OPINION | India needs a strategic gas buffer before the next supply shock

When geopolitical tensions escalate in West Asia, the impact rarely remains confined to logistics alone.

Global gas markets move in cycles of stability and disruption. The ongoing geopolitical tensions in West Asia are yet another reminder of how quickly these cycles can shift. A substantial share of global liquefied natural gas (LNG) cargoes passes through the Strait of Hormuz, one of the most critical maritime corridors for energy flows into Asia. Any disruption in this route can immediately tighten global LNG supply and amplify price risks across importing markets.

For India, the exposure is particularly significant. Nearly 45–50% of the country’s natural gas demand is met through imports, and a large portion of LNG supplies originate from the Middle East. When geopolitical tensions escalate in this region, the impact rarely remains confined to logistics alone. It quickly translates into price volatility, procurement uncertainty, and rising costs for domestic industries and consumers.

The challenge, therefore, is not simply geopolitical risk. The more fundamental question is whether India’s gas market possesses the resilience and flexibility required to absorb sudden global supply shocks. At present, the system is still evolving towards that level of preparedness.

A Structural Gap in India’s Gas Ecosystem

India’s natural gas demand is steadily rising as the country attempts to increase the share of gas in its primary energy mix. Current consumption stands at roughly 190–195 million standard cubic metres per day (MMSCMD) and is projected to reach nearly 290–300 MMSCMD by 2030.

This growth is being driven by expanding demand from fertiliser production, city gas distribution networks, industrial users, petrochemicals, and gas-based power generation.

As demand increases, LNG imports will form a larger part of the supply mix. Estimates suggest LNG imports could reach 180–200 MMSCMD by the end of this decade.

This growing reliance on imported gas is already exposing India to global price volatility. Asian spot LNG prices, represented by the Platts JKM benchmark, have experienced sharp swings in recent years. Prices that hovered around US$10–12 per MMBtu during stable periods have surged to US$24–25 per MMBtu during episodes of geopolitical stress.

At the same time, India’s LNG sourcing remains geographically concentrated. Market assessments indicate that Qatar and the UAE together accounted for nearly 55–60% of India’s LNG imports in 2025, representing almost one-third of the country’s total gas consumption.

Such concentration increases vulnerability to disruptions affecting shipping routes through the Persian Gulf and the Strait of Hormuz.

When geopolitical disruptions occur, LNG cargoes are often diverted towards higher-priced markets, freight and insurance costs increase, and spot prices escalate sharply. These changes cascade through the supply chain and ultimately affect domestic industries, power plants, and city gas consumers.

India’s Limited Storage Cushion

One of the most significant structural gaps in India’s gas ecosystem is the limited storage buffer.

At present, India has around 22–24 LNG storage tanks across regasification terminals, with an estimated storage capacity of roughly 2–2.5 billion cubic metres (BCM). This volume represents only about 10–12 days of national gas consumption.

For a country with rapidly rising demand and increasing import dependence, this buffer is relatively small. In the event of supply disruptions or sharp price spikes, the domestic system has limited capacity to absorb the shock.

Lessons from Global Gas Markets

Globally, major gas-importing economies treat storage as a central pillar of energy security.

The European Union operates approximately 110 BCM of underground gas storage capacity. Following the Russia–Ukraine crisis, EU regulations required member states to fill storage facilities to at least 90% capacity before winter.

The United States maintains the world’s largest underground gas storage network with roughly 113 BCM of working gas storage capacity across more than 400 facilities.

These facilities serve several functions:

• seasonal demand balancing

• emergency supply security

• commercial trading and market flexibility

In Europe, a portion of storage is reserved for strategic reserves, while the remaining capacity is offered to gas shippers and traders. Traders typically inject gas into storage when prices are low and withdraw it when demand rises. Seasonal spreads of US$2–3 per MMBtu often make such operations economically viable.

Similarly, major LNG importers such as Japan and South Korea maintain large LNG storage capacities to ensure uninterrupted supply during demand surges or supply disruptions.

These global experiences highlight a simple fact: storage infrastructure is not merely a backup mechanism but a structural component of a mature gas market.

Building India’s Strategic Gas Buffer

Just as India has created Strategic Petroleum Reserves (SPR) for crude oil, a similar approach is required for natural gas. In addition to LNG storage tanks, India should develop underground gas storage in salt caverns and depleted gas fields, which allow both injection and withdrawal of gas.

Underground storage also supports commercial trading. Gas can be stored when prices are low and released when demand rises, helping stabilise domestic markets.

Such facilities can eventually partly recover investment costs through commercial operations.

Further, infrastructure alone cannot stabilise markets. India must strengthen gas trading exchanges and market-based pricing mechanisms, which improve price discovery and allow efficient allocation of gas during supply stress.

Another strategic priority is to diversify supply routes. One option is the development of transnational subsea gas pipelines, such as the proposed Oman–India gas pipeline. A comprehensive detailed feasibility report could evaluate the technical and commercial viability of the project.

Recommendations

To strengthen the resilience of India’s gas ecosystem, the following policy measures deserve priority:

1) Establish a National Gas Storage Policy aligned with India’s long-term gas demand growth, including an integrated energy security plan comprising domestic gas, imported gas, gas storage, and transnational gas pipelines.

2) Develop Underground Storage Infrastructure by identifying salt caverns and depleted gas fields suitable for large-scale storage.

3) Encourage Public–Private Participation to accelerate investment in storage infrastructure.

4) Strengthen Gas Trading Platforms to improve liquidity and transparent price discovery.

5) Diversify LNG Supply Sources and Transportation Routes to reduce geographic concentration risk.

Energy security is not built during a crisis. It is built before the crisis arrives. And for India’s gas economy, the time to build that strategic buffer is now — not after the next supply shock.

(Ashutosh Karnatak – Former Member, Petroleum & Natural Gas, APTEL and Former Chairman & Managing Director, GAIL India.)

Views are personal, and do not represent the stand of this publication.