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Geopolitical tensions jeopardise energy flows in India and Pakistan

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May 9, 2025
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The intensifying tensions between nuclear powers India and Pakistan pose a significant risk of widespread and severe humanitarian consequences for the region.

Escalating tensions highlight the critical need for emergency preparedness in the energy sector. A protracted conflict would significantly threaten both nations’ capacity to satisfy their energy demands, according to Rystad Energy.

The Indian army reported that Pakistan’s armed forces initiated “multiple attacks” involving drones and other munitions across India’s entire western border on Thursday night and early Friday, escalating the conflict between the two nuclear-armed nations.

Source: Rystad Energy

Energy security

There is a significant disparity between India and Pakistan’s strategic petroleum reserves. 

In terms of daily crude demand, India consumes 5.40 million barrels per day (bpd) compared to Pakistan’s 0.25 million bpd, according to Rystad Energy analysis.

India maintains a strategic petroleum reserve of 39 million barrels, with 21.4 million barrels currently in stock. Pakistan, conversely, does not possess any strategic oil reserves, which could expose the country to supply vulnerabilities.

India’s commercial stockpiles are close to 160 million barrels.

“However, the discrepancy goes beyond just demand—India’s strategic and commercial reserves can sustain supply for over a month (33 days), while Pakistan, which lacks any strategic reserves, has only 20 days’ worth in stock,” Rohan Goindi, senior analyst, commodities markets, oil at Rystad Energy said in an emailed commentary.

India, the world’s third-largest crude importer, depends heavily on foreign sources for its oil needs, with approximately 85% of its demand met through imports. 

Similarly, Pakistan imports around 78% of the crude oil required to meet its domestic demand.

Fortunately, refineries in both India and Pakistan are situated outside the conflict zone, mitigating the risk of operational disruptions, Rystad said. 

Additionally, the lack of refineries and LNG terminals in the affected areas suggests that crude oil and LNG imports are unlikely to be directly impacted.

However, a notable difference exists in the level of emergency preparedness between the two nations, which raises concerns, the Norway-based energy intelligence company said.

Water treaty suspension

India has intensified pressure beyond military action through significant diplomatic and infrastructure moves. 

These include suspending the Indus Waters Treaty, expelling Pakistani diplomats, and accelerating five hydroelectric projects in Jammu & Kashmir with over 4,000 MW capacity. 

The hydroelectric projects, previously hindered by treaty-related issues, can now proceed more quickly due to the suspension of procedural obstacles. 

The potential suspension of a long-standing water-sharing treaty poses a significant threat to Pakistan’s energy sector, as 90% of its installed hydropower capacity relies on this agreement, according to Rystad.

The Indus Water Treaty is crucial for both India and Pakistan. 

India has 2.7 GW of hydropower projects relying on rivers covered by the water treaty, which is part of its total installed hydropower capacity of 52 GW nationwide.

Source: Rystad Energy

Disruption to these projects will have a relatively small impact in India as hydropower only contributed 8% to total power generation in 2024.

However, disruption to the water treaty could put up to 9.3 GW of hydropower capacity–equivalent to 90% of Pakistan’s total installed hydropower capacity–at risk, as per Rystad’s analysis.

Uttamarani Pati, analyst, renewables & power research at Rystad Energy said;

If the treaty were to be terminated altogether, India would gain full control of the Indus, Jhelum and Chenab rivers, enabling it to build more hydropower projects and potentially operate existing upstream facilities in ways that could adversely affect its downstream neighbor.

Suspension of water treaty more severe for Pakistan

According to Rystad, the suspension of the Indus Water Treaty will have a more severe impact on Pakistan than for India. 

“Reduced inflow from the Indus and Jhelum rivers will compromise Pakistan’s grid stability and ability to meet peak power demand, especially in the summer months, potentially leading to widespread blackouts.”

Terminating the Indus Waters Treaty (IWT) would allow India to control the Indus, Jhelum, and Chenab rivers, potentially enabling the construction of additional hydropower projects in the area, it further said.

India’s current upstream hydropower operations carry a potential risk of negatively affecting its downstream neighbor. 

This could occur through actions such as sediment flushing and unexpected releases of large volumes of reservoir water, which could lead to flooding.

Rystad noted:

However, no steps have been taken in this direction at present, and any international backlash from such unilateral actions could be significant.

In addition, escalating tensions threaten long-term green energy investments like Pakistan’s Thatta hydrogen project and could disrupt mature projects such as AM Green Ammonia’s Kakinada plant in India due to economic instability and supply chain issues.

Also, in anticipation of supply shocks, India could ramp up purchases of crude oil, which is likely to support prices in the short term.  

The post Geopolitical tensions jeopardise energy flows in India and Pakistan appeared first on Invezz

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