INDIA-UAE STRATEGIC PETROLEUM RESERVES PARTNERSHIP

Why in the news?

Prime Minister Narendra Modi visits the UAE to secure energy agreements on Strategic Petroleum Reserves (SPR).

What is Strategic Petroleum Reserves (SPR)?

The Government of India initiated the Strategic Petroleum Reserve (SPR) Programme in 2004 to maintain emergency crude oil stockpiles during global supply disruptions.

The Indian Strategic Petroleum Reserves Limited (ISPRL), a special purpose vehicle, manages and commercializes these strategic reserves.

Why does India need SPR?

High import dependence: India import over 85% of crude oil demand to meet growing energy requirements; vulnerable to supply shocks

Geopolitical shocks and Strait of Hormuz vulnerability: India needs strategic buffers to safeguard energy supply chain against regional instability and blockades in chokepoints like the Strait of Hormuz.

Price volatility: SPR serves as a strategic tool for international price stabilization, reducing the domestic economy's vulnerability to global oil price fluctuations.

India's Current SPR Capacity

Existing storage facilities (Phase-I): India built a 5.33 Million Metric Tonnes (MMT) storage capacity across three underground locations: Visakhapatnam, Mangalore, and Padur.

Days of reserve coverage: The ISPRL currently provides 9.5 days of strategic coverage, while oil marketing companies maintain commercial storage, bringing India's total national supply cushion to 74 days.  

Planned expansion (Phase-II): The Government approved two commercial-cum-strategic facilities to add 6.5 MMT capacity at Chandikhol (4 MMT) in Odisha and Padur (2.5 MMT) in Karnataka, which will provide an additional 11 days of coverage.

India-UAE Strategic Petroleum Reserves Partnership

The UAE is the first foreign entity to store crude oil in India's strategic reserves. Under a 2018 agreement, the Abu Dhabi National Oil Company (ADNOC) secured permission to store over 5 million barrels of crude oil in ISPRL's Mangalore cavern.

This partnership grants India first-right access to the entire crude oil stockpile during emergencies while allowing the UAE to commercialize a portion of the storage.

Investments in Abu Dhabi oil blocks

• A consortium of Indian companies (OVL, BPRL, and IOCL) acquired a 10% stake in the Lower Zakum block in the UAE.
• The Urja Bharat joint venture takes up a stake in the Abu Dhabi Onshore Block-1, India's first upstream investment successes in the region.

Proposed LPG + SPR agreements: The UAE and India to elevate their energy diplomacy by finalizing pacts on Liquefied Petroleum Gas (LPG) and expansions to the Strategic Petroleum Reserves during the Indian Prime Minister's visit.

Why is the UAE emerging as a Strategic energy partner for India?

Economic factors

Stable supplier: The UAE supplies nearly 11% of India's crude oil as the 4th largest source globally, and fulfills nearly 40% of LPG requirements.

Long-term agreements: ADNOC Gas commits to a 10-year supply agreement of 0.5 million tonnes per annum (MMTPA) of LNG to Hindustan Petroleum Corporation Limited (HPCL) starting in 2028.

Strategic factors

Diversification beyond traditional suppliers: India secures energy flows through direct bilateral agreements, bypassing volatile multilateral frameworks.

Reliable partner amid crises: The UAE demonstrates strong consistency in honoring energy supplies despite regional disruptions like Strait of Hormuz attacks.

Geographic advantage

Proximity to India: The geographical closeness across the Arabian Sea reduces shipping times and lowers transit costs for crude oil.

What opportunities does deeper India-UAE energy cooperation create?

Energy security

Deep integration into Gulf region fortifies long-term resilience for India's expanding economy.

Investment opportunities

Emirati companies invest heavily in India's refining sectors, petrochemicals, and strategic infrastructure.

Renewable energy cooperation

Masdar (the Abu Dhabi Future Energy Company) and the Indian Renewable Energy Development Agency (IREDA) co-develop clean energy projects like solar and wind power.

Green hydrogen prospects

Both nations explore future collaborations in green hydrogen, carbon capture, and clean technological innovation.

IMEC connectivity

The India-Middle East-Europe Economic Corridor integrates logistics networks end-to-end, which bypasses traditional supply chokepoints.

Strategic autonomy

Stronger bilateral ties reduce reliance on volatile global markets and external power interventions.

What challenges could limit the effectiveness of the partnership?

Geopolitical instability

Shifting alliances and maritime security threats in the Gulf disrupt fragile energy corridors.

Dependence on external suppliers

Over-reliance on Gulf imports exposes the Indian economy to severe supply shocks during Middle Eastern conflicts.

Energy transition toward renewables

Global decarbonization goals threaten the long-term viability of conventional fossil fuel trade between the two nations.

Infrastructure constraints

Bureaucratic hurdles and land acquisition problems delay crucial capacity-building projects like the Phase-II Chandikhol SPR facility.

Market volatility

Severe fluctuations in international crude oil prices strain long-term economic planning and bilateral energy budgets.

What should be India's way forward to strengthen long-term energy resilience?

Expand SPR capacity

The government must accelerate Phase-II SPR construction at Chandikhol (4 MMT) and Padur (2.5 MMT) to build adequate buffers.

Diversify import sources

India needs to pursue alternative international suppliers alongside the UAE to mitigate geographic concentration risks.

Increase renewable energy

Both nations must fast-track joint investments in solar, wind, and advanced nuclear technologies under frameworks like the new SHANTI law.

Strengthen overseas energy assets

ONGC Videsh Limited (OVL) should acquire more upstream equity stakes in foreign oil basins to ensure direct equity oil supply.

Deepen strategic partnerships

India must leverage multilateral platforms like I2U2 and IMEC to institutionalize economic integration and safeguard maritime trade routes.

Improve domestic production

State governments must incentivize indigenous production and infrastructure modernization through initiatives like 'Make in India' to lower overall import dependency.

Conclusion

The India-UAE Strategic Petroleum Reserves partnership reflects India's transition from reactive energy management to proactive energy diplomacy, where energy security becomes an integral component of national security.

Source: INDIANEXPRESS