India to fill its strategic oil reserves

India plans to use the low oil prices to stock up on its strategic oil reserves. Shoring up on its oil reserves is crucial for India, which imports as much as 79 percent of its crude oil. The recent fall in the crude oil prices provides it with an opportunity to do so.

India will be importing 8 million barrels of crude oil form Basra in Iraq. The Petroleum Ministry is understood to have asked the state refiners Indian Oil Corporation and Hindustan Petroleum Corporation to seek to very large crude carriers for bringing Basra oil in May-June. Basra oil was chosen because it suits the refineries in India’s east coast.

To build up its strategic reserve, it is also constructing underground storages for the crude oil in Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka, that will have a total storage capacity of 5.33 million tonnes. An oil ministry official said the underground storage at Visakhapatnam is ready to receive crude oil.

“The Finance Ministry has provisioned Rs 2,399 crore in the Supplementary Demands for Grants for buying crude oil to fill the Vizag facility. Indian Strategic Petroleum Reserve Ltd (the firm that is creating the reserves) has been asked to use cheaper oil to fill the storage,” he said.

While the underground storage facility at Visakhapatnam facility can store 1.33 million tonnes of crude oil, the one in Mangalore will store 1.55 million tonnes and the Padur facility will store 2.5 million tonnes of crude oil.

With the commissioning of these storage, India joins US, Japan and China as nations having strategic reserves. But unlike these nations that use the stockpiles not only to guard themselves against disruptions in supplies but also to sell to refiners when the price of crude spikes, India will use it to guard itself against any disruption in the supply.

The finance ministry has provided Rs 2400 crore from its revised budget estimates for the current fiscal year towards the one-off purchase of crude oil.