Government mulls additional petroleum reserves
Strategic crude oil reserves that are funded by the government will allow India to counter short-term supply disruptions.
New Delhi: The Centre will shortly consider a proposal to create 5.5 million tonnes of strategic petroleum reserves (SPR) to insulate the economy from volatility in global energy markets.
The proposed underground rocky cavern reserves will be in addition to 6.5-million tonnes SPRs being created to provide 12 days of supply at Chandikol in Odisha and Padur in Karnataka.
Already, India has achieved 9.5 days of SPRs with 5.3 million tonnes in the first phase of its campaign to ensure energy security that includes storages at caverns in Mangalore.
“A fresh review of SPR will be done after the second phase of strategic crude oil reserves is completed during the next few months. We may have to undertake the third phase with yet another 5.5 million tonnes,” said a top government official on condition of anonymity.
Last November the Cabinet had approved establishing additional 6.5 million tonnes of strategic petroleum reserves involving an investment of over Rs 10,000 crore.
The second phase SPRs is being implemented in partnership with global oil majors like Abu Dhabi National Oil Company (ADNOC). Six other top oil companies have been in the reckoning to bag the SPRs deal. As per the partnership deal being clinched for the second phase, the oil majors would be entitled to sell at least 35 per cent reserves in the open market. On the rest 65 per cent, the government will exercise its right to utilise for its own purposes.
Together with commercial reserves for 65 days held by oil refining companies, the total reserves will now touch about 87 days. However, the government is contemplating crossing the 90-day mark with the third phase of 5.5 million tonnes SPR.
This will provide extra cushion for the government to manage its crude requirements that are currently imported from various sources in the Middle East and far-eastern countries.
Apart from providing fallback arrangement in terms of volatility in crude markets, the government will also use these reserves in times of exigencies like conflicts and war.
The Petroleum Ministry’s special purpose vehicle (SPV), Indian Strategic Petroleum Reserves Ltd (ISPL), will be the nodal point for dealing with strategic reserves. While Petroleum Secretary is the Chairman of ISPL, he would act under the Prime Minister’s directive.
Till date, crude from SPR has not been drawn to tame domestic petrol and diesel prices. On the contrary, US President Donald Trump had decided to draw on American SPRs worth over 518 million tonnes to negate the mpact of sanctions on Venezuela and consequent disruption in oil supplies.
The final decision to create 5.5 million tonnes additional SPR will have to be approved by the Union Cabinet before the Election Commission notifies the Lok Sabha polls schedule.
India is the third largest importer of crude after the US and China and meets about 82 per cent crude requirements by sourcing oil from global partners.
Strategic crude oil reserves that are funded by the government will allow India to counter short-term supply disruptions. International Energy Agency (IEA) members, including India, have been striving to maintain emergency oil reserves equivalent to at least 90 days of net imports.