Hindustan Petroleum Corporation (HPCL) and Mangalore Refineries (MRPL) will lift crude from India’s maiden crude caverns coming up in Vizag and Mangalore, respectively.

These caverns are expected to come up onstream by the later part of the next fiscal, said LN Gupta, secretary, Oil Industry Development Board (OIDB), a body under the ministry of petroleum and natural gas which assists oil companies with their funding requirements.

OIDB, through its fully-owned subsidiary Indian Strategic Petroleum Reserves (ISPRL), is setting up three crude caverns at Vizag in Andhra Pradesh and Mangalore and Padur in Karnataka.

Together, these caverns will have a total storage capacity of 5.33 million tonne (mt) and will primarily be used as emergency crude stockpiles for the country.

Out of this, Vizag will have 1.33 mt of strategic storage and will be built at a cost of R1,038 crore. This will be the first to be commissioned and will be ready by August 2014.

The next will be R732 crore strategic storage space at Mangalore with a capacity of 1.5 mt and the third at Padur, with a capacity to store 2.5 mt and being built at R993 crore.

Media reports suggest ISPRL is looking at creating additional storage space of 12.5 mt at various locations in Karnataka, Odisha, Gujarat and Rajasthan.

However, as the caverns will also have to be financially viable, ISPRL has decided to supply some part of the crude to refiners in the respective regions.

?We first decided to increase the capacity of the Vizag storage as much as

possible. After we increased it, we saw we have 0.3 mt

additional capacity and we offered it to HPCL. The remaining 1.03 will be the government’s reserves. With MRPL we are yet to work out the details,” said Rajan K Pillai, CEO of ISPRL.

In fact, the company is also talking to some global companies to lease out some compartments in these caverns to monetise them at the earliest. “Discussions are on with some players but nothing much can be said at the moment,” said Gupta.

Pillai said emergency stockpiles of a country are one of the pre-requisites for India to claim membership to the International Energy Agency (IEA). “Our focus is to commission the first cavern by July-August 2014. After that we can seek partners also,” he said.

Since India is not yet a member of IEA, the government is free to use the crude stored in caverns the way it wants, but primarily it will be for contingency needs.

Pillai said the cavern storage spaces are being built in the form of compartments and work is on to seal (make ready for operations) these compartments at the earliest. One compartment each in Vizag (0.3 mt) and Mangalore (0.75 mt) has been sealed while two have been sealed at Padur (0.625 mt each).

Vizag will have two compartments of 0.3 mt and 1.03 mt, of which the first one will be used to supply to HPCL.

At Mangalore, two compartments of 0.75 mt will come up, of which one is

likely to be used to supply to MRPL. Padur will have four compartments of 0.625 mt each.

While HPCL and MRPL will take crude from Vizag and Mangalore respectively, the Padur caverns will be solely used for storing emergency crude as logistic constraints don?t allow for viable transportation from the region.

In fact, ISPRL is planning to connect the Padur and Mangalore caverns through a 36-km pipeline, which will further extend from Mangalore landfall to the cavern by another 12 km for bringing in the crude.

?This should be ready shortly and after that, we can give a deadline for the commissioning of Mangalore and Padur storage caverns,? Pillai said.