The West Asia war and the halt in vessel movements through the critical chokepoint of the Strait of Hormuz have put a question mark on certain long-held assumptions in the energy sector, like the reliability of Gulf energy for India, and the country must act to quickly diversify its energy sources, meaningfully expand strategic oil and gas reserves, and chase “each and every drop of oil, gas, and coal” that can be produced domestically, Oil and Natural Gas Corporation (ONGC) Chairman and CEO Arun Kumar Singh said on Friday. Government-owned ONGC is India’s largest producer of crude oil and natural gas.
“I now firmly believe that thinking that the Middle East is nearest to us, and therefore (we have access to) all their resources, I think that assumption should be taken with a pinch of salt,” Singh said at an industry event in the Capital. He also opined that this war may not be just a temporary phenomenon, but a lingering disturbance that could rear its head every now and then due to permanent ideological and internal divisions in the region, which itself is a long-term threat to supply stability.
The effective closure of the Strait of Hormuz by Iran, now in its second month, has led to the worst energy supply crisis in decades. About a fifth of global oil and gas flows transit through the critical maritime chokepoint that connects the Persian Gulf with the Arabian Sea. Much of these oil and gas volumes go to Asian economies, including India.
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The country depends on imports to meet over 88% of its crude oil needs, 40% of which depend on the Strait of Hormuz. As for natural gas, India’s import dependency is about 50%, and 55-60% of India’s liquefied natural gas (LNG) imports come via the Strait. In the case of liquefied petroleum gas (LPG), India’s reliance on imports is 60%, and a whopping 90% of those come through the critical waterway. The supply disruption forced reduction in natural gas and LPG supplies to certain industries in India as the government was forced to prioritise the requirements of households and priority sectors.
According to Singh, so far, the global energy sector functioned on the assumption that globalisation will increase, but that hypothesis is now threatened and challenged. As the world gets more and more “deglobalised”, there are bound to be more problems at hand for energy importers like India, he said, adding that no one ever believed that there would come a day when the Strait of Hormuz would be closed. “Had that been the case, nobody would have invested so much in countries like Qatar,” the ONGC Chairman said.
He said that there is a fundamental “paradigm shift” where the world is moving away from the globalised order of the last 30 years, suggesting that the “orderly” world under a single superpower is over, which may lead to a “war of supremacy” with multiple competing powers.
His concerns also centred on the physical vulnerability of energy infrastructure, particularly in West Asia. He noted that with precision weapons, modern warfare or sabotage does not require destroying an entire refinery; rather, just targeting the crude distillation unit (CDU) will disable the refinery for years. The West Asia war saw multiple precision attacks on energy infrastructure in the region with low-cost drones and missiles. This vulnerability is compounded by a shift in global dynamics where countries no longer want to share physical oil in joint projects with other countries, and instead insist that the partners take their share in the form of dividends.
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“We should chase wherever oil or gas is in our country at any cost, because in a crisis nobody (will help),” Singh said, adding that while India oil and gas exploration is being pursued intently, more needs to be done, particularly in deep water areas. Amid growing domestic demand for petroleum fuels and products and stagnant domestic oil output, the country’s reliance on imported crude has been touching new highs with each passing year. He described domestic exploration and production of oil and gas as an “existential necessity”.
Singh also said that the disruption caused by the West Asia war also led to unprecedented volatility in fuel prices. For instance, cracks or margins on diesel surged to such highs that they overtook the price of crude oil itself. “But now we should be prepared to see more of these things. We must do whatever the country needs to protect its energy sovereignty,” he said.
The ONGC head emphasised that addressing energy storage is a critical priority that must be pursued “whatever it takes”. Drawing a comparison to Japan, which lacks its own energy resources but successfully mitigated this weakness through large strategic reserves, he said that India must have large strategic reserves of not just oil, but also natural gas, to effectively mitigate future global energy crises. Saying that there has been a lot of positive movement on this front in recent weeks, Singh expressed hope that the government will announce “something big” on this front.
India’s strategic petroleum reserves (SPRs), which have a capacity to store 5.33 million tonnes of crude oil, and were holding 3.37 million tonnes of oil, or just about two-thirds of their total storage capacity, the Ministry of Petroleum and Natural Gas (MoPNG) informed the Rajya Sabha on March 23. At full capacity, the SPRs—spread across three locations in Andhra Pradesh and Karnataka—cover around 9.5 days of India’s crude oil supplies. The current total national capacity for storage of crude oil and petroleum products is 74 days, including commercial stocks with refiners.
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The International Energy Agency (IEA) recommends that countries should hold oil stocks equivalent to at least 90 days of their net oil imports. IEA members are obligated to maintain these levels of reserves; India is not a full member of the grouping but an associate member. This 90-day reserve holding can include strategic reserves as well as commercial inventories.
