India-Pak conflict exposes energy vulnerability

You know what happens in the energy space when two oil and gas producing nations have a conflict. But what happens when two energy import dependent nations like India and Pakistan have tensions?

Besides serious humanitarian implications — both are nuclear armed — it also brings to the forefront the importance of emergency preparedness in the energy sector and the two nations’ ability to meet the energy needs during the time of conflict.

In such a situation, movement and supply of crude oil and gas can get disrupted.

Regional tensions can disrupt key maritime routes leading to increased shipping risks and higher freight charges and finally supply chain disturbances. Also crude oil prices are sensitive to geopolitical instability.

According to Rystad Energy’s market update on India-Pakistan tensions raise concerns for energy markets: “The risk of direct attacks on commercial vessels is rare and prohibited under international law. Still, the risk of military confrontations or a misunderstanding, especially in areas close to naval operations, increases during times of heightened tension. Tankers passing through the region could be subject to scrutiny or diversion if the situation escalates.”

India’s key refining hubs in western Gujarat handle over 50 per cent of the country’s daily crude imports, with the Sikka, Vadinar and Mundra ports supplying to six refineries, it said.

Energy vulnerabilities

According to Tracy Shuchart, Senior Economist, NinjaTrader Group. LLC., “The recent India-Pakistan tensions have highlighted significant energy security vulnerabilities for both countries, though with asymmetric impacts. While intra-regional energy trade offers theoretical benefits, the current geopolitical reality makes implementation challenging in the short term. Strategic petroleum reserves emerge as a critical focus area for both countries.”

India imports approximately 88.8 per cent of its crude oil requirements, which amounted to 234.26 million tonne in 2023-24. India imports 47.1 per cent of its natural gas requirements, with 31.80 billion cubic metres (BCM) imported last year.

Even for coal, where India has substantial domestic production, it imported 263.56 million tonne, representing about 21.3 per cent of India’s consumption, Shuchart pointed out.

Pakistan’s situation is similarly challenging. “They import around 78 per cent of their crude oil requirements, with imports of 6.151 million tonne between July 2024 and January 2025. Their RLNG (imported LNG) consumption is about 695 MMCFD, which is 21.7 per cent of their total gas consumption. They also rely significantly on imported coal for power generation, though they are making efforts to substitute this with indigenous coal,” she said.

What is particularly concerning is how these dependencies translate into vulnerabilities during conflicts.

“The recent tensions demonstrated the fragility of maritime shipping routes in the Arabian Sea, which both countries rely on for energy imports. We also saw how border closures can disrupt any cross-border energy infrastructure and how energy facilities could potentially become strategic targets in a prolonged conflict,” she said.

Intra-regional trade

But in times of conflict, what happens to intra-regional trade? Does it make sense particularly in the context of Pakistan?

“Intra-regional energy trade between India and Pakistan makes economic sense but faces significant political barriers. India’s diverse electricity generation mix could complement Pakistan’s generation profile, which faces shortages. India’s expanding natural gas infrastructure could potentially serve regional needs, and its substantial refining capacity creates potential for petroleum product exports,” she said.

The economic benefits would include cost savings, enhanced energy security through diversification, and better integration of renewable energy.

However, implementation faces major obstacles: the recent terror attack in Kashmir has damaged prospects for cooperation; both countries have security concerns about energy infrastructure becoming strategic targets; limited cross-border infrastructure; and need for harmonisation of regulatory frameworks.

“Potential pathways forward include an incremental approach with small-scale projects, embedding bilateral trade within broader regional frameworks, and third-party facilitation by international organisations,” she said.

But, what could these countries focus on to sustain their energy security? One of the answers is strategic petroleum reserves.

“Strategic petroleum reserves should be a critical focus for both countries, though with different priorities,” Shuchart said adding, “India currently maintains reserves sufficient for approximately 74 days of consumption (through IOC, ISPRL, and other state-run retailers), But this falls short of the international standard of 90-120 days recommended by the IEA,”.

There is no international standard for strategic reserves, but a common practice is to maintain oil reserves equivalent to at least 90 days of net imports as is part of agreements within the International Energy Agency (IEA).

India has allocated funds to expand these reserves in the 2025-26 Budget.

Pakistan, however, lacks formal strategic petroleum reserves, maintaining only commercial stocks sufficient for approximately 20 days, she said adding that “This absence represents a significant vulnerability, as demonstrated during the recent conflict when panic buying occurred even in India despite its reserves.”

For India, its priorities should include expanding reserves to international standards, enhancing geographic diversification, and developing protocols for addressing panic buying, she said.

“For Pakistan, establishing basic strategic reserve capacity is an urgent priority, potentially through a phased approach starting with 30 days of reserves. While costly, strategic reserves represent an essential insurance policy against supply disruptions that could have devastating economic and security implications,” Shuchart said.

To protect itself from the supply chain shock, India could increase crude purchases, which may support prices in the short term. But, India still is vulnerable in the energy space and now is the time to act.

Published on May 19, 2025