The West Asia conflict has exposed India's vulnerability in ways traditional petroleum reserves cannot address. When the Iran war disrupted global energy flows, nearly half of India's natural gas demand—met through imports—faced immediate risk. Unlike crude oil, which can be sourced from multiple regions and stored conventionally, LNG supplies remain concentrated among limited exporters like Qatar, UAE, and the US. The Strait of Hormuz, through which significant LNG cargoes transit, became a chokepoint during the conflict. Shipping data showed vessel movements through the strait plummeting from over 130 to just 16 transits daily, underscoring how quickly gas supply chains can fracture.
Global oil markets surged after Israel's airstrikes on Iran and Tehran's retaliation, with Brent crude hitting a six-month high of $74 per barrel. Though Iranian oil flows remained unaffected, fears of supply bottlenecks in the Strait of Hormuz pushed prices higher. The geopolitical risk premium faded once it became clear Iran would not escalate further, but the episode left a lasting impression: India's energy security framework had a critical gap. AnnualReports
The urgency for strategic gas reserves stems from fundamental differences in how natural gas and crude oil reach India. India imports about 55% of its natural gas requirements, valued at around $15 billion annually. LNG imports remain concentrated—Qatar alone accounts for about half of supplies in FY25. This concentration creates single-point failure risks that petroleum reserves don't face to the same degree.
Natural gas requires specialized infrastructure—LNG terminals, regasification facilities, high-pressure pipelines—that cannot be quickly repurposed or substituted. When West Asia conflicts disrupt LNG shipments, India cannot easily switch to alternative suppliers or routes due to these infrastructure constraints. The just-in-time delivery model for LNG, with limited buffer capacity, makes the supply chain inherently more vulnerable to disruptions compared to crude oil.
ONGC's exposure to international gas sourcing routes creates multiple points of failure. The Red Sea and Gulf of Aden attacks during Middle East tensions forced 30% of global tanker traffic to detour around Africa, sending shipping costs soaring. These attacks exposed the fragility of the world's oil and gas lifelines. For natural gas specifically, the situation underscores the vulnerability of critical shipping routes to geopolitical tensions, with bottlenecks in the Suez and Panama canals driving a return to more regional LNG flow patterns. AnnualReports +1
This represents 13-43% of ONGC's annual capex, creating substantial reallocation pressure from traditional exploration and production activities toward strategic infrastructure.
ONGC's recent capex performance provides context. FY 2024-25 saw the highest ever capex utilization of ₹62,057 crore, with 63% allocated specifically toward exploration, drilling, field development, and asset integrity improvements. The strategic gas reserve would compete directly with these core investments. The company has 25 major projects worth ₹74,474 crore in its pipeline, targeting domestic production growth of 3.4% CAGR to reach 44.51 million metric tonnes of oil equivalent by FY26. AnnualReports
The ₹14,527 crore Phase-II strategic petroleum reserve expansion provides a valuable benchmark. Under the PPP model, government viability gap funding is capped at 60% of total cost (₹8,716 crore), with the private sector contributing 40% (₹5,811 crore). This framework could be adapted for the gas reserve, with potential funding structure including 50-60% government VGF, 20-30% ONGC equity, and 10-20% private partnership.
The trade-offs are immediate. Strategic reserves have lower returns compared to E&P investments, which typically generate 15-20% return on capital employed. ONGC's current ROCE of 12.55% could face pressure from capital diversion to strategic infrastructure. However, the commercial component—40% of storage capacity available for trading—could generate ongoing revenue, similar to European models where commercial operations help sustain strategic facilities.
ONGC's strategic gas reserve planning represents both a complement to and significant departure from India's existing strategic petroleum reserves framework. While the initiative leverages lessons from the PPP model used in Phase-II SPR expansion, it introduces fundamental differences in storage technology and operational requirements.
The current SPR network comprises 5.33 million metric tonnes capacity at Visakhapatnam, Mangaluru, and Padur, providing 9.5 days of consumption coverage. Combined with 64.5 days of industry inventories, India has 74 days of total reserve coverage—approaching the IEA's 90-day standard for member countries. However, India has zero strategic natural gas reserves, with only 2 BCM of commercial storage in pipelines and LNG tanks.
Geographic proximity creates significant synergies. ONGC's gas reserve planning near western India assets can leverage existing SPR infrastructure at Mangaluru, where the company already operates LPG cavern storage with a capital investment of ₹2,438.90 crore. The company owns and operates over 25,500 kilometers of pipeline across India, including 4,500 kilometers of sub-sea pipelines, serving both oil and gas transportation needs. AnnualReports +1
The depleted gas field approach offers cost advantages. Unlike underground rock caverns required for crude oil storage, depleted gas fields have existing infrastructure and proven geological formations for high-pressure storage. This reduces both development time and capital expenditure compared to greenfield cavern construction.
India's leadership in emergency fuel stockpiles, alongside South Africa's recent strategic reserve developments, provides valuable implementation lessons. In March 2026, the IEA coordinated a record release of 400 million barrels from member countries' strategic reserves—the largest in the agency's history—in response to the Iran war. This release, equivalent to about four days of global production, proved insufficient for prolonged disruptions, highlighting the importance of robust strategic reserves.
South Africa's draft Strategic Petroleum Stocks Policy, published in July 2026, proposes a mixed stockholding model where the government maintains 60 days of national demand through the state-owned South African National Petroleum Company, while licensed fuel wholesalers maintain an additional 14-21 days. This combined approach provides 80+ days of coverage.
For ONGC's gas reserve, international benchmarks suggest a 4-8 year implementation timeline from approval to full operational capacity. This represents significant acceleration compared to the 20-year timeline for Phase-I SPR development (1998 concept proposal to 2018 completion), enabled by depleted field technology requiring less construction than underground caverns and PPP experience from Phase-II SPR.
The initiative requires comprehensive regulatory approvals across multiple agencies, including the Ministry of Petroleum & Natural Gas, PNGRB, Ministry of Environment, Forest & Climate Change, and state governments.
Recent policy developments support accelerated implementation. The Natural Gas and Petroleum Products Distribution Order, 2026, notified under the Essential Commodities Act, provides a streamlined framework with time-bound approvals, deemed clearance provisions, and standardized charges. This addresses longstanding challenges in infrastructure development and regulatory uncertainty.
The proven PPP model and VGF support mechanisms from Phase-II SPR establish a clear precedent for government financial support. The July 2026 India-Japan joint statement on energy resilience further creates opportunities for international cooperation, including knowledge sharing on stockpiling systems, emergency response coordination, and institutional collaboration between ISPRL and Japanese institutions like JOGMEC and JBIC.
This precedent could facilitate similar national importance designation for the strategic gas reserve, accelerating regulatory approvals and government support. Others
