India Expands Oil Storage Sites After Shock Supply Disruption

India's state-run Oil and Natural Gas Corporation (ONGC) is planning to expand its oil storage capabilities following a significant supply disruption caused by the Iran war and the subsequent bottleneck at the Strait of Hormuz. The country, the world's third-largest crude oil importer, aims to enhance its resilience against potential future supply shocks.

In response to the crisis, ONGC intends to construct a new storage facility in Mangaluru, a city located on the southwestern coast of India in the state of Karnataka. The new site will be capable of storing approximately 1.75 million metric tons of oil, which translates to around 13 million barrels. This additional capacity will be divided equally between strategic reserves and ONGC's commercial operations, according to Suresh Gopi, the Minister of State for Petroleum and Natural Gas.

The new storage project is expected to cost around $1.6 billion and will be funded entirely by ONGC, as reported by Indian media. The urgency of this expansion became apparent just four months into the Middle East crisis, when the Indian government directed ONGC to build and fill a new site specifically for strategic petroleum reserves. The estimated investment for this initiative amounts to $1.6 billion, according to a June report by the Economic Times, citing sources familiar with the plans.

At present, India's Strategic Petroleum Reserve storage has a capacity of 5.33 million metric tons of crude oil, equivalent to only 39 million barrels or eight days' worth of India's oil consumption. This limited storage capacity has exposed India to considerable risks, particularly in the face of potential supply disruptions. By bolstering its storage infrastructure, India aims to reduce its vulnerability to external shocks and better manage its oil demands in the future.