ONGC has received board approval to develop a 1.7 million tonne strategic crude oil reserve in Mangaluru. This initiative aims to strengthen India's energy security and buffer against potential global supply disruptions, with plans to explore commercial storage options.
State-run Oil and Natural Gas Corporation (ONGC) has received board approval to construct a 1.7 million tonne (MT) strategic crude oil reserve in Mangaluru, Karnataka. The project is part of a larger national effort to improve India's ability to withstand sudden energy supply shocks caused by geopolitical instability. By increasing the volume of oil stored within the country, the government aims to ensure a more stable supply chain for domestic refineries.
Expanding National Storage Capacity
India currently maintains 5.3 MT of strategic crude oil reserves, which are managed by the Indian Strategic Petroleum Reserve Limited (ISPRL). These existing facilities are located in Visakhapatnam, Mangaluru, and Padur and provide roughly 9.5 days of import cover based on national consumption levels. The addition of this new 1.7 MT facility will significantly boost the nation's total storage capacity. Furthermore, the government has already initiated a Phase-II expansion program, which includes developing additional underground caverns in Chandikhol and Padur to add 6.5 million metric tonnes (MMT) of capacity.
Commercial Use and Operational Strategy
While these reserves are primarily for national emergency use, ONGC is looking at ways to manage the high costs of building and maintaining these underground storage facilities. The company’s board has requested permission from the government to allow for partial commercial utilization of the new reserve. This model would allow for the storage of crude oil for third parties or for trade, which could help offset operational expenses. Similar practices have been adopted by ISPRL for existing facilities. Even if commercial use is permitted, the central government will maintain primary access to the oil in the event of an energy crisis.
Sector Context and Partnerships
This expansion follows a period of heightened focus on energy security, with the Ministry of Petroleum and Natural Gas actively encouraging capacity growth. India has been working to build storage partnerships with international players to fund and stock these facilities. For example, Abu Dhabi National Oil Co (ADNOC) has entered into agreements to store significant volumes of crude oil in India, highlighting the country's move to leverage foreign collaboration to secure its energy requirements.
Financial and Execution Monitorables
For investors, the key monitorables will be the project's timeline and the capital spending required to complete such a large-scale underground infrastructure project. As ONGC invests in this expansion, stakeholders will be tracking the company's ability to maintain its profit margins while balancing these significant infrastructure commitments. Additionally, the final decision from the government regarding the proposed commercial storage model will be important, as it directly impacts the project's long-term financial viability and contribution to the company's balance sheet.