By this time next year, India could have a strategic oil reserve in place. With this, the country would be joining the ranks of a clutch of nations including the US, China and Japan with such an exigency plan.
To start with, India will have reserves that would last for 14 days. Eventually, the reserves would be augmented to last 90 days.
The storage would be in three underground caverns that can be instantly deployed in case of emergencies, oil ministry sources said. As per current oil prices, 14-days reserves would cost around Rs 25,000 crore to fill up the caverns.
However with just Rs 4,800 crore budgetary outlay made to ISPRL, the special purpose vehicle (SPV) building the facility, it might have to look at ways to monetize the storage space in order to meet the deficit, the sources added.
The first of the these caverns is expected to come up in Visakhapatnam in Andhra Pradesh by August next year, while caverns at Mangalore and Padur in Karnataka will be ready by the end of 2014.
India imported 184.8 million tonne of crude oil in the year ended March 31 for $144.3 billion, which was 7.8% of the country?s gross domestic product.
Almost 80% of the country’s oil needs are met through imports, making it highly vulnerable to external shocks like a sudden price spiral.
The US has a the world’s largest stockpile of government-owned emergency crude oil in the world with a capacity of 727 million barrels.
ISPRL, the sources said, is considering various business models to monetize the storage space in order to reduce the burden on the exchequer.
For instance, it is in talks with national oil companies of countries such as Kuwait and Saudi Arabia as well as private companies like Shell to use the caverns as storage space on a leaseholder basis. ?These companies could use the caverns to store their crude oil as they typically transport oil from Middle East to the Far East or even sell it in India. This will reduce our need to purchase this from domestic producers or through imports. However, the right of first use in case of an emergency will lie with India,? an official said.
?The 1.33-millon tonne (MT) cavern at at Vizag should be ready by August 2014, while the Mangalore cavern with a capacity of 1.55 MT and Padur at 2.5 MT will be ready in the last quarter of 2014. The 5.33 MT reserves will last India 14 days and entails an investment of close to Rs 4,000 crore,? said Rajan K Pillai, CEO of ISPRL. ISPRL, formed in 2006, is wholly-owned by the Oil Industry Development Board (OIDB).
The government plans to build reserves that could last 90 days. This would require ISPRL to scout for new locations. The coastal areas of Orissa, Rajasthan and Gujarat are currently in the radar for the next set of caverns in phase 2 of expansions.
?We want to build enough reserves to last 90 days. To meet these expansion plans we could seek equity partnerships as well. Some of the proposed areas, includes Chandhikol in Orissa, Bikaner in Rajasthan and Rajkot in Gujarat.?
