India Moves to Build Strategic Gas Reserves After Hormuz Disruption
New Delhi is evaluating underground caverns and cryogenic LNG tanks for a first-ever strategic buffer, prompted by supply shocks from the West Asia conflict.
India has begun work on its first strategic natural gas storage system, with public sector oil companies evaluating underground salt caverns and above-ground cryogenic LNG tanks as the government responds to supply disruptions triggered by the West Asia conflict. A committee formed under the Petroleum Ministry after the conflict erupted is assessing both options, according to sources cited by The Hindu BusinessLine on Saturday (2026-07-05).4
The move reflects how exposed India's gas supply chain proved to be when fighting around the Strait of Hormuz choked LNG shipments into the region. India, which relies heavily on spot LNG purchases rather than long-term contracted volumes, had limited physical buffers when cargo availability tightened.4
Sources said cryogenic overground tanks are among the options under active evaluation. Underground salt caverns, used for strategic petroleum reserves in the United States and Europe, could serve a similar function for natural gas, though India's geology makes viable cavern sites geographically limited.4
One source raised the dual-use potential of whatever capacity India builds: "How much should be strategic and commercial, considering storage buffers can also help monetise arbitrage opportunities — like China does with its huge crude storage." The framing positions Indian strategic gas storage not purely as an insurance mechanism but as a market tool.4
China's crude storage practices have allowed Beijing to absorb price shocks and time purchases to periods of supply surplus, converting physical inventory into a commercial instrument. A similar capability in gas would let Indian buyers time LNG procurement around JKM price cycles rather than purchasing in tighter spot markets during demand peaks. JKM futures stood at $16.07 per million British thermal units as of Monday (2026-07-06), reflecting broader Asian LNG market conditions.4
The broader Asian market context makes the timing of India's initiative intelligible. Wood Mackenzie cut its forecast for Asian LNG imports to around five million metric tons from a prior estimate of 12.4 million tons, assuming a two-month disruption to Middle East supply.2 Asian utilities, facing reduced LNG availability and higher spot prices during the disruption, accelerated their turn toward coal-fired generation to fill the gap. Bangladesh increased coal-fired power output and imports of coal-based electricity, according to government data.2
Total LNG shipments into Japan, China, South Korea and Taiwan came in at roughly 15.94 million tonnes in February, down nearly 19% from the prior month, according to shipping data cited by Reuters.3 The disruption hit just as the region's structural dependence on LNG imports was already under pressure. Wood Mackenzie has noted that local gas production across Asia is declining, with China the exception in the near term, and that the region will need sustained investment in domestic supply to avoid repeating the crisis conditions of 2026.1
India's strategic storage initiative sits within a regional pattern. Asian LNG buyers have historically relied on the depth of global spot markets as a substitute for physical stockpiling — a model that worked when supply was abundant and prices low but proved fragile under a genuine route disruption.3
The committee's evaluation is at an early stage and no final storage design or timeline has been announced. Subsurface salt cavern development takes years from site selection to commissioning; cryogenic tank builds are faster but carry different cost and siting constraints. The source comment on commercial arbitrage use suggests the eventual policy may try to recover some of the capital cost through market operations rather than treating the facility purely as an emergency buffer.4
Whether India moves from evaluation to a funded programme will depend in part on how long Hormuz disruptions persist. If tanker traffic through the strait fully recovers and spot LNG prices remain accessible, the political urgency behind the storage push may ease. For now, a Petroleum Ministry committee is on record examining the question — the first formal step India has taken toward a strategic gas reserve after decades of relying on market access alone.