Govt taps ONGC to build new strategic ₹15,000 crore oil reserve after Iran war exposes energy vulnerabilities

The Centre has directed state-run Oil and Natural Gas Corporation (ONGC) to build India's next strategic petroleum reserve (SPR) at Mangaluru, marking the first time a public sector oil producer has been tasked with developing a national emergency crude storage facility.

According to reports, the project is expected to cost nearly ₹15,000 crore, including construction and crude procurement costs.

The move comes in the aftermath of the Iran war, which exposed India's limited emergency oil stockpile and its vulnerability to sudden disruptions in global energy supplies. The proposed underground cavern at Mangaluru will have a storage capacity of 1.75 million metric tonnes (MMT) of crude oil, increasing the country's existing strategic storage capacity of 5.33 MMT by nearly one-third.

Reports say ONGC already owns the land earmarked for the project and is likely to spend around ₹5,000 crore on constructing the cavern. An additional ₹10,000 crore may be required to fill the reserve with crude at current oil prices and exchange rates.

Shift in strategic storage approach

The development signals a shift in the government's approach towards strategic oil storage. India's three existing SPR facilities, located at Visakhapatnam, Mangaluru and Padur, were fully funded by the government and are operated by Indian Strategic Petroleum Reserves Ltd (ISPRL), a special purpose vehicle under the Ministry of Petroleum and Natural Gas.

India currently consumes about 5 million barrels of crude oil per day. Its existing strategic storage capacity of around 39 million barrels remains significantly smaller than those of major economies.

According to data from the US Energy Information Administration, India's strategic crude stockpile stood at about 21 million barrels as of late 2025, compared with 1.4 billion barrels in China, 413 million barrels in the United States and 263 million barrels in Japan.

The new facility will complement the government's second phase of SPR expansion, which includes a 4 MMT reserve at Chandikhol in Odisha and an additional 2.5 MMT facility at Padur being developed under a public-private partnership model. Once these projects are completed, India's total strategic storage capacity could exceed 13 MMT.

Energy security gains

Energy experts say larger strategic reserves help countries cushion the impact of supply disruptions, sharp price spikes and geopolitical conflicts. During the recent West Asia crisis, countries with substantial stockpiles were better positioned to manage import disruptions and volatile crude prices, while Indian refiners were forced to seek alternative supplies in global markets.

A larger strategic reserve base is also expected to strengthen India's energy security and improve its bargaining power with crude suppliers by reducing dependence on emergency purchases during periods of market stress.