The state-controlled explorer’s board granted in-principle approval for the project on July 9, classifying it as an undertaking of national importance. The development, described as a Phase-I extension, will include underground storage caverns and associated facilities near the existing reserve on Karnataka’s coast.
The planned facility will hold about 13 million barrels of crude oil. It will increase dedicated strategic storage capacity from 5.33 million tonnes to 7.08 million tonnes, an expansion of nearly one-third. ONGC has not disclosed a construction timetable or final investment figure.
The decision marks the first time ONGC is expected to finance and develop a national strategic crude storage facility. Earlier reserves were built and managed by Indian Strategic Petroleum Reserves Limited, a government-owned special-purpose company under the Ministry of Petroleum and Natural Gas.
Industry estimates place the overall cost at about ₹15,000 crore. Roughly ₹5,000 crore could be required to construct the underground caverns and related infrastructure, while filling the reserve at prevailing crude prices may cost approximately ₹10,000 crore. Actual expenditure will depend heavily on oil prices, engineering specifications and the timing of procurement.
ONGC’s board also directed the company to engage with the government on opportunities for wider commercial use of the facility. Such an arrangement could allow a portion of the storage to be leased to oil producers, traders or refiners while preserving government rights to access the crude during an emergency.
The country’s existing strategic reserves are located at Mangaluru and Padur in Karnataka and Visakhapatnam in Andhra Pradesh. The Mangaluru site can store 1.5 million tonnes, Padur has capacity for 2.5 million tonnes and Visakhapatnam holds 1.33 million tonnes. The facilities were developed as underground unlined rock caverns to protect stocks and reduce land requirements.
The additional reserve will more than double strategic capacity at Mangaluru to 3.25 million tonnes. Its position near Mangalore Refinery and Petrochemicals Limited and the western coastline provides access to refinery, pipeline and port infrastructure, helping crude move between arriving tankers, storage caverns and processing units.
Energy planners accelerated the proposal after the conflict involving Iran disrupted maritime traffic through the Strait of Hormuz. Tankers were delayed, diverted or forced to turn back as attacks raised insurance costs and reduced shipping availability. The waterway carries about one-fifth of global oil and gas supplies and remains vital for cargoes originating in the Gulf.
The country is the world’s third-largest consumer and importer of crude oil and depends on overseas suppliers for more than 88 per cent of its requirements. Its refineries can process about 5.2 million barrels a day, making reliable access to seaborne cargoes essential for transport, industry and household fuel markets.
Although refiners have diversified purchases towards Russia, the Americas and Africa, Gulf producers remain important because of their geographical proximity and ability to supply large volumes. A prolonged closure or severe restriction at Hormuz can therefore increase freight costs, delay deliveries and intensify competition for alternative grades.
Strategic reserves are designed to provide a temporary buffer when normal commercial supply is interrupted. They differ from inventories maintained by refiners and fuel retailers for routine operations. The government can order crude releases from strategic caverns during wars, natural disasters, sanctions-related disruption or other severe supply emergencies.
The present stockpile remains small when measured against national consumption. Combined strategic and commercial holdings have been estimated to cover about 70 to 75 days of demand, below the 90-day emergency stock benchmark followed by members of the International Energy Agency. The strategic caverns alone provide a much narrower cushion.
