India Strategic Petroleum Reserve Expansion: ONGC Approves New Cavern

ONGC‘s board has approved a new 1.75 million tonne underground crude storage cavern at Mangalore, Karnataka, marking the first time a state-owned Indian producer has funded strategic reserve capacity from its own balance sheet rather than commercial stockpile space. The move, confirmed in an exchange filing on Friday, July 10, 2026, is the clearest sign yet of New Delhi’s push for india strategic petroleum reserve expansion following the near-total closure of the Strait of Hormuz during the Iran war.

Why Mangalore, Why Now

India imports more than 85% of its crude, and a large share historically transited the Strait of Hormuz. When the strait was effectively closed during the recent conflict, tankers were forced onto longer routes via the Cape of Good Hope, driving up freight costs and exposing how thin India’s strategic buffer really was. The government’s response has been to accelerate india strategic petroleum reserve expansion at a pace not seen since the original reserve sites were built more than a decade ago.

Mangalore was the logical location for ONGC’s new cavern. The city already hosts one of India’s three existing strategic storage caverns, and MRPL (Mangalore Refinery and Petrochemicals Ltd), ONGC’s own subsidiary, runs a 300,000 bpd refinery in the same state. That co-location gives the new capacity a direct operational link to refining infrastructure ONGC already controls, rather than requiring reserves to be built and managed in isolation from any processing capacity.

Reuters has reported the project carries an estimated investment of roughly $1.6 billion, tracing back to a government request made to ONGC last month. That figure was not confirmed in Friday’s exchange filing, which disclosed the approval itself but not cost or timeline. ONGC has not indicated when construction will begin or how long the cavern build is expected to take.

India’s Strategic Petroleum Reserve Buildout

India’s existing strategic reserve, managed by Indian Strategic Petroleum Reserves Ltd (ISPRL), totals 5.33 million tonnes across three underground cavern sites: Visakhapatnam in Andhra Pradesh, and Mangalore and Padur in Karnataka. Combined, Phase I is widely reported as covering roughly eight days of national crude demand at full fill, though the sites have historically run below maximum capacity. ONGC’s new 1.75 million tonne addition takes Mangalore’s own capacity to 3.25 million tonnes and pushes the case for further india strategic petroleum reserve expansion well beyond the original three-site network.

Two further sites are already under construction under what ISPRL classifies as Phase II: a 4 million tonne cavern at Chandikhol, Odisha, and a 2.5 million tonne addition at Padur, Karnataka, together adding 6.5 million tonnes once complete. New Delhi’s stated ambition is to build combined crude, LPG and LNG reserves sufficient to cover roughly one month of domestic demand, and it is leaning on public-private partnership structures to spread the state’s share of the cost across ONGC and outside operators rather than funding every cavern from the central budget alone.

The choice of underground rock caverns over surface tank farms is deliberate. Caverns cost more to excavate upfront but need far less land, carry lower fire and vapour-loss risk, and are cheaper to maintain over a multi-decade strategic reserve lifespan than equivalent above-ground tankage. That trade-off matters more as India adds capacity at pace rather than building one site at a time. The largest strategic reserve programmes globally dwarf India’s current buildout in absolute terms, but the rate of expansion now underway across Mangalore, Chandikhol and Padur signals a shift from a minimal-cover posture to one designed to absorb a genuine supply shock.

ADNOC’s Role and the Commercial Storage Question

Abu Dhabi National Oil Co (ADNOC) already leases space in India’s existing Mangalore caverns, and Reuters has reported ADNOC plans to raise the volume of crude it holds there to 30 million barrels. Delhi is separately exploring reciprocal storage for Indian crude at Fujairah, UAE, a site that sits outside the Strait of Hormuz chokepoint entirely, which would give India a forward crude position closer to Gulf supply without the transit risk exposed by the recent conflict.

ONGC is also expected to ask the government for permission to use part of the new stockpile commercially, according to Reuters, which would blur the historically strict line between strategic reserves (held for national emergency use only) and commercial storage (leased or traded by operators). If approved, it would give ONGC a revenue path on capacity that would otherwise sit idle outside a crisis, while still counting toward the government’s national cover target.

For terminal operators and EPC contractors watching the Gulf-India storage corridor, the Mangalore approval is a signal that India’s reserve build-out is no longer purely government-funded. State producers with balance sheet capacity, and foreign operators like ADNOC looking for leased space near a major consuming market, are both becoming active participants in how India closes its strategic storage gap. That opens a wider pipeline of cavern engineering, EPC and inspection contracts than a purely state-funded programme would generate on its own.

Source: Oilprice.com