India’s push to expand strategic petroleum reserves has become an infrastructure priority as geopolitical disruption exposes the cost of depending on imported crude without enough emergency storage. The immediate challenge is not only to announce more capacity, but to complete projects that have already spent years moving through land, commercial and financing negotiations.
The country is setting up two facilities with combined capacity of 6.5 million tonnes under Phase 2 of its strategic petroleum reserve programme: a 4-million-tonne facility at Chandikhol in Odisha and a 2.5-million-tonne facility at Padur in Karnataka. The projects are being developed as commercial-cum-strategic storage, a model that seeks to combine public energy-security objectives with private participation and commercial use of the facilities.
The recent West Asia conflict has renewed calls to immediately double India’s domestic strategic storage capacity and explore overseas locations. The pressure reflects a structural vulnerability in the country’s energy system. India imports a large share of the crude oil it processes, leaving the economy exposed not only to supply interruptions but also to sharp movements in international prices, freight and insurance costs.
The infrastructure response, however, remains uneven. The Chandikhol project, which has been delayed for nearly eight years, is described in the report as gradually moving forward while certain commercial terms with Abu Dhabi National Oil Company are being finalised. Around 400 acres of land has been handed over for the project. That land transfer is an important administrative milestone, but it does not by itself complete the financial, technical and commercial arrangements needed to bring a large underground storage project into operation.
The project’s prolonged timeline illustrates why strategic storage cannot be treated as a conventional construction exercise. It requires the alignment of land, cavern or storage engineering, crude procurement, operating arrangements, evacuation infrastructure and funding. A facility can have a strategic purpose for the state while also needing a commercial structure that makes participation viable for private and overseas partners.
Manas Majumdar, Partner and Leader, Oil & Gas, Fuels & Resources at PwC India, told BusinessLine that Phase 2 is being developed in the public-private partnership mode at an estimated capital cost of around ₹15,000 crore. Megha Engineering, ADNOC and the Centre are involved, with voluntary gap funding from the government accounting for close to 60 per cent, according to the report.
That funding structure reveals the central institutional problem. Strategic petroleum reserves create a public benefit that may not be fully captured by commercial revenues. The government therefore has to absorb part of the viability gap while private participants contribute capital, capabilities or access to crude. If commercial terms remain unresolved, a project can possess land and an approved strategic rationale but still fail to progress at the required speed.
The scale of the financial exposure makes the storage question more than an energy-sector concern. Majumdar said India’s annual crude import bill was around $150 billion last year and that the crude basket had risen from about $90 a barrel to more than $110. He estimated that the increase could add $20 billion to $30 billion to the import bill, depending on the quantity India imports.
The economic value of storage lies in the timing of procurement. Crude placed in storage before a price spike can provide supply at a lower acquisition cost than fresh purchases made during a period of international disruption. Strategic reserves cannot eliminate exposure to global markets, but they can provide time for the government and refiners to manage a temporary shock rather than respond entirely through immediate purchases.
India’s existing and planned storage network has several components. Alongside the Phase 2 facilities, state-run ONGC is developing a 1.75-million-tonne strategic petroleum reserve at Mangalore. Two additional locations, Bina in Madhya Pradesh and Bikaner in Rajasthan, have been identified for crude oil, liquefied natural gas and liquefied petroleum gas storage. Feasibility studies are under way, according to the report.
The proposed locations also point to a broader shift in how energy infrastructure is being planned. Storage is no longer limited to crude oil caverns associated with the original strategic reserve system. The identification of sites for crude, LNG and LPG suggests an attempt to build a wider buffer across several fuels. The supplied report does not establish the final design, capacity or implementation schedule for the Bina and Bikaner facilities, so their contribution remains at the feasibility stage.
The choice of storage technology and geography will shape both cost and resilience. Majumdar has called for exploration of salt caverns in Madhya Pradesh and Rajasthan. He has also suggested commercial lease and sale models to bring more private players into strategic reserve development. These proposals place geology, land availability, connectivity and commercial rights at the centre of the infrastructure debate.
A reserve is useful only when stored fuel can be accessed and moved into the operating network. That means the physical facility must work with ports, pipelines, refineries and distribution systems. The report does not provide detailed information on the evacuation networks or operational arrangements for each proposed site. What it does show is that storage capacity is part of a larger chain: land must be secured, facilities must be financed and built, crude must be procured, and the stock must be available when the government needs it.
India is also looking beyond domestic sites. The country has signed a memorandum of understanding with the United Arab Emirates for stockpiling crude in foreign locations, according to the report, and is in talks with Japan to deepen cooperation in strategic fuel reserves. The UAE agreement is dated May 2026 and the Japan discussions July 2026. Overseas storage could diversify the physical location of reserves, but it also introduces questions about access, ownership, release conditions and coordination during a crisis. The supplied material does not specify the commercial or operational terms of either arrangement.
The institutional responsibility is therefore distributed across the Centre, state-owned energy companies, private infrastructure participants and foreign partners. The Centre’s voluntary gap funding supports viability, while entities such as ONGC and private companies have roles in developing or operating facilities. State-level land and administrative coordination are also material, as demonstrated by the land transfer for Chandikhol. This makes project execution dependent on more than the energy ministry or a single implementing agency.
The eight-year delay at Chandikhol is significant because it shows how strategic infrastructure can lose time even after the need for it is established. Each year of delay leaves the country with less additional buffer than planned and reduces the ability of the reserve system to respond to changing geopolitical conditions. At the same time, the current movement on commercial terms suggests that stalled projects can progress when institutional and financial arrangements are resolved.
The numbers also clarify the gap between policy ambition and delivered capacity. Phase 2 alone represents 6.5 million tonnes across Odisha and Karnataka, while the Mangalore project adds another 1.75 million tonnes under development. The report says India should immediately double its domestic strategic storage capacity, but it does not state the country’s current total capacity or provide a completion date for the proposed expansion. The headline ambition is therefore clear, while the delivery timetable remains unsettled.
This distinction matters for urban and industrial India. Refineries, transport systems, manufacturing clusters and household fuel markets depend on stable energy flows, even when storage facilities are located far from major cities. A disruption in crude availability or a sudden import-price increase can travel through logistics costs, industrial production and consumer prices. Strategic reserves are therefore a form of national infrastructure whose effects are experienced across the built economy rather than only at the storage site.
The evidence supplied by the report confirms a clear policy direction: India is seeking more domestic capacity, overseas storage partnerships and a larger role for public-private financing. It also confirms that execution remains the immediate constraint. Chandikhol is advancing after years of delay, Padur is part of the same Phase 2 expansion, Mangalore is under development, and Bina and Bikaner remain at the feasibility stage.
The developments to monitor are consequently practical rather than rhetorical: the finalisation of Chandikhol’s commercial terms, the construction progress of the Odisha and Karnataka facilities, the status of ONGC’s Mangalore reserve, the outcome of feasibility studies at Bina and Bikaner, and the operating terms of overseas storage cooperation. Until those milestones are reached, India’s strategic petroleum reserve expansion will remain a capacity plan in transition rather than a completed shield against energy shocks.
