India’s Strategic Gas Storage: Upcoming LNG Buffer Mandate for Terminals Explained
Even as India focuses on enhancing its strategic petroleum reserves, the government is now planning to establish emergency liquefied natural gas (LNG) reserves. The initiative aims to create storage at import terminals, allowing operators to recover costs through increased regasification charges, according to sources familiar with the discussions. This approach could expedite the development of strategic gas reserves compared to a government-funded project.
The disruption of LNG shipments through the Strait of Hormuz during the Iran conflict has prompted the Indian government to reconsider the establishment of strategic gas reserves. Although this proposal has been evaluated previously, it was not pursued due to high costs.
Plans for LNG Storage
Instead of building strategic storage facilities in depleted gas fields, which is considered too expensive, policymakers are exploring a plan that would require LNG terminal operators to expand storage capacity at their existing import facilities. A final decision on this plan is still pending, and the extent of the additional storage required is under review.
The government is looking at a mechanism that would allow terminal operators to recover their investment through increased regasification tariffs. These higher charges would eventually be passed on to consumers by gas importers. Currently, terminal operators charge around Rs 65-80 per mmBtu for regasification services, where imported LNG is converted into natural gas for the pipeline network. However, concerns have been raised that imposing additional costs on importers could further reduce terminal utilization, as many are already operating below capacity.
LPG Reserves Also in Focus
In parallel, India is intensifying efforts to diversify its sources of Liquefied Petroleum Gas (LPG). The United States has become the largest supplier in recent months, particularly following disruptions in the Gulf region. India has traditionally relied on Gulf countries for LPG imports, and the shipping disruptions through the Strait of Hormuz have significantly impacted cooking gas supplies.
To mitigate this reliance, India is expanding its LPG sourcing from countries like Argentina, Nigeria, and Malaysia. Oil marketing companies are now looking to increase LPG imports from the U.S. beyond the current level of approximately 2.2 million tonnes annually. In May, the petroleum ministry directed these companies to develop a roadmap for creating a strategic LPG reserve capable of meeting 30 days of demand. This proposed reserve would complement the existing 45-day rolling stock maintained by oil marketing companies to meet domestic and commercial LPG needs.
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