India Moves on Strategic Gas Storage After Hormuz Disruption Halved LNG Imports
A West Asia conflict that choked off nearly half of India's Middle East LNG supply has prompted New Delhi to develop strategic gas reserves while domestic demand enters its sharpest decline in years.
India's natural gas demand is on course to fall roughly 8% year-on-year in 2026, with the fertilizer sector absorbing the steepest cuts. The West Asia conflict and a disruption to flows through the Strait of Hormuz effectively choked off nearly half of the country's LNG imports from the Middle East, according to data published on Saturday (2026-07-11).5
The supply shock did more than compress near-term demand. It exposed how thin India's gas security buffers are. Public sector oil companies are now evaluating options for the country's first strategic natural gas storage system, including underground salt caverns and above-ground cryogenic LNG tanks, following the formation of a Petroleum Ministry committee constituted after the conflict erupted.4
The scale of the disruption explains the urgency. Around 20% of global LNG production flows through the Strait of Hormuz, and Goldman Sachs estimated the supply pause reduced near-term global LNG availability by about 19%. ICE Endex TTF front-month gas rose 35% on Tuesday (2026-05-19) alone, reaching more than €60 per megawatt-hour, and was roughly 76% higher on the week of 2026-05-18. JKM Asian LNG was trading at $16.52 as of Monday (2026-07-13).2
India's oil reserve position illustrates how exposed the country was going into this crisis. It holds strategic petroleum reserves of 5.33 million metric tons — roughly 39 million barrels, or about eight days of consumption at approximately 5 million barrels per day. Thailand, despite spending about 7% of GDP on oil and gas imports, holds nearly 100 days of reserves.3,1
On crude, the government has already moved. It asked state-owned ONGC to develop a new strategic petroleum reserve site at Mangaluru with a proposed capacity of 1.75 million metric tons, according to local outlet the Economic Times. The investment could reach $1.6 billion and would raise India's total crude storage by roughly one third.3
Gas storage is the harder problem. Unlike crude, natural gas requires either specific geological formations for underground storage or large capital outlays for cryogenic surface infrastructure. Salt caverns can cycle rapidly but are geologically constrained. Cryogenic LNG tanks are proven but expensive to build and maintain. The ministry committee has not settled on a preferred route, a source told The Hindu BusinessLine.4
A secondary debate within the committee concerns classification. Strategic reserves exist for supply emergencies. But some officials are weighing whether India's gas storage capacity could also generate returns by timing purchases to market weakness — the approach China has used to monetize its large crude stockpiles. That question would determine how any capacity is sized, financed, and regulated.4
The demand picture complicates the investment case. With gas consumption down 8% in 2026 and the fertilizer sector posting the sharpest declines among domestic users, commercial pressure on new gas infrastructure has eased even as strategic motivation has intensified. State companies will be asked to commit capital to storage at precisely the moment demand signals are weakest.5
India's LNG imports have historically relied heavily on Middle East suppliers, including Qatar's Ras Laffan terminal — a route running directly through the Strait of Hormuz. The conflict exposed that dependency fully. Whether the Petroleum Ministry's committee finalises a storage option before the next disruption tests the system is the question the sector will be watching.4,5