A parliamentary panel has recommended accelerating overseas oil asset acquisitions and expanding India's Strategic Petroleum Reserve (SPR) capacity by 6.5 million tonnes. These measures aim to protect the economy against global energy supply shocks. Investors should track the significant capital spending involved in these expansion projects and the ongoing efforts to reduce India's heavy reliance on crude oil imports.
A parliamentary panel has urged the government to speed up the acquisition of overseas energy assets and complete the second phase of India’s Strategic Petroleum Reserve (SPR) program. This directive comes as India looks to strengthen its energy security, primarily to protect the economy from global supply chain disruptions caused by geopolitical tensions.
Strategic Petroleum Reserve Phase II
India currently holds 5.33 million metric tonnes (MMT) of crude oil in storage facilities located in Visakhapatnam, Mangaluru, and Padur. To increase this buffer, the government has planned Phase II of the SPR program, which aims to add 6.5 MMT of storage capacity. This project is planned for Chandikhol and Padur and is expected to cost approximately ₹14,527 crore.
To manage the financial burden, the project is structured under a Public-Private Partnership (PPP) model, with the government providing viability gap funding of up to 60% of the project cost. Additionally, state-owned ONGC is independently working on a 1.75 MMT storage facility in Mangaluru, with half of the capacity designated for strategic reserves and the other half for commercial use. This dual-use approach is designed to balance energy security with operational revenue.
Investment and Energy Security
Beyond building storage, the government is also pushing to boost domestic oil output. The cabinet has already approved an investment of ₹84,000 crore for offshore oil and gas exploration, which will be deployed through the 2030-31 fiscal year. This capital spending is essential because India currently imports about 89 percent of its crude oil requirements.
This high dependency on imports makes the Indian economy sensitive to external factors, such as conflicts in the Middle East or instability along key maritime trade routes like the Strait of Hormuz. By acquiring more overseas oil and gas assets—where Indian public sector firms currently hold stakes in 45 assets across 21 nations—the government hopes to secure a more stable supply line.
Risks to Monitor
While these expansion plans are aimed at long-term stability, there are notable risks for investors to consider. The massive capital spending required for both exploration and storage infrastructure places significant pressure on the balance sheets of state-run energy companies. Execution delays in large-scale infrastructure projects remain a constant challenge that could impact project timelines and cost estimates.
Furthermore, while the focus is on crude oil, the lack of formal strategic reserves for natural gas remains a structural weakness. As India moves toward a more gas-based economy, the absence of such reserves leaves the power and fertilizer sectors vulnerable to sudden price shocks and supply shortages. Investors should keep a close watch on the timeline for Phase II project commissioning and the impact of continued exploration spending on the cash flows of major energy companies like ONGC and Oil India.