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New Delhi: The geopolitical crisis that has been roiling global energy markets for some time now has prompted countries with high crude oil import dependence to consider how they will secure fuel supplies during emergencies. India, which imports close to 85% of its crude oil requirement, is now rapidly building up strategic petroleum reserves in a substantial manner as a result of an increased strategic relationship with the United Arab Emirates.
During Prime Minister Narendra Modi’s visit to Abu Dhabi, India and the UAE signed up to increase cooperation in strategic oil storage. The agreement will see the Abu Dhabi National Oil Company (ADNOC) boost its stake in India’s Strategic Petroleum Reserve (SPR) system up to 30 million barrels of crude oil.
The size of the agreement is significant. Currently, India has a strategic crude storage capacity of about 5.3 million metric tonnes (MMT), or approximately 38 million barrels, at underground facilities in Visakhapatnam, Mangaluru and Padur. According to government-linked estimates, this new agreement with ADNOC could add almost 70% to the effective reserve stockpile.
The shift, in many respects, is part of a broader phenomenon worldwide. The countries are no longer exclusively dependent on their own oil stocks, but are forming alliances to allow for more rapid access when oil comes under strain. The timing is particularly crucial for India, where the instability in West Asia and worry over the Strait of Hormuz keep worrying energy markets.
It is important to note, however, that the UAE is not “donating” 30 million barrels of free oil to India. Most of the crude will be ADNOC-owned stocks held in India’s strategic reserve network, as part of the agreement. However, India enjoys immediate access, emergency supply flexibility, and stronger energy security in times of crisis.
The Indian Strategic Petroleum Reserves Limited (ISPRL) is a government entity in India responsible for managing the petroleum reserve system as part of preparations for previous global oil crises. The existing facilities in Visakhapatnam, Mangaluru and Padur cover about 9-10 days of crude oil requirements at the national level.
The extra 30 million barrels would bring the total to the equivalent of almost five to six days of crude demand coverage. India currently consumes 5-5.5 million barrels of oil per day, and even relatively small growth in reserves is strategically valuable.
What’s remarkable is that this collaboration also helps India avoid constructing new storage facilities from the ground up, a process that takes significant time and money. India will accelerate its access to reserves and strengthen its relationship with one of its primary energy providers through ADNOC’s involvement.
Over the last ten years, the India-UAE energy partnership has been gaining momentum. For the first time in India’s SPR program, ADNOC entered into an agreement in 2017 to store approximately 5.86 million barrels of crude at its Mangaluru reserve facility in Karnataka.
Since then, bilateral ties have expanded from crude trade to downstream projects, LNG supply talks, logistics and supply chain agreements, and infrastructure financing. Both countries also discussed cooperation in LNG, LPG, ship repair infrastructure, and maritime connectivity during Modi’s latest visit to the UAE.
Strategic reserves today, however, are more than just for war. They are increasingly employed by governments to manage temporary market disturbances, stabilize supply chains, and minimize the risk of sudden price rises. In India, the impact of fuel inflation is not only on transportation and manufacturing but also on household expenses, which makes reserve capacity have broader economic implications.
It is a change that can be seen all over the world. Other economies, such as China, Japan and South Korea, have strategic stocks that are much bigger than their consumption volumes, and are typically managed by both the government and private companies. The reserves in India are not high but have been built up in phases.
In Phase II of the SPR program, the government has already granted permission to carry out an additional commercial-cum-strategic storage at Chandikhol in Odisha and the expansion of storage at Padur in Karnataka, with a combined capacity of 6.5 million metric tonnes.
While India’s transition to renewable energy and electric vehicles has made significant strides, crude oil still plays an important role in the economy and will likely continue to do so in the near future. The aviation, freight transportation, petrochemicals, and heavy industries sectors are still relying heavily on fossil fuels.
This is why the UAE reserve arrangement is more than just the numbers. It’s a message of a more pragmatic energy strategy – one that not only diversifies energy supply but also promotes energy resilience and faster access during emergencies in an ever-changing global energy market.
English (US) ·