Strategic Petroleum Reserve In India

By BYJU'S Exam Prep

Updated on: September 13th, 2023

Context: Keeping in mind the ever-fluctuating global crude oil availability and prices, Government of India is planning its strategic oil reserves. These oil reserves are a boost to the energy security of the nation as they act as a buffer against volatility in crude oil prices. The Government plans to build underground caverns at two locations in Odisha and Karnataka which can hold up to 6.5 million tonnes. Along with the proposed new locations, India already has three underground storage facilities which have a total capacity of 5.33 million tonnes.

Strategic Petroleum Reserve In India: Definition; Why India Needs strategic reserves; Govt Initiatives; Global Strategic Petroleum Reserve 

What is the Strategic Petroleum Reserve?

The SPR is a national supply of emergency crude oil established primarily to reduce the impact of disruptions in supplies. The strategic reserves are in addition to the existing ones with the oil companies. The crude oil storages are constructed in underground rock caverns. In India, Indian Strategic Petroleum Reserves Limited ( ISPRL), a Special Purpose Vehicle, is responsible for maintaining the country’s strategic petroleum reserves. ISPRL is wholly owned subsidiary of Oil Industry Development Board (OIDB) which functions under the administrative control of Ministry of Petroleum and Natural Gas.

At present, ISPRL maintains an emergency fuel store of 5.33 million tonnes ( 36.92 million barrels). This is enough to provide crude oil for ten days of consumption.

The Strategic Petroleum Reserve programme in India is being developed in several phases. In Phase I, strategic oil storages are built at Mangalore (1.55 MMT, Karnataka), Padur ( 2.5 MMT, Karnataka) and Visakhapatnam ( 1.33 MMT, Odisha). It has a storage capacity of 5.33 million tonnes.

In Phase II, two more underground reserves will be developed at Chandikhol (Odisha) and Udupi (Karnataka), giving an extra storage capacity of 6.5 million tonnes.  It will amount to 12 days of national consumption. These will, however, be a Public-Private Partnership (PPP) collaboration.

Why underground rock caverns?

Rock caverns are large man-made spaces in the rock and are considered the safest means of storing hydrocarbons.

Why does India Need Strategic Oil Reserves?

India is not an oil abundant nation. Along with its vast population, rapid development, and improving standards of living, its energy demand is exponentially increasing. This has made India one of the largest importer and consumer of crude oil and natural gas. Due to this, India is vulnerable to global oil shocks which could occur out of any reason- economic, political or natural.

  1. In 1990, the Gulf War led to an energy crisis in India. At that time India’s oil reserves were adequate only for three days. Such a similar threat in the present as well owing to the volatile geopolitical conditions of the Middle East.
  2. Despite promising to move to non-fossil fuel-based resources for 40% power generation by 2030, India’s dependence on fossils is not visible to go down anytime soon. On top of that, India imports 82% of its oil needs at present and aims to bring it down to 67% by 2022.
  3. India remains 3rd largest consumer of oil in the world.

Thus, India is always reeling under the strategic risk, energy insecurity and financial drains due to its crude oil import.

To address strategic risk and energy insecurity, Atal Bihari Vajpayee government came up with a concept of Strategic Petroleum Reserves in 1998.

Indian refinery companies also maintain crude oil storage of 65 days. So now after completion of Phase II, India will have a total of 87 (65+22) days of the strategic buffer of crude oil.

Government Initiatives to improve Strategic Oil Reserves

  • Attracting investments and technology to improve hydrocarbon extraction worth Rs 50 lakh crore in the next 20 years.
  • Special budgetary provisions to construct strategic oil reserves in various places in Phase II of SPR programme. 

SPR Programmes at Global Level

Crude oil is considered a valuable resource all over the world. So, the countries, as well as private industries, maintain a healthy stockpile of crude oil. This hoarding is done to protect from future oil shocks due to the volatile Middle East region, which is seeing regular conflicts.

The oil production of the world is affected by the groups such an OPEC (Organisation of Petroleum Exporting Countries) and GCC (Gulf Cooperation Council) which regulate over 44% of world’s total crude oil production and approximately 21% of the natural gas production. The disruption in oil supply can also be caused due to any natural disaster as well.

So, the strategic oil reserves are a defence against any downfall in future oil production.

Since the oil reserves are unevenly located across the countries, it is wise to maintain a stockpile, especially when the prices are determined by the demand-supply system of the market. As the present era is built upon globalisation and industrialisation, any disruption in the oil market severely impact the socio-economic and political environment of the nations.

The USA, China and Japan are the nations with the biggest Global Strategic Petroleum Reserves.

  • The US is the world’s largest holder of crude oil reserve with a maximum capacity of 726.6 million barrels. It maintains its strategic reserves in underground caves along the gulf coast.
  • China has 2nd largest reserve with a capacity of about 470 million barrels.
  • Japan has 3rd largest petroleum reserves at 324 million barrels. Japan announced to share its oil reserves with other countries in 2007.
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