How India’s oil sector remained stable during the Hormuz crisis

The scale of pre-crisis risk was substantial. About 45% of India’s crude oil imports and about 60% of our liquefied petroleum gas passed through the Strait of Hormuz before its closure. For a country that consumes more than two million barrels of crude oil per day, such concentrations represent acute vulnerability. Yet the crisis exposed something we had been quietly building: the operational capacity to absorb and divert large-scale flows in a matter of days. Within weeks of the closure, the share of crude sourced from non-Hormuz routes increased from 55% to 70%. This reflects a sourcing strategy that has expanded our supplier base from 27 countries in 2006-07 to 41 countries today. That diversity, from the US, Norway, Algeria, Canada, Russia and our Gulf partners, means we can receive flows from the North Sea regions, West African basins and Atlantic markets almost simultaneously.

However, diversification on paper is not diversification in operation. This capacity of 41 countries rests on an astute physical infrastructure accumulated over the years: 24 refineries configured for crude oil flexibility (each handling different viscosities, sulfur contents and yield profiles from different fields); more than 54,000 kilometers of hydrocarbon pipelines that enable flows to change direction without new construction; A network of over a lakh petrol pumps has been created to absorb whatever flow the distribution system can provide. Infrastructure came first. Supplier relationships were valuable only because the infrastructure could consume what they provided.

The LPG picture tells a parallel story. In 2014, India had 11 import terminals for liquefied petroleum gas; Now we have 22. This doubling reflected a strategic conviction that domestic cooking gas, especially in rural India, was too important to depend on a single port or a single shipping route. When the Strait of Hormuz closed, those 22 terminals became the physical backbone of supply continuity. Each terminal represents not only a landing point but a distinct node: a west coast terminal reaches suppliers through one route; An eastern terminal through completely different geographical areas. Redundancy worked. LPG supply requires active, moment-to-moment management, with refineries prioritizing their output and import coordination going on around the clock. The system never failed.

Government coordination activated with precision and speed. The LPG control order of March 8 directed refineries to maximize the yield of liquefied petroleum gas from their crude processing; Domestic LPG production increased from 35 TMT per day to 54 TMT per day, an operational transformation achieved under intense pressure. Some refineries that had never produced LPG came online. This was not some imaginary supply achieved through accounting; It was refinery teams working to reconfigure their units, traders securing feedstock, and operators managing unfamiliar production profiles. Simultaneously, the Natural Gas (Supply Regulation) order of March 9 under the Essential Commodities Act established an allocation hierarchy: domestic piped natural gas, CNG for transportation, and LPG production were kept at 100% of historical usage; Industrial consumers could reach 80%; Fertilizer plants received 70%; Refinery fuel use was capped at 65% of historical levels. Refineries operating at two-thirds capacity face efficiency losses and higher per-unit costs. The industry accepted this disruption because we understood the risks and because the allocation orders made it clear that the disruption was temporary, not structural.

Inventory became a significant gain. At the peak of the crisis, India had about 60 days of crude oil and liquefied natural gas reserves, as well as 45 days of LPG in dedicated storage. These figures are not contingency reserves. They represent conscious investment in buffer capacity, including our strategic reserves under the Indian Strategic Petroleum Reserve Limited Programme, and reflect international coordination on the release of 400 million barrels by the International Energy Agency on March 11. Every downstream oil company faces this question in a crisis: Will we run out before supply chains rebalance? India’s answer was no, as we had built up tank capacity and crude oil diversity to avoid disruption.

Ship exemption was of great importance. On March 26, India joined a select group of just five countries with diplomatic status to allow commercial vessels to transit through the strait despite the widespread closure. By 6 April, nine India-flagged ships had passed under the exemption, including the LPG carrier Green Asha. Each transit ship brought not only products but also confidence. This proved that the supply chain was not just theoretical but operationally real. Refineries can receive fresh crude oil, schedule their operations with visibility, and plan intake schedules in weeks instead of days. Management of flows, coordination with security assets, and the operational discipline required to keep ships moving were the conditions that made the no-dry-out outcome possible.

Oil marketing companies suffered extraordinary losses during the peak phase. The government did not pass this shock on to consumers. Instead, he absorbed it. Oil marketing companies are heading towards losses ₹Rs 1 lakh crore in this quarter ₹Last year, Rs 30,000 crore was promised to keep LPG prices stable. cut excise duty ₹Rs 10 per liter hike on petrol was announced in late March, along with export duty on diesel. ₹21.5 per liter and aviation turbine fuel ₹29.5 per liter to prevent wastage of supplies abroad. Consumers paid the familiar price at the pump. Ujjwala remained stable on cylinder in Delhi ₹642 in total, largely absorbed into the state ₹Rs 700 per cylinder subsidy; Import costs may have increased ₹1,600. This is the mathematics of deliberate crisis management: Government bears the costs, industry absorbs operational disruption, consumers get stability.

India’s fuel security strategy includes tools beyond crisis response. Blending about 20% ethanol in petrol saves about 45 million barrels of crude oil imports annually, which is a stable pressure valve on crude oil demand. Refinery flexibility itself represents design choices accumulated over years; Indian refineries are configurable rather than rigid, single-feed installations locked into a single crude type, capable of processing crude oil from different origins, different qualities and different supply rhythms. That flexibility is a capability, not an accident. When the Hormuz crisis came, we were not trying to find new options; We were deploying options already built into the system.

What the Hormuz crisis demonstrated is that energy security cannot be won through a single lever or outright intervention. It comes from patient, deliberate accumulation of choices: supplier diversity, terminal capacity, depth of storage, refinery flexibility, diplomatic relationships that generate operational freedom, government systems efficient enough to reallocate resources, and industry discipline willing to absorb disruptions in the service of a larger collective outcome. The real crisis management had already happened, in terminal investments that rarely made headlines, supplier contracts that appeared as footnotes in reports, storage construction that seemed routine. The crisis only exposed what we had created. This result was the result of a preparatory meeting with operational rigor at this moment.

(Views expressed are personal)

This article is written by Satish Kumar Waduguri, Director General, Federation of Indian Petroleum Industry (FIPI).