India Plans to Boost LNG Storage Capacity Amid Strait of Hormuz Crisis

The liquefied natural gas (LNG) supply disruption due to the closure of the Strait of Hormuz amid the West Asia war has underscored the need for having more LNG storage capacity in India to cushion geopolitical and supply shocks, and all stakeholders in the sector are now serious about increasing the capacity by adding more storage tanks, according to the chief executive of India’s largest LNG importer Petronet LNG. “Definitely, taking cue from this present crisis, all stakeholders are seriously thinking about increasing the storage capacity…I’m quite sure that very soon you will seeing activity in this regard,” Petronet LNG CEO A K Singh told reporters on Monday, adding that the company already has firm plans to increase its cryogenic LNG tanks by about 70%. Singh added that there is “serious movement” in this regard even at the government level, and hopefully, the “lessons learnt” from the current crisis will lead to creation of additional LNG stockpiles in the country. How much should be the optimum reserve storage capacity is a question that is being actively deliberated upon. India has strategic and commercial stockpiles of crude oil as reserves, but hardly any of LNG. Petronet LNG itself is looking at adding storage tanks at its LNG terminals. It has eight LNG tanks at its flagship Dahej terminal and two at its other terminal at Kochi. Singh said that the under-execution Gopalpur terminal project will add two tanks, and the company is looking to add another tank at the Kochi terminal. As for Dahej, Petronet LNG is looking to add four LNG tanks, and is looking at land availability for the same. India depends on LNG imports to meet about half of its natural gas requirement, and about 60% of those imports came through the critical maritime chokepoint of the Strait of Hormuz , primarily from India’s largest supplier Qatar, and also the UAE. Vessel movements through the Strait are all but halted owing to the West Asia conflict. The Strait of Hormuz is a major chokepoint for global energy flows, accounting for a fifth of international oil and LNG shipments. Not one LNG cargo has reached India from the Persian Gulf for over two months now, hitting supplies even as India has been trying to augment supplies by sourcing LNG from alternative sources. Moreover, with LNG imports under pressure, the government was forced to prioritise natural gas supplies to certain critical segments like transportation and household kitchens, while rationing the flow to some industries. According to industry analysts, having additional LNG storage buffers could have helped blunt the impact of the unprecedented Strait of Hormuz blockade, something that was considered extremely improbable, but happened nonetheless. Currently, India has 23 LNG tanks spread across its various LNG terminals; Petronet LNG alone accounts for 10 of those. While these tanks do provide some short-term buffer, they are mostly geared for continuous operations of the regasification terminals, and aren’t really seen as emergency stockpile capacity. One tank usually accommodates one shipload of LNG, and India’s LNG consumption translates to about 1.25 tanks a day, Singh explained. Specialised tanks, will take time Given that LNG tanks have to be cryogenic in order to keep LNG in the liquid state, building them is an expensive proposition and a longer-term project as compared to building a tank to hold other liquid fuels. According to Singh, it will take at least three years for a new tank to be constructed, which can only start once all the pre-project activities are complete and the requisite approvals are in place. Singh said that the initiative is still at the planning stage, and did not comment on the likely execution timeline. Follow our daily newsletter so you never miss anything important. On Wednesday, we answer readers' questions. Natural gas, liquefied into LNG at ultra-low temperatures, is loaded onto specialised cryogenic vessels and transported by sea. The LNG vessels then discharge the LNG into cryogenic tanks at regasification terminals, which convert the LNG back into the gaseous state. The natural gas is then supplied to consumers through pipelines. Apart from building more LNG tanks, Singh also emphasised the need to densify the gas pipeline grid in India. Some LNG terminals in the country have sub-optimal pipeline connectivity, which makes it unviable for them to operate at high capacity as there are limited avenues to evacuate the fuel for supply to consumers. As pipeline connectivity improves in the country, and more consumers get linked to terminals, the capacity use at such terminals and consequently their LNG stockpiles are also expected to improve.