India Moves to Build First Strategic Gas Reserve After Hormuz Closure Exposed Import Fragility
New Delhi is evaluating underground salt caverns and cryogenic LNG storage after the West Asia conflict disrupted close to half of the country's Middle East LNG supply.
ONGC's board approved on July 10 (2026-07-10) an expansion of India's strategic petroleum reserves by 1.75 million tons, equivalent to 12.8 million barrels, at Mangalore in Karnataka, according to a company filing cited by Rigzone. The decision came alongside a parallel move: India's Petroleum Ministry had already constituted a committee to evaluate options for the country's first strategic natural gas reserve, sources told The Hindu BusinessLine on July 5 (2026-07-05).4,2
The committee, formed in the immediate aftermath of the West Asia conflict, is assessing underground salt caverns and above-ground cryogenic LNG tanks, as well as storage options for LPG. No funding commitment, preferred technology, or construction timeline has been disclosed. "Besides, storing gas in cryogenic overground tanks is also being worked out," a Petroleum Ministry source told The Hindu BusinessLine.2
The two approaches carry different risk profiles. Salt caverns can hold large volumes of gas at comparatively low operating cost once built, but require suitable geology that India has not publicly confirmed it possesses. Cryogenic overground storage is faster to commission but more capital-intensive and operationally demanding. The committee has not indicated when it expects to reach a conclusion on which path to pursue.2
The urgency traces directly to what happened during the conflict. The Strait of Hormuz closure cut off close to half of India's LNG imports from the Middle East, according to The Hindu BusinessLine on July 11 (2026-07-11), pushing full-year gas demand toward a projected 8 percent year-on-year decline in 2026. Fertilizer production is expected to take the steepest hit, as that sector depends on gas feedstock with limited ability to switch fuels at short notice.5
The crude side advanced more quickly. Alongside the Mangalore approval, New Delhi has plans for two further strategic petroleum reserve sites: one at 4 million tons capacity (29 million barrels) and another at 2.5 million tons (18.3 million barrels), OilPrice reported. India's government had also asked ONGC to build and fill an additional SPR site with an estimated investment of $1.6 billion, a request reported around June 19 (2026-06-19). During Prime Minister Modi's visit to the UAE, Abu Dhabi's national oil company committed to increasing the crude it stores on Indian soil to 30 million barrels. India's existing strategic crude stockpile stands at 5.33 million tons, roughly 39 million barrels, at three southern sites — enough for about eight days of consumption, according to OilPrice.3,1
But gas presents a different supply problem than crude. LNG routes are more concentrated, and India's Middle East cargoes pass directly through Hormuz. JKM Asian LNG spot prices stood at $21.43 per MMBtu on Tuesday (2026-07-28). Without a domestic buffer, Indian buyers caught without supply during a disruption have few immediate options beyond shutting down gas-dependent processes, as the fertilizer sector found out.5
The geopolitical backdrop has not stabilised. The United States launched airstrikes on Iran on July 7 (2026-07-07) following Iranian attacks on vessels in the Strait of Hormuz, and suspended a Treasury Department license authorizing Iranian oil sales for sixty days, the Atlantic Council reported on July 9 (2026-07-09). The Gulf war, the Atlantic Council noted, was not over. ICE Brent crude front-month traded at $85.48 per barrel on Tuesday (2026-07-28), up 0.74 percent on the session.6
One ministry source framed a design question that goes beyond technology selection: how much of any reserve should be held as a strategic buffer, locked away for supply emergencies, versus operated commercially to generate returns. "Another key issue to debate is 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 source told The Hindu BusinessLine.2
China has used its crude stockpiles to buy at low prices and release at high ones, treating reserves as both an energy security asset and a trading position. Applying that model to gas requires not just tanks, but pricing flexibility, commercial dispatch rules, and a regulatory framework that allows it — none of which India currently has in place for its gas sector. Whether the committee will recommend a split model, and on what basis, has not been indicated.2
For LNG traders assessing Indian demand, the 8 percent contraction in 2026 is partly the product of supply disruption rather than permanent demand destruction. Recovery depends on whether buyers whose procurement was interrupted return to the spot market with confidence. That confidence may take longer to restore than the physical supply constraints do, and India's absence of any gas storage buffer leaves buyers with no mechanism to smooth purchases against future price or supply shocks. The committee's next deliverable is a technology selection and site identification. Until those are confirmed, the storage initiative is a design exercise.5,2