The Board of ONGC has approved a ₹15,000 crore project to build a 1.75 MMT strategic petroleum reserve extension in Mangaluru, Karnataka. Funded via internal corporate capital, the deep underground cavern expansion will boost India's emergency crude stockpiles by nearly one-third to mitigate global energy supply risks.
MUMBAI — In a major structural shift for India's national energy security framework, the Board of Directors of the state-run Oil and Natural Gas Corporation Limited (ONGC) has officially granted in-principle approval for a 1.75 million metric tonne (MMT) Phase-I expansion of the strategic petroleum reserve at Mangaluru. The decision, finalized during an evening board session on July 09, 2026, elevates the project to a critical matter of national importance.
The project marks a significant change in how India funds its emergency stockpiles. For the first time, a public sector oil producer will use its own balance sheet rather than direct government financing to construct and fill a national emergency crude cavern. The acceleration of this underground expansion comes after the recent shock of the Iran war exposed supply chain vulnerabilities and the risk of shipping bottlenecks near the critical Strait of Hormuz corridor.
Shifting From Government Budgets to Corporate Financing
According to the regulatory corporate filing submitted by ONGC to the National Stock Exchange of India (NSE) and BSE Limited, the strategic development follows formal policy directives issued by the Union Ministry of Petroleum and Natural Gas (MoP&NG). Total project costs are estimated to reach ₹15,000 crore (approximately $1.6 billion USD).
Operational details outline a bifurcated capital expenditure model:
Infrastructure Construction: ONGC will allocate approximately ₹5,000 crore to engineer and excavate the deep unlined underground rock caverns.
Crude Inventory Inventory Acquisition: An estimated ₹10,000 crore will be utilized to procure and fill the facility with base crude oil grades at current international market metrics.
Unlike the country's three existing strategic petroleum reserve (SPR) facilities located at Visakhapatnam, Mangaluru, and Padur which were fully funded by the central exchequer and are operated by Indian Strategic Petroleum Reserves Limited (ISPRL), ONGC will construct this node on land it already owns near its refining subsidiary, Mangalore Refinery and Petrochemicals Limited (MRPL).
Expanding Capacity Against Global Supply Risks
Energy sector consultants note that the proposed 1.75 MMT facility will expand India's existing emergency storage buffer of 5.33 MMT by nearly one-third. Currently, India's active strategic stockpiles hold roughly 21 million barrels of oil, providing about 9.5 days of net import cover. This emergency buffer is considerably lower than the strategic reserves maintained by other major global economies, such as China, the United States, and Japan.
The near-total closure of the Strait of Hormuz during the regional Middle East conflict created severe energy import premiums, forcing policymakers to look for alternatives. To improve the financial viability of this massive corporate investment, the ONGC board has directed its management to work with the central government to establish a regulatory framework allowing for partial commercial utilization of the new storage capacity. This model mirrors the existing arrangement with the Abu Dhabi National Oil Company (ADNOC), which leases space inside the current Mangaluru caverns while allowing India primary draw rights during domestic shortages.
Official Sources Section
The corporate distribution details and board determinations were recorded and officially communicated to the market exchanges by Shashi Bhushan Singh, Company Secretary & Compliance Officer at Oil and Natural Gas Corporation Limited. Project criteria align with the long-term energy cushion metrics tracked under the guidance of the Ministry of Petroleum and Natural Gas.
Quote Section
"The Board of Directors of the Company has granted in-principle approval for the development of 1.75 MMT capacity Strategic Petroleum Reserves at Mangalore," confirmed ONGC Limited in its official regulatory exchange submission.
"According to officials familiar with the developments, the project management team has been directed to pursue broadening commercial utilization opportunities to enhance the project's long-term financial viability."
Why It Matters
Building a larger strategic oil reserve directly protects domestic consumers, logistics operators, and businesses from sudden spikes in global energy prices during international crises. For large enterprise industries and transit fleets, a secure emergency buffer prevents sudden domestic fuel shortages, stabilizes the cost of goods, and helps insulate the broader economy from the severe inflationary spikes that typically follow geopolitical supply disruptions.
Key Facts at a Glance
Total Project Capacity: Adds 1.75 million metric tonnes (MMT) of underground crude oil storage.
Investment Volume: Total projected cost of ₹15,000 crore, including ₹5,000 crore for cavern construction.
Funding Innovation: First time a state-run producer will finance a strategic reserve using its own corporate balance sheet.
National Security Impact: Expands India's existing 5.33 MMT emergency storage infrastructure by approximately one-third.
FAQ Section
What is a Strategic Petroleum Reserve (SPR) and why is it important?
An SPR is an emergency stockpile of crude oil stored in highly secure underground rock caverns. It acts as a safety buffer to protect the national economy against sudden global supply shocks, shipping disruptions, or geopolitical conflicts.
How does this project differ from India's existing oil reserves?
India's existing reserves were funded directly by the central government and are managed by ISPRL. This expansion will be funded and built by ONGC using its own internal capital reserves and land holdings.
Will the entire 1.75 MMT facility be locked away for emergencies?
The ONGC board is currently working with the central government to set up a hybrid model. This would allow the company to commercially lease a portion of the capacity to international entities while ensuring India retains priority access during national emergencies.
Source: Regulatory compliance disclosures submitted to the National Stock Exchange of India (NSE) and corporate policy outlines from Oil and Natural Gas Corporation Limited.
