MEIL bags $687 million Strategic Reserve Contract
In a landmark development for India’s energy security, Megha Engineering & Infrastructures Ltd (MEIL) has secured the contract to build and operate India’s first-ever private sector strategic petroleum reserve (SPR). This $687 million (₹5,700 crore) project marks a significant shift in how India approaches its oil security strategy, bringing private sector efficiency to a traditionally government-controlled domain.[1]
The Big Picture: Why This Matters Now
India imports over 80% of its crude oil needs, making it the world’s third-largest oil importer. With current strategic reserves covering only 8-9 days of crude oil demand, the country faces significant vulnerability to supply disruptions and price volatility. Recent geopolitical tensions and supply chain disruptions have only highlighted this critical gap in energy security.
The new facility at Padur, Karnataka, will add 2.5 million metric tonnes (MMT) to India’s existing 5.33 MMT strategic stockpile. While this may seem modest, it represents a crucial step toward building India’s oil buffer to international standards.[2]
Project Details: Scale and Timeline
MEIL will construct the underground storage facility over five years and operate it for 60 years. The project includes a crude oil filling cost estimated at $1.25 billion (₹11,020 crore) at current prices. The company will receive a 214-acre land parcel from Indian Strategic Petroleum Reserves Ltd (ISPRL) at no cost.
The bidding process, managed by ISPRL, was determined by viability gap funding (VGF) requirements. The government capped VGF at 60% of the project cost, with MEIL’s proposal coming just under this ceiling.[3]
Global Context: Catching Up with the Giants
India’s current strategic petroleum reserve capacity of approximately 39 million barrels pales in comparison to global leaders. The United States maintains 727 million barrels in its Strategic Petroleum Reserve, while China’s strategic reserves are estimated at around 290 million barrels, with some estimates suggesting total crude storage capacity exceeding 1,200 million barrels.
These numbers highlight the enormous gap India needs to bridge. China has been particularly aggressive in building its reserves, with recent reports indicating plans to add another 60 million barrels to emergency stockpiles. The country’s total crude storage tank capacity now exceeds 1.8 billion barrels, about 30% larger than total U.S. storage capacity.[4]
The IEA Connection: Membership Requirements Drive Expansion
India’s strategic reserve expansion is closely tied to its aspirations for full membership in the International Energy Agency (IEA). The IEA requires member countries to maintain crude oil reserves equivalent to 90 days of the previous year’s net imports. Currently, India’s strategic oil reserves equal only 9.5 days of its requirements. Combined with commercial storage at refineries and in-transit supplies, India can meet about 75 days of domestic consumption.
The IEA invited India to become a full member in 2024, recognizing the country’s strategic importance in addressing global energy and climate challenges. India has been an associate member since 2017.
Commercial Innovation: Beyond Traditional Storage
The Padur project introduces a novel “commercial-cum-strategic” model that allows private operators to lease storage space and trade crude oil while ensuring government priority during emergencies. This approach mirrors successful models in Japan and South Korea, where private companies can commercially utilize strategic reserves under normal conditions.
MEIL can recover its investment through two revenue streams: leasing storage space to government or oil companies for steady cash flows, and trading stored crude for higher but riskier returns. This dual approach makes the project financially viable while serving national security interests.
India’s Broader Energy Security Strategy
The private SPR project is part of India’s comprehensive energy security strategy. ISPRL plans to more than triple India’s strategic reserves to 15 million tonnes over the next decade. Additional projects include a 4 million-tonne facility at Chandikhol in Odisha and three new proposed sites at Bikaner (Rajasthan), Mangalore (Karnataka), and Bina (Madhya Pradesh).
India’s oil import dependency has reached 88.2% in FY 2025. The country’s crude oil demand is projected to rise from 5.64 million barrels per day in 2024 to 6.66 million barrels per day by 2030, making strategic reserves even more critical.[5]
Looking Ahead: Challenges and Opportunities
While the Padur project represents significant progress, challenges remain. The facility will take five years to build and another period to fill completely. Global oil market volatility, ongoing geopolitical tensions, and the need for substantial capital investment pose continued risks.
However, the project also opens new opportunities. Private sector participation could accelerate India’s reserve expansion program, bringing commercial efficiency to strategic infrastructure. The model could be replicated for future projects, potentially attracting international investment and expertise.
Conclusion
MEIL’s strategic petroleum reserve project represents more than just additional storage capacity, it signals India’s evolving approach to energy security in an uncertain world. By combining private sector efficiency with strategic national interests, India is building resilience against supply disruptions while moving closer to international standards. As global energy markets remain volatile and geopolitical risks persist, such initiatives become not just important but essential for India’s energy future.
References
[1] Business Standard, “MEIL to build India private strategic petroleum reserve,” September 16, 2025.
[2] Times of India, “India’s first private-sector strategic petroleum reserve,” September 15, 2025.
[3] Outlook Business, “Megha Engineering to Build India’s First Private Strategic Oil Reserve,” September 15, 2025.
[4] Reuters, “China asks state firms to add 60 million barrels of oil reserves,” July 4, 2024.
[5] Economic Times, “Value of India’s crude imports from Russia surges significantly,” July 28, 2025.
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