Assessing India’s Energy Security: Oil, LPG, and LNG Reserves from the Middle East
India, one of the world’s leading economies, is facing potential challenges to its energy security due to the ongoing conflict involving the US, Israel, and Iran, which has disrupted global oil and gas shipments. The closure of the Strait of Hormuz, a critical passage for oil transport, raises concerns as India relies heavily on imports for its crude oil needs. However, Indian Oil Minister Hardeep Singh Puri has assured that the country has sufficient energy reserves and is closely monitoring the global energy market to ensure uninterrupted supplies.
India’s Oil Dependency on Middle East & Strait of Hormuz
India’s energy landscape is significantly influenced by its dependency on the Middle East, with estimates indicating that approximately 50% of the country’s oil imports come from this region. In recent years, India has adopted a more pragmatic approach to its oil import strategy, diversifying its supplier base. Following Russia’s invasion of Ukraine, there has been a notable shift in India’s crude oil sourcing, moving away from Middle Eastern dominance towards increased imports from Russia. Currently, oil supplies from the Middle East account for about 45-50% of India’s total imports, as refiners adjust their purchases in response to U.S. sanctions on Russian oil.
Experts highlight that while India has established near-term buffers through strategic petroleum reserves and commercial inventories, its heavy reliance on imports makes it vulnerable to disruptions in Gulf oil flows. The country imports roughly 90% of its crude oil, underscoring the structural sensitivity to any geopolitical tensions that may arise in the region. This dependency necessitates a careful balancing act as India navigates its energy needs amidst ongoing global uncertainties.
How Much Oil Reserves Does India Have? What’s the Buffer?
India currently maintains around eight weeks’ worth of crude oil and petroleum products inventory, which includes strategic reserves. Reports indicate that this inventory comprises 25 days of crude oil and an additional 25 days of petrol and diesel. While experts believe that India’s near-term supply is secure, the inherent risks associated with high import dependence remain a concern. The country’s strategy to diversify its crude oil suppliers, coupled with its existing reserves, has helped mitigate potential geopolitical disruptions.
India’s strategic petroleum reserves, along with commercial stocks held by refiners and oil marketing companies, are designed to manage temporary supply shocks rather than prolonged outages. According to Kpler inventory data, India’s commercial crude stocks are approximately 100 million barrels, including reserves located at facilities in Mangalore, Padur, and Visakhapatnam. In the event of a disruption in crude imports, these reserves could theoretically cover around 40-45 days of supply, supplemented by refined product inventories. However, compared to China, India’s strategic reserves are relatively smaller, raising questions about the adequacy of its buffers in times of crisis.
What Are the Alternatives to Middle East Crude?
In a worst-case scenario where oil supplies via the Strait of Hormuz are completely halted, India would face significant challenges in sourcing its crude oil. Approximately 50% of India’s oil imports, amounting to 2.6 million barrels per day, transit through this critical waterway. In response to increasing pressure regarding its Russian oil purchases, India has already ramped up crude oil imports from non-Russian sources, including the U.S., Canada, West Africa, and Latin America.
India’s crude oil procurement strategy is diversified, with suppliers from over 40 countries. Experts suggest that India could enhance its oil supplies from these alternative sources and potentially increase purchases of Russian Urals crude if tensions in West Asia persist. Additionally, India is exploring routes such as the Saudi East-West Pipeline and the Abu Dhabi Crude Oil Pipeline to bypass the Strait of Hormuz. While logistical challenges and price fluctuations would arise from such disruptions, India’s refiners typically hold commercial inventories, which could provide short-term relief.
Crude Oil Bill to Balloon?
Should India increase its crude oil procurement from alternative sources due to disruptions in the Strait of Hormuz, the country’s crude import bill is likely to rise significantly. Even without a complete blockade, factors such as higher freight costs, war-risk insurance, and geopolitical premiums would contribute to increased landed costs. Approximately 45-50% of India’s annual crude oil procurement comes from the Middle East, primarily due to proximity and established trade relationships. However, the share of oil imports from this region has been declining as Russia offers competitively priced crude.
In the event of prolonged disruptions, oil tankers may need to reroute via the Cape of Good Hope, extending transit times and increasing costs. Experts estimate that a $1 increase in crude oil prices could add nearly $2 billion to India’s annual import bill, based on current consumption rates. While refinery margins may remain stable due to strong demand for middle distillates, sustained disruptions could lead to significant economic implications, emphasizing the need for India to navigate its energy strategy carefully amidst ongoing global tensions.
LPG and LNG Disruption Threat
India’s energy security extends beyond crude oil, as the country is also a major importer of liquefied petroleum gas (LPG) and liquefied natural gas (LNG). Reports indicate that nearly 50% of India’s LNG imports and over 85% of its LPG imports transit through the Strait of Hormuz. With India sourcing approximately 80-85% of its LPG needs from Gulf suppliers, the potential for disruption poses a significant risk, especially since the country does not maintain strategic reserves of LPG on a comparable scale.
While government sources have suggested that India is currently in a comfortable position regarding LPG and LNG supplies, the logistical sensitivity of these flows in a disruption scenario remains a concern. Unlike crude oil, which can be buffered through strategic reserves and commercial stocks, LPG flows are more vulnerable to supply chain interruptions. As India continues to explore alternative sources for its energy needs, the importance of maintaining a diverse and resilient energy supply chain becomes increasingly clear.
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