New Delhi: India is considering making it mandatory for oil marketing companies (OMCs) to hold minimum kitchen gas reserves to double the buffer, as the world’s second-largest importer of the fuel amid the ongoing West Asia war, according to two people aware of the development.
“Companies may have to look at having an inventory for longer reserves for themselves than the usual two-three days. There is so far no such mandate. Given the scenario, the government may consider coming up with a mandate for minimum LPG (liquefied petroleum gas) storage for a certain period for the OMCs,” said one of the two people mentioned above, speaking on the condition of anonymity.
“Any such move would require an order from the petroleum ministry. However, the decision would be taken after factoring in several aspects, including the cost factor as setting up additional storage capacity would involve a higher inventory cost for these companies,” the person added.
The present practice of stocking LPG for two to three days has left India short of supply after the US and Israel’s war on Iran, and subsequent retaliation from . The country imports up to 65% of its annual LPG requirement of around 33 million tonnes, with 90% of it sourced from West Asia.
“It is of utmost importance to develop more reserves for LPG, whether strategic or commercial. Currently, India may have about 18.6 days of LPG reserves, which are spread across pipelines, depots and the commercial reserves. It’s quite small given the country’s requirement,” said D.K. Sarraf, former chairman of the Petroleum and Natural Gas Regulatory Board (PNGRB) and former chairman of Oil and Natural Gas Corp. “Given that about 90% of the country’s LPG consumption goes towards domestic cooking, the government cannot afford any discontinuity in LPG supplies.”
Govt weighs expanding cavern storage
LPG is used for cooking by nearly 340 million households. Panic booking and long queues were seen outside retail LPG distribution centres after the war in West Asia broke. The government has over commercial and industrial sales and has directed oil companies to maximize production. It also restricted households in rural areas to one LPG refill 45 days after the previous booking, and in urban areas to 25 days. It also asked households and commercial consumers to move towards piped natural gas (PNG), which is supplied through natural gas supplies, and has also eased the norms for using fuels like kerosene and coal.
Mandates to ensure minimum reserves are in place across several member countries of the International Energy Agency (IEA), but India has so far imposed such mandates on the OMCs, which are commercial entities, said the second person cited, who also did not want to be identified.
Apart from storage by OMCs at depots or other storage tanks, the government is also working on a roadmap to increase the cavern-based underground commercial LPG reserves. Currently, the country has two commercial reserves with a cumulative capacity of 140,000 tonnes, owned and operated by state-run Hindustan Petroleum Corp. Ltd (HPCL) and TotalEnergies.
“Both caverns are operational, and drawdowns have also taken place from the caverns as a regular business operation. More such reserves will be developed. Consultations have already started. The plan right now is to enhance reserves of LPG in the country,” said the second person.
Queries emailed to the spokespersons of Union ministry of petroleum and natural gas remained unanswered until press time.
Sourcing to be diversified
Fuel storage projects require about five to seven years for completion. India is already making efforts to diversify its LPG sourcing, and the US and Canada are seen as major potential suppliers. Indian Oil Corp. Ltd in January this year signed a contract to source LPG , which would account for 10% of India’s annual imports. This, however, is set to increase, as West Asian supplies through the Strait of Hormuz are unlikely to flow at the usual rate, although India has secured safe passage for two LPG tankers carrying about 92,000 tonnes of LPG.
Pankaj Kumar Goswami, former director, operations at Oil India Ltd, stressed the need for strategic reserves, which would be more effective than commercial buffers during exigencies.
“Storing LPG in underground caverns would be easier than storing natural gas,” said Goswami. “Although commercial reserves would also help supplies, given that LPG is a common man’s fuel and the Pradhan Mantri Ujwala Yojana is aimed at supporting the common man, the focus should be on strategic reserves, which would be under the government’s control.”