India, the world's third biggest oil consumer and importer, plans to build its first commercial crude oil strategic storage as part of efforts to shore up stockpiles as insurance against any supply disruption.
Indian Strategic Petroleum Reserves Ltd (ISPRL), a special purpose vehicle created by the government for building and operating strategic petroleum reserves in the country, has invited bids for constructing 2.5 million tonnes of underground storage at Padur in Karnataka, according to the tender document.
ISPRL had in the first phase built a strategic petroleum reserve in underground unlined rock caverns for storage of 5.33 million tonnes of crude oil at three locations Visakhapatnam (1.33 million tonnes) in Andhra Pradesh and Mangalore (1.5 million tonnes) and Padur (2.5 million tonnes) in Karnataka.
Under Phase-II, it intends to build a commercial cum strategic petroleum reserve in underground unlined rock caverns along with associated above ground facilities, including dedicated SPM and associated pipelines (offshore and onshore) for storage of 2.5 million tonnes of crude oil at Padur-II at a cost of Rs. 55.14 billion.
The Phase-I storages were built at government expense.
In the tender, ISPRL said the Padur-II will be constructed in a PPP (public-private partnership) model where private parties will design, build, finance, and operate the storage.
Bidders have been asked to quote the financial grant they require for the building of the reserves or the premium/fee they want to offer to the authority.
The project will be awarded to entities that offer the highest premium. Where no bidder is offering a premium, it would go to the one seeking the lowest grant, the tender document said.
"Maximum quantum of grant to be quoted for the project shall be capped to Rs. 33.08 billion," ISPRL said. "A bidder who seeks a grant cannot offer any premium." The operator of Padur-II will lease out the storage to any oil company wishing to store oil and charge a fee. The companies storing oil can sell it to domestic refiners. But in case of an emergency, India will hold the first right on oil usage.
