India’s Strategic Crude Reserves
 

In a move to buy and stock up crude oil when prices are low, and release it in the domestic market when prices are high, India, the world’s third-largest oil importer, has begun supplying crude oil from its strategic reserves to state-owned refiners to hedge against price inflation.
 

The Indian Strategic Petroleum Reserves Ltd (ISPRL) plans to sell 4.34 million barrels of crude oil to Hindustan Petroleum Corporation Limited (HPCL) and Mangalore Refinery and Petrochemicals Limited (MRPL) by December. In 2020, India bought crude oil at $19 a barrel to fill up its 5.33 million tonnes (mt) of strategic petroleum reserves (SPR), saving $685.11 million in the process.
 

The country’s strategic oil stockpile of 5.33 mt or 36.5 million barrels of crude located at Vishakhapatnam (1.33 mt), Mangalore (1.50 mt) and Padur (2.5 mt) boosts its energy security and serves as a cushion during any supply disruptions. These three SPRs can meet approximately 9.5 days of national demand. The estimated cost of the project was Rs. 2,837 crore based on September 2005 prices. Underground rock caverns are considered as the safest means of storing hydrocarbons.
 

These strategic storages are in addition to the existing storages of crude oil and petroleum products with the oil companies. Thus the current total national capacity for storage is 74 days.
 

In phase II expansion, the government has decided to more than double the country’s strategic crude oil reserves to 11.83 mt from 5.33 mt. The two strategic reserves can hold 47.8 million barrels of crude and will enhance the availability by 12 days during oil shortage events.
 

The expansion involves building a 4 mt capacity underground cavern to hold crude oil at Chandikhol in Odisha with an investment of Rs. 9,952 crore and a 2.5 mt capacity reserve at Padur near Udupi in Karnataka at an estimated cost of Rs. 6,986 crore, including dedicated single point moorings (SPMs) in the sea and associated pipeline for transferring the crude arriving on ships.
 

Phase II covers commercial and strategic storage and will be done on a public-private partnership model. ISPRL will be allowed to sell 1 mt of crude to local buyers, while private companies leasing storage will be allowed to re-export 1.5 mt of oil if Indian firms don’t want it.
 

India’s move to commercialize its SPR brings it in line with similar policies with other biggest crude buyers in Asia.

Pallavi Agrawal

Editor

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