India is planning to expand its strategic oil reserves, increase storage capacity and at the same time strengthen supply partnerships as it seeks greater protection against future price shocks following the Iran conflict, Bloomberg writes.

The world’s third-largest oil consumer and the most populous nation on the planet is preparing for greater volatility in energy markets after crude prices surged during the war before retreating once flows through the Strait of Hormuz began recovering following the ongoing but interim US-Iran peace deal.

Oil Minister Hardeep Singh Puri said India was not overly concerned about future price spikes but needed to prepare for potential disruptions – a statement many analysts in Asia had been expecting.

The recent decline in crude prices is also likely to encourage other Asian countries to rebuild their own inventories.

For now, India remains heavily dependent on the Middle East for crude oil, LPG and LNG. However, Puri said the country managed the disruption through a diversified supply portfolio and effective relationships with energy producers.

New Delhi also worked to limit the impact on consumers by preventing sharp increases in retail fuel prices. This policy resulted in state-owned refiners recording combined losses of INR747.81bn ($7.9bn) on diesel, petrol and LPG sales during the April-June quarter, Puri added.

On the home front, India is also expanding domestic refining capacity with Prime Minister Narendra Modi having inaugurated a new 180,000 barrels per day greenfield refinery in Rajasthan on July 4 - a project expected to significantly strengthen domestic fuel supplies.

However, the new refinery, when fully operational, will also increase India’s crude imports by an additional 150,000 barrels per day.

The country’s refining capacity is now projected to rise by about 20% to 6.2mn barrels per day by the end of the decade as part of India’s long-time ambition to become a major global refining hub.

Looking at the bigger picture, India’s energy strategy reflects broader concerns among major importers across Asia and elsewhere following the disruption caused by the Iran conflict, with New Delhi seeking to reduce exposure to sudden supply interruptions by combining larger strategic reserves with expanded domestic processing capacity.

Puri highlighted the changing global refining landscape on the subcontinent, noting that the US has not built a new greenfield refinery in five decades, while Europe has been reducing refining capacity.

As such, India’s expanding refining sector is expected to increase its role in global hydrocarbon markets as demand for energy security remains a priority for major economies.