirmed by the Minister of State for Petroleum and Natural Gas, which means that one-third of India’s strategic buffer sits almost empty. At the current level that strategic reserve amount stands to roughly five to six days of supply cover, not 9 days, and to bring in more context, here the International Energy Agency requires its member countries to maintain oil stock levels equivalent to no less than 90 days of net imports. In this situation, India’s strategic and commercial storage currently stands at 74 days of total net imports, which is still well short of that 90-day ceiling, and yet that figure includes commercial stocks held by state oil companies rather than purely strategic reserves.

WHY DOMESTIC PRODUCTION HASN'T COME TO THE RESCUE

Here is where the obvious question arises: why cannot India simply produce more of its own oil? The most reliable answer would be that India has been trying, although with mixed results. ONGC (Oil and Natural Gas Corporation Limited), which is India’s state-owned explorer and the country’s largest oil producer, previously announced plans to raise crude oil output by 11 percent in the financial year 2024-25, and the company has made genuine progress in this new exploration in FY 2024-25. ONGC disclosed five new oil and gas discoveries, including both onshore and offshore finds, and with the Ministry of Petroleum launching the 10 ^th Open Acreage Licensing Policy round in February 2025, it offers 25 new oil and gas blocks covering nearly 192,000 square kilometers.

Yet the structural constraints have continued to persist as India’s proved crude oil reserves have actually fallen from 762.73 million tons in 2014 to 672.07 million tons as of 2025, which is almost a 12% decline, suggesting that new discoveries are not keeping pace with the consumption. India’s geographical endowment simply cannot match the country’s consumption appetite, and closing the gap with imports is what is leaving the nation at a strategic chokehold.

DIPLOMACY AS ENERGY POLICY

It is in this context that Prime Minister Narendra Modi’s visit to the UAE on May 15, 2026, as the first stop on his five-nation tour, was of great significance, as the energy outcomes of that particular visit are among the most substantive of any India-UAE summit in recent years. With the centerpiece being an MOU on strategic collaboration between ISPRL and ADNOC under which ADNOC may store up to 30 million barrels of crude oil in Indian strategic petroleum reserve facilities, including participation in storage at Visakhapatnam and future facilities at Chandikhol in Odisha.

This agreement will also open the possibility of India’s crude oil reserves being stored at Fujairah in the UAE, a strategic move that is expected to significantly strengthen India’s emergency energy preparedness. This is indeed quite a novel structural arrangement as a foreign national oil company holding participation interest in India’s strategic energy infrastructure will create a shared stake in the stability and security of India’s energy supply system as ADNOC’s long term commercial interest will become directly aligned with India’s energy security outcomes in a way transitioning the bilateral relations from transactional to a special, privileged, and strategic one. A separate agreement was also signed between ADNOC and Indian Oil Corporation for long-term and prioritised LPG supplies, which is of special significance because the UAE currently meets nearly 40 percent of India’s domestic LPG requirements.

The timing of these agreements is not just incidental. These came against the backdrop of an unstable global order across the Gulf and the mounting threats to maritime routes around the Strait of Hormuz. India is already expanding its SPR footprint with expansion sites at Chandikhol in Orissa and a second phase at Padur, having gained approval. The ADNOC agreement will provide a credible pathway for accelerating that process. India is also in discussions with Oman about lasting space to store five million barrels abroad, a model that could allow India to maintain energy reserves outside its own territory, reducing vulnerability to a single point of disruption.

Ultimately, inside a fractured global trade architecture, a volatile Strait of Hormuz, and a world where energy has become an explicit instrument of statecraft, India's skyrocketing oil demand entails ensuring a resilient and stable energy security framework more essential than ever before. New Delhi must make haste and rapidly evolve beyond tactical crisis management and proactively build a diversified sanctions-insulated supply network.

BY ASMITA SAHA

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