India partners with foreign firms to build strategic petroleum reserves
Bracing for unforeseen price shocks and supply disruptions, India is trying to strengthen its Strategic Petroleum Reserves (SPRs) in partnership with foreign oil producers and traders.
Oil traders and producers who stock crude oil in Indian SPR caverns will have the right to sell their oil to refineries in the region on commercial terms, but India will have the first the right to buy it in the case of emergency.
Currently, India has three underground reservoirs with the total capacity of 5.33 million tonnes of oil, which can store to meet the country’s needs for nine days. The 1.33-million tonne Vishakhapatnam (Andhra Pradesh) reservoir is one-third filled-up by Hindustan Petroleum Corporation, a state-run entity, while half of the 1.5 million tonne Mangalore (Karnataka) facility has been leased out to Abu Dhabi National Oil Company (Adnoc) and the other half is to filled up by the Indian government. Padur (also in Karnataka) reservoir, which has four rock caverns, each capable of holding 0.625 million tonnes, is empty.
The government is in negotiation with a number of oil producers, including Saudi Aramco and Adnoc, and international oil traders to set up two more reservoirs to enhance the storage at SPRs by 6.5 million tonnes of crude oil. One of these will be built at Chandikhol in the eastern state of Odisha and the other again at Padur. Chandikhol will be equipped to hold four million tonnes and new Padur reservoir 2.5 million tonnes. Together the new SPRs will be capable of meeting the oil needs of the country for another 12 days, says Indian Strategic Petroleum Reserves Ltd. (ISPRL) Chief Executive Officer H P S Ahuja.
Indian refiners maintain 65 days of crude oil. When it is added to the volumes of storage planned and achieved by ISPRL, the capacity of Indian SPRs rises sufficient enough to meet its oil needs for 87 days. This figure is very close to the storage of 90 days mandated by IEA for member countries.
“The filling of the strategic petroleum reserves (SPR) under public-private-partnership model is being undertaken to reduce budgetary support of government of India,” an official statement issued after the meeting said.
India officials were in Singapore in October to seek private investors to build, operate and fill the second phase of its SPR with crude.
Construction of phase 2 is estimated to cost $1.6 billion, while the cost of filling it with crude would be three times the investment at today’s oil price, Sunjay Sudhir, joint secretary at the ministry of petroleum and natural gas, said.
Strategic reserves are crucial for a growing consumer like India that can serve as buffer against volatility in oil prices.
Energy-deficient India imports around 82 percent of oil and 50 percent of natural gas to power its economic growth. In the 2017-18 it imported. India paid US$ 87.7 billion (Rs 5.65 lakh crore) to importing 220.43 million tonnes of oil. In 2018-19 the volume is poised to rise to 227 million tonnes in line with the increased growth and the country has to grapple with the double whammy of high prices and falling Indian rupee.
