Crude Calculations: India-UAE Energy Ties Amid Gulf Turbulence

Spotlight:

• The density of India-UAE energy agreements in 2026 signals strategic intent, from SPR expansion to gas reserves.
• ADNOC’s expanding footprint in India’s storage infrastructure is mutually rational and the Fujairah corridor offers a partial yet meaningful Hormuz bypass. But they also require India to accelerate domestic infrastructure and define robust emergency access governance.
• Deepening the UAE partnership while preserving diplomatic balance across the Gulf remains India’s most complex and consequential energy policy challenge in an era of hardening regional alignments.

When Prime Minister Narendra Modi landed in Abu Dhabi on 15 May 2026, he was received at the airport by UAE President His Highness Sheikh Mohammed bin Zayed Al Nahyan and accorded a ceremonial welcome. The visit comes against the backdrop of a sharp escalation in Gulf tensions, including a drone strike on the Fujairah Oil Industry Zone injuring three Indian nationals, the sinking of an Indian-flagged vessel struck by a suspected drone south of the Strait of Hormuz, and an attack on the UAE’s Barakah Nuclear Energy Plant.

The intensity of the bilateral calendar tells its own story. UAE President Sheikh Mohamed bin Zayed visited India in January 2026, followed by Crown Prince Sheikh Khaled bin Mohamed bin Zayed in February. Indian Foreign Secretary Vikram Misri had travelled to Abu Dhabi just days before the Prime Minister’s visit, where he met UAE Minister of State Reem Al Hashimy and Mubadala Investment Company CEO Khaldoon Al Mubarak. At a time of sharpening geopolitical rivalries, fragmented supply chains, and continued volatility in global energy markets, New Delhi is deepening ties with partners such as the UAE that can support both India’s economic ambitions and its long-term energy security.

The UAE is already India’s third-largest trading partner and second-largest export destination, with the relationship underpinned by energy at every layer. The central question is how effectively both countries can translate longstanding commercial ties into a more resilient energy partnership.

Scaling the Energy Security Architecture

Several bilateral energy agreements are not new in conception. They reflect a relationship that had been systematically deepened well before the present crisis— one that is now being asked to bear far greater strategic weight.

The most structurally significant dimension is crude oil storage. Since a 2018 agreement, the UAE has been the only foreign country participating in India’s Strategic Petroleum Reserve (SPR) programme. Under that arrangement, Abu Dhabi National Oil Company (ADNOC) invested US$400 million to store crude in Indian Strategic Petroleum Reserves Limited’s (ISPRL) underground caverns at Mangaluru, where it holds 5.86 million barrels of strategic crude.  India had extended ADNOC the right to re-export crude stored in Indian caverns in 2020, a commercially meaningful concession that transforms the arrangement from a diplomatic gesture into a functioning part of ADNOC’s regional logistics and trading infrastructure.

Since a 2018 agreement, the UAE has been the only foreign country participating in India’s Strategic Petroleum Reserve (SPR) programme.

Alongside this, an Indian consortium led by ONGC holds a 40-year upstream stake in ADNOC’s Lower Zakum field, one of Abu Dhabi’s largest offshore deposits, securing a proportional share of crude output that offers a degree of supply assurance beyond spot-market competition. These arrangements illustrate how the India–UAE energy relationship has evolved from a transactional buyer–seller dynamic into a more deeply embedded strategic partnership.

The May 2026 visit expanded and formalised this architecture in meaningful ways. A new Strategic Collaboration Agreement between ISPRL and ADNOC targets UAE participation in India’s SPR of up to 30 million barrels, a near-fivefold increase, alongside a commitment to jointly develop strategic gas reserves within India.  ADNOC bears the cost of the crude it stores, feeding its commercial interest in maintaining a strategically located inventory close to one of Asia’s largest refining markets. India, in turn, gains the benefit of a substantially larger buffer without the capital outlay that would otherwise be required to fill that additional capacity, making it a structurally efficient arrangement for India’s balance sheet.

The frameworks governing access priority and first right of refusal under emergency conditions are therefore a critical dimension of the ISPRL-ADNOC arrangements that will need to be robustly defined as this partnership scales to 30 million barrels and potentially extends to storage outside Indian jurisdiction at Fujairah.

The crude stored in Indian caverns belongs to ADNOC, not India, and the re-export provision allows ADNOC to sell a portion of it commercially, however, India’s right to access ADNOC-stored crude in a supply emergency is established under the original 2018 terms of the arrangement. The frameworks governing access priority and first right of refusal under emergency conditions are therefore a critical dimension of the ISPRL-ADNOC arrangements that will need to be robustly defined as this partnership scales to 30 million barrels and potentially extends to storage outside Indian jurisdiction at Fujairah.

Source: Drishti IAS

The opportunity here is real but unlocking it depends substantially on what India builds at home. India’s operational SPR capacity currently stands at just 5.33 MMT, roughly 39 million barrels across three underground caverns at Visakhapatnam, Mangaluru, and Padur, with current stocks of only around 24–25 million barrels. Even a full realisation of the 30-million-barrel ADNOC expansion would still leave India well under the IEA’s recommended 90-day coverage benchmark.

Phase II expansion, 6.5 MMT across Chandikhol in Odisha and an additional Padur cavern, approved in 2021 with an estimated investment exceeding Rs 14,500 crore, remains in various stages of development. The agreement to scale ADNOC participation is thus only as meaningful as India’s ability to accelerate the commissioning of the cavern capacity needed to receive it.

Source: Discovery Alert

The Fujairah corridor is the geographic linchpin of this emerging architecture. The Port of Fujairah, the world’s second-largest bunkering facility, sits entirely outside the Strait of Hormuz on the Gulf of Oman coast, and the existing Abu Dhabi Crude Oil Pipeline already carries UAE crude there at a capacity of 1.8 million barrels per day. ADNOC has fast-tracked a second West-East Pipeline to double this export capacity, targeted for completion in 2027.

Perhaps the most strategically novel element of the current agreement architecture is the discussion underway for India to store crude at Fujairah as part of its own SPR framework. If operationalised, this would make India among the first major Asian crude importer to hold distributed strategic reserves on both ends of the supply chain, domestically within underground caverns, and at a Gulf waypoint within days of the source, representing a “structural innovation” in developing-economy energy security strategy.

If operationalised, this would make India among the first major Asian crude importer to hold distributed strategic reserves on both ends of the supply chain, domestically within underground caverns, and at a Gulf waypoint within days of the source, representing a “structural innovation” in developing-economy energy security strategy.

Yet even this corridor has limits. When Iran effectively closed the strait from late February, ADNOC was forced to shut in a substantial portion of its own production because the existing pipeline could carry less than half of its normal export volumes. Repeated attacks on UAE energy infrastructure, including Fujairah’s own oil industry zone, have further curtailed output. Until 2027 the bypass remains a bottleneck, and even after the new pipeline comes online it cannot replicate the full throughput the strait carries on a normal operating day. While the Fujairah corridor meaningfully mitigates Hormuz risk; it does not eliminate it.

The UAE’s exit from OPEC+ on 1 May 2026 adds production headroom, freed of quotas, ADNOC is targeting 5 million barrels per day, a goal brought forward by three years, with potential to push toward 6 million bpd. India’s geographical proximity confers a natural freight cost advantage over more distant alternatives. But this advantage will be contested: China, South Korea, and Japan face the same Hormuz exposure and are pivoting simultaneously toward the same Fujairah-routed volumes. In a supply scramble, proximity helps; it does not guarantee preferential access.

Beyond Crude

The gas picture underscores a broader vulnerability in India’s energy infrastructure. India holds only around 1.4 lakh tonnes of LPG storage against daily consumption of approximately 80,000 tonnes while LNG storage remains almost entirely dependent on stocks at regasification facilities run by Petronet LNG and BPCL, with no dedicated underground reserves. The commitment to jointly develop strategic gas reserves within India, announced during the May visit, is therefore as important as the crude oil expansion and equally contingent on India’s willingness to accelerate the infrastructure investment required.

On gas, Indian Oil Corporation had already signed a US$ 7–9 billion, fourteen-year deal to import 1.2 million tonnes per year of LNG from the UAE’s Das Island facility, with deliveries beginning 2026; and in January 2026, HPCL and ADNOC Gas signed a further ten-year LNG supply agreement for 0.5 million tonnes per year, beginning 2028.

On LPG, the stakes are more immediate. India imports roughly 60 percent of its LPG requirements, and the UAE is already one of its largest suppliers. During Prime Minister Modi’s May 2026 visit, Indian Oil and ADNOC signed a strategic collaboration agreement to explore expanded LPG supply and trading opportunities, including a potential long-term sale and purchase agreement. For India, the significance extends beyond commercial diversification. Stable LPG supplies help shield millions of households, particularly lower-income consumers, from disruptions and price spikes in cooking fuel. Converting this understanding into a firm long-term contract will be an important near-term test of how effectively both sides can translate diplomatic momentum into operational outcomes.

Conclusion

Taken together, the agreements signed in 2026 represent a significant strengthening of the India–UAE energy architecture, one whose strategic value has been underscored by the Hormuz crisis. The pace and density of bilateral engagement send an important signal to markets and regional partners alike: both governments view energy cooperation as a long-term strategic priority rather than a series of isolated commercial transactions.

The pace and density of bilateral engagement send an important signal to markets and regional partners alike: both governments view energy cooperation as a long-term strategic priority rather than a series of isolated commercial transactions.

For UAE, a deeper presence in India’s energy infrastructure reflects a broader commercial logic of national oil companies (ADNOC) seeking downstream footholds in major import markets as a hedge against long-term demand uncertainty and transition-related risks. For India, these arrangements provide more than supply contracts; they create optionality through storage, upstream equity, and logistical diversification.

The significance of the May 2026 visit lies less in any single agreement than in the architecture it advances. If implemented fully, India and the UAE will be building one of Asia’s most sophisticated bilateral hydrocarbon partnerships, converting long-standing energy interdependence into a durable source of strategic resilience.

Parul Bakshi is Fellow, Energy and Climate, ORF Middle East.