Expert Explains | How UAE’s exit from OPEC presents an opportunity for India’s strategic petroleum reserves

The opportunity presented by the UAE’s exit

The UAE’s exit from OPEC, once considered geopolitically unthinkable, was years in the making. Abu Dhabi’s frustration with production quotas had grown since 2023, as they prevented it from monetising its expanded upstream capacity, now exceeding 4.85 million barrels per day. The exit reflects a clear two-decade strategy: produce at full capacity before the energy transition closes the window, unencumbered by a cartel whose internal dynamics increasingly served other members’ interests. Its sovereign wealth fund, ADIA, now commands nearly $1.12 trillion in assets.

The UAE-Saudi divergence, visible in their contrasting objectives in Yemen and differing threat perceptions over Houthi attacks on Red Sea shipping, made a break from OPEC inevitable. For the UAE, whose entire economic model depends on open sea lanes, the attacks were existential; for Saudi Arabia, engaged in peace talks with the Houthis, escalation was unwelcome.

Perhaps most consequentially for India, the UAE’s normalisation with Israel under the 2020 Abraham Accords has created a strategic alignment with significant energy security dimensions — giving Abu Dhabi access to Israeli capabilities in cybersecurity, intelligence, and energy infrastructure protection. Even through the Gaza war, the UAE held firm to the Accords. This convergence of interests is further reflected in the India-Middle East-Europe Economic Corridor (IMEC), backed by the UAE, Saudi Arabia, Israel, and the United States, which aims to build connectivity routes that bypass the Strait of Hormuz entirely. New Delhi’s strategic planners should be actively leveraging this convergence.

The bilateral opportunity

The bilateral prospects that exist can act as leverage only if India seizes this opportunity. Freed from its quota constraints, UAE oil major ADNOC could offer long-term government-to-government supply contracts and negotiate volumes and prices without worrying about cartel compliance. The existing discussions on rupee-dirham oil trade settlement become far more viable when Abu Dhabi is not tethered to OPEC’s implicit dollar-denominated norms.

A post-OPEC UAE, flush with unconstrained revenues and eager to lock in captive demand, has powerful incentives to invest directly in refining and petrochemical capacity. This includes the current arrangement under which UAE crude is stored in India’s strategic reserves, a hybrid commercial strategic model that gives ADNOC partial access to its own stored barrels. This must be urgently renegotiated into a genuine emergency access agreement with unambiguous Indian access during a crisis.

India’s strategic petroleum reserves

India’s Strategic Petroleum Reserve (SPR), managed by the Indian Strategic Petroleum Reserves Limited (ISPRL), was established in response to the supply anxieties around 2010, when Iran sanctions and Arab Spring volatility made India’s import dependence feel exposed. The total government-held capacity is 5.33 million metric tonnes. Along with other existing storage arrangements, based on current consumption levels, this elevates the strategic storage to roughly 74 days of national demand, as quoted by Minister Hardeep Singh Puri.

The west and east coast facilities were deliberately positioned to receive Gulf crude rapidly during a crisis. The ADNOC bilateral was envisioned explicitly as a hedge against a disruption to the Strait of Hormuz, the 21-mile choke point through which over 80% of Asia’s Gulf oil transits. The logic was sound, but the arithmetic was devastatingly insufficient.

In marked contrast, Japan maintains strategic reserves covering 254 days of net import cover, while South Korea holds 210 days of strategic reserves. China, opaque but systematic, has built estimated reserves of 90 to 100 days of cover.

The International Energy Agency mandates that its members hold at least 90 days of net imports as a baseline of energy security. India is not yet a full IEA member, but it aspires to be. The gap between that aspiration and the reality of its reserves is not a detail, but a strategic vulnerability. India’s reserves cannot be easily substituted with lighter or heavier alternative grades in an emergency. The commercial strategic hybrid model that governs ADNOC toward crude storage creates genuine legal ambiguity about who controls what during a crisis. With no SPR facility in India’s vast northern interior, any emergency distribution to the heartland would depend on a pipeline and road network with its own vulnerabilities.

The government had outlined expansion plans comprising additional facilities at Chandikhol in Odisha and an expanded Padur facility — which together would add 6.5 MMT of capacity — to be completed by 2023-24. This deadline has passed without completion, delayed by land acquisition, environmental clearances and financing models that rely heavily on the very public-private partnerships that have struggled to attract committed capital. The next phase must now be funded through dedicated capital, not PPP experimentation.

The commercial stock obligation on private refiners must be raised towards the levels required in Japan and South Korea. The ADNOC storage arrangement must be renegotiated into a binding strategic instrument. And India must accelerate its pathway to full IEA membership, integrating itself into the collective emergency mechanisms that Japan and other members have relied on for decades. This could be mutually beneficial for the India-UAE partnership in the energy sector, allowing it to expand further in the future with the UAE’s recent strategic exit from OPEC.

TP Seetharam is a former Indian Ambassador to the UAE.