India is advancing its plans to expand LPG underground caverns to cushion the impact of price and supply fluctuations amid increasing geopolitical turbulence, thereby broadening its oil storage and stockholding strategy beyond crude oil.
Analysts and industry sources told Platts that India’s underground cavern LPG storage capacity is set to more than double in 2025, with a new facility in southern India expected to become operational later this year. This development represents a strategic initiative by the country’s state-run oil companies to increase stock levels as a buffer against potential supply shocks and to enhance energy security. Platts is part of S&P Global Commodity Insights.
“India is making significant strides in strengthening its LPG infrastructure to meet rising domestic demand and ensure long-term energy security,” said Anmol Bhushan, lead research analyst for Asia and the Middle East at Commodity Insights.
“These developments align with India’s goals to reduce dependence on spot market imports, stabilize domestic prices, and ease financial losses faced by oil marketing companies due to government-controlled pricing,” Bhushan said. “By improving infrastructure, India is poised to sustain LPG demand for residential and commercial sectors while reducing transportation costs and under-recoveries.”
Hindustan Petroleum Corp. Ltd. is building an 80,000 mt underground LPG rock cavern in Mangalore, which is expected to be operational by mid-2025, company and government officials said. This project will raise the country’s total underground cavern LPG storage capacity to about 140,000 mt this year. The only cavern that is currently operational is the 60,000 mt capacity operated by South Asia LPG Co. Pvt. Ltd. (SALPG).
Analysts and industry sources said the new cavern will enhance India’s supply chain resilience and mitigate price volatility. Strategically located near the country’s largest LPG import terminal, which imported 4 million mt of LPG in 2024, the facility will enable efficient distribution across southern and central India through road, rail and pipelines.
“India’s strongly growing LPG demand, powered by a clean fuels push, increases its dependence on costly imports and hence exposes the country to price volatility,” said Tushar Bansal, senior director at consulting agency Alvarez and Marsal.
“A new LPG storage facility will not only increase India’s supply security but also boost its ability to partly withstand high price volatility. This will also help support the government budget by managing LPG subsidy outgo,” Bansal said.
Infrastructure push
HPCL is also considering potentially building another underground facility in Vadodara with a capacity of 60,000 mt, which would raise the total underground cavern capacity to more than 200,000 mt by 2027, according to industry sources.
“Given the supply risks that we are seeing, it is imperative to hold much larger stocks of oil — whether it is LPG or crude,” said an Indian refining source.
According to Commodity Insights, India’s current total LPG storage capacity, which includes both on-the-ground tanks and underground caverns, currently stands at 1.9 million mt, providing only 21.5 days of supply cover. India plans to add about 410,000 mt of overall storage capacity over the next two to three years to bolster strategic reserves and safeguard against market disruptions, such as the price spikes experienced during the Russia-Ukraine conflict. Additionally, the startup of the upcoming 2,800-km-long Kandla-Gorakhpur pipeline sometime in 2025 is expected to further enhance distribution efficiency.
In 2024, India’s LPG imports rose by nearly 12.5%, fueled by strong buying interest generated by significant subsidies and discounts announced by the government ahead of the general elections. Looking forward, Commodity Insights expects India’s LPG demand for the residential and commercial sectors to grow at a moderate pace compared with previous years.
“Despite the addition of new infrastructure, I do not expect Indian LPG imports to increase much in 2025, especially compared with the surge of over 12% seen in 2024,” Bhushan said. “In the short term, however, propane demand is expected to rise with the commissioning of GAIL’s new propane dehydrogenation plant, which will likely increase propane imports starting in the late half of 2025 or early 2026.” The PDH unit will have a nameplate capacity of 500,000 mt/year, according to GAIL.
Crude SPRs outside India
On the crude front, India is expanding its strategic storage domestically and exploring Oman and other Middle Eastern countries as potential options to accelerate capacity expansion in light of ongoing geopolitical tensions.
India’s strategic petroleum reserves currently offer about 9.5 days of total net oil imports. Additionally, state-run oil companies maintain storage facilities for crude oil and petroleum products, providing coverage for 64.5 days of total net imports. The nation’s total national capacity for storage for crude oil and petroleum products amounts to 74 days of total net imports.
On the other hand, International Energy Agency member countries are obligated to ensure oil stock levels equivalent to at least 90 days of their net imports.
In its initial phase, India established SPRs at three locations with a combined capacity of 5.33 million mt: 1.33 million mt at Visakhapatnam, Andhra Pradesh, 1.5 million mt at Mangalore, Karnataka, and 2.5 million mt at Padur, Karnataka.
In the second phase, India aims to further enhance storage capacity by creating an additional 6.5 million mt of SPRs at two locations: 4 million mt at Chandikhol in the eastern state of Odisha and another 2.5 million mt at Padur. The SPRs will be set up using a public-private partnership model called design, build, finance, operate and transfer or DBFOT.
Source: Platts
