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India to commission 5-mt underground oil storages by October

The first strategic oil reserve of 1.33 mln tonnes will be ready in Visakhapatnam by next month and this will be followed by two more facilities.

, ET Bureau|
Updated: Jan 31, 2015, 10.03 AM IST
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India has decided to commission over 5 million tonnes of underground crude oil storages by October to ensure uninterrupted oil supply to the nation.
India has decided to commission over 5 million tonnes of underground crude oil storages by October to ensure uninterrupted oil supply to the nation.
NEW DELHI: India has decided to commission over 5 million tonnes of underground crude oil storages by October to ensure uninterrupted oil supply to the nation for about two months in the case of disruptions in imports from oil producing countries due to geopolitical reasons.

The first strategic oil reserve of 1.33 million tonnes will be ready in Visakhapatnam by next month, officials said, adding that this will be followed by two more facilities in Mangalore (1.5 mt) and Padur (2.5 mt) in the next eight months.

"Together, the three projects will store crude oil for 13 days. To ensure energy security for 90 days, we will require additional 13.32 mt capacity storages. That will be achieved in the second phase," said an official, requesting not to be named.

Four more caverns of 12.5 million tonnes capacity will be built in the second phase, for which the locations that have been identified include Bikaner, Rajkot, Chandikhol and Padur, the official added.

The caverns are being developed by Indian Strategic Petroleum Reserves Ltd (ISPRL), a special purpose vehicle of the Oil Industry Development Board, a statutory body created for India’s energy security. According to ISPRL, the capital cost of creating three storage facilities is about Rs 3,958 crore and filling them with 5.03 million tonnes of crude oil will require about Rs 25,000 crore.

India — the fourth-biggest energy consumer in the world after the US, China and Russia — depends on imports for more than 80% of crude oil it processes for domestic consumption.

At present, the country can store crude oil in storage tanks of refiners and oil pipelines for less than 45-50 days.

In 2009, the government had decided to construct strategic caverns to store oil. India has emerged as the regional refining hub with annual capacity of over 215 million tonnes. The government is in touch with oil producing countries such as Kuwait and Abu Dhabi to store about 2 million tonnes of crude oil in Indian caverns that the country can use in case of supply disruptions. The two Gulf countries have expressed their willingness to fill crude oil in two compartments of caverns at Visakhapatnam and Mangalore, officials said.

Besides foreign companies, Indian refiners such as Hindustan Petroleum Corporation and Mangalore Refinery and Petrochemicals have already booked two compartments of 0.3 MT each in Visakhapatnam and Mangalore, respectively. Ownership of the stored crude oil will lie with the producers, who will be free to trade their inventories, officials said, but clarified that India will have the first right of refusal during emergencies.

Kuwait and Abu Dhabi are keen on storing crude oil in India to tap into the vast Asian markets because energy imports of America are on the decline due to availability of shale gas at relatively cheaper rates, officials said.



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