Understanding India's Energy Security: The Role of the Strait of Hormuz

The Critical Role of the Strait of Hormuz for India

The Strait of Hormuz is a strategic waterway that connects the Persian Gulf with the Arabian Sea. It serves as a crucial passage for global oil trade, with nearly 40% of oil transported by sea traversing this narrow strait. India, which imports more than 80% of its crude oil requirements, is heavily reliant on Gulf suppliers such as Iraq, Saudi Arabia, and the UAE. Consequently, any disruption in the strait can have direct implications for India’s energy security.

India's Strategic Petroleum Reserves

The Strategic Petroleum Reserve (SPR) in India, managed by Indian Strategic Petroleum Reserves Limited (ISPRL), currently holds 5.33 million metric tonnes (MMT) of crude oil across three key facilities located in Visakhapatnam, Mangaluru, and Padur. This reserve plays a vital role in ensuring that the nation’s energy needs are met in times of crisis.

Duration of Current SPR Capacity

With the current levels of consumption in 2023, the SPR is capable of sustaining India’s crude oil needs for approximately 9 to 10 days. This limited timeframe highlights the critical nature of the reserves in the face of potential disruptions.

Plans for Expanding SPR Capacity

Recognizing the importance of oil reserves, India has initiated plans to enhance its SPR capacity under Phase-II. This expansion aims to add an additional 6.5 MMT of storage, which, once completed, would enable the SPR to cover around 22 days of crude oil demand.

Additional Buffers Beyond the SPR

In addition to the SPR, Oil Marketing Companies (OMCs) in India maintain commercial stockpiles that can sustain the country for approximately 60 to 65 days. When combined with the reserves of the SPR, India can manage its oil supply for a total of about 70 to 75 days.

Consequences of a Blockade in the Strait of Hormuz

If the Strait of Hormuz were to be blocked for an extended period, India could rely on its combined reserves for the short term. However, a prolonged blockage would likely lead to soaring oil prices, increased pressure on the current account deficit, disruption of fuel supply chains, and potentially necessitate rationing or price interventions to manage demand.

Steps to Mitigate Vulnerabilities

To minimize its vulnerabilities in terms of energy security, India can consider several strategic actions:

• Diversifying import sources by looking to suppliers from the US, Brazil, Russia, and West Africa
• Expanding the capacity of the SPR
• Encouraging domestic oil exploration
• Promoting green energy and electric vehicles (EVs) to lessen reliance on imported fossil fuels

By implementing these strategies, India can bolster its energy security and reduce its exposure to geopolitical risks associated with the Strait of Hormuz.