Asian economies are increasing their storage capacity for oil and gas to mitigate risks associated with conflicts in the Middle East. The region faced significant economic challenges following the outbreak of war between the United States, Israel, and Iran six months ago. The Strait of Hormuz, a critical shipping route for Gulf oil and gas, has seen reduced traffic due to Iranian attacks and a US naval blockade. In response, Asian countries implemented fuel conservation measures, including price caps and work-from-home mandates for civil servants, as oil and gas prices surged.
To address the energy disruption, Asian nations are pursuing more permanent solutions by keeping essential oil and gas supplies closer to home. Parul Bakshi, a visiting research fellow at the Oxford Institute for Energy Studies, noted, "The crisis is producing two very different kinds of investment: infrastructure that bypasses geopolitical risk, and infrastructure that eliminates exposure to imported fuel altogether."
Japan, despite its heavy reliance on Middle Eastern energy, has managed the crisis better than many other economies due to its substantial strategic oil reserves. Japanese Prime Minister Sanae Takaichi announced the $10 billion POWERR Asia initiative in April, aimed at assisting Southeast Asian economies in procuring oil and building strategic stockpiles.
As of late February, Vietnam's national reserves could only meet its needs for five to seven days, although commercial inventories extended supplies for up to another 65 days. Thailand had approximately 61 days of reserves, while the Philippines had an estimated 50-60 days in private inventories, all below the International Energy Agency's 90-day minimum benchmark. In response, the Philippines approved a bill to create a 60-day government-held reserve, and Thailand is advancing plans for new crude pipelines and tank farms.
India is also reassessing its strategic stockpile, holding about 74 days' worth of oil stocks as of May, with plans from the state-owned Oil and Natural Gas Corporation to build a reserve of 1.75 million metric tonnes. Major Asian economies are exploring direct storage deals with Gulf suppliers, with Japan, South Korea, and Singapore looking to expand their existing capacities.
The United Arab Emirates and its Abu Dhabi National Oil Company (ADNOC) already store oil in various countries, including Singapore and India. ADNOC aims to increase its crude oil storage capacity in India to 30 million barrels, while South Korea is considering expanding its reserves by an additional 30-40 million barrels.
In China, the blockage of the Strait of Hormuz has prompted a renewed focus on energy security, with the latest five-year plan for oil and gas development including provisions for more pipelines and expanded LNG storage. State-owned PipeChina is accelerating construction on numerous oil and gas projects, reinforcing the need for increased national energy reserves.
Bakshi emphasized the importance of reducing reliance on a single fuel source, supplier, or chokepoint, stating, "It is no longer enough to ask where the next barrel comes from. We also have to ask how it gets there, how long we can operate without it, and whether we can reduce our need for that barrel altogether."