India Boosts Oil Security: ONGC to Build ₹15,000 Cr Mangaluru Reserve

The Indian government has directed the state-owned Oil and Natural Gas Corporation (ONGC) to construct and fill a new strategic petroleum reserve (SPR) facility in Mangaluru, Karnataka. This significant undertaking, estimated to cost approximately ₹15,000 crore (around $1.6 billion), is a direct response to recent geopolitical instabilities, particularly an 'Iran war shock' that exposed India's vulnerabilities to global oil supply disruptions. The proposed facility will be an underground cavern with a capacity of 1.75 million metric tonnes (MMT). This expansion is crucial for India, as it will increase the nation's existing strategic crude storage capacity of 5.33 MMT by roughly one-third. The total cost of the project is bifurcated, with approximately ₹5,000 crore allocated for the construction of the cavern itself and another ₹10,000 crore designated for filling the reserve with crude oil at current market prices and exchange rates. This initiative represents a notable departure from previous practices in India's strategic petroleum reserve program. Historically, SPR facilities were funded solely by the government and managed by Indian Strategic Petroleum Reserves Limited (ISPRL), a special purpose vehicle. However, for the Mangaluru project, ONGC, India's largest oil and gas producer, is taking on the responsibility of financing and developing this critical national energy security asset using its own balance sheet. The company already owns the land earmarked for the project, which streamlines the development process. Furthermore, ONGC's board has authorized engagement with the central government regarding the expansion of commercial utilization of this new facility, indicating a potential hybrid model for future reserves. The primary impetus behind this urgent push for enhanced oil reserves is the recent 'Iran war shock,' which, according to reports, involved a 'US-Israeli attack on Iran' and subsequent disruptions in the crucial Strait of Hormuz. These events highlighted India's heavy reliance on oil imports, with approximately 89 percent of its crude oil requirements being met through foreign sources. Such geopolitical conflicts and supply route vulnerabilities underscore the critical need for robust energy security measures to protect the Indian economy from drastic supply shocks and price volatility. India currently operates three strategic petroleum reserve facilities under Phase-I, located at Visakhapatnam (1.33 MMT) in Andhra Pradesh, and Mangaluru (1.5 MMT) and Padur (2.5 MMT) in Karnataka, totaling 5.33 MMT. While the existing Mangaluru reserve has a capacity of 1.5 MMT, with part leased to Mangalore Refinery and Petrochemicals (an ONGC subsidiary) and Abu Dhabi National Oil Company, the new project will be a Phase-I extension, significantly bolstering the existing infrastructure. India's current strategic crude stocks of about 21 million barrels at the end of 2025 are considered modest compared to other major oil-consuming nations, such as China and Japan, which possess much larger reserves. The government's broader strategy for energy security also includes plans for Phase II of the SPR program, which aims to add another 6.5 MMT of storage capacity. This involves new facilities at Chandikhol in Odisha (4 MMT) and an expansion at Padur (2.5 MMT), to be developed under a Public-Private Partnership (PPP) model with government viability gap funding. Additionally, there are discussions about expanding strategic reserves beyond crude oil to include liquefied petroleum gas (LPG) and liquefied natural gas (LNG), with an estimated cost of $42 billion over 10 years, further illustrating India's comprehensive approach to energy resilience. In conclusion, the government's directive to ONGC to build the ₹15,000 crore strategic oil reserve in Mangaluru is a timely and critical step to fortify India's energy security. This move, triggered by recent geopolitical turbulences in the Middle East, demonstrates India's proactive stance in mitigating risks associated with its high import dependency and ensuring a stable energy future for its rapidly growing economy.

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