India’s First Commercial SPR
 

In a move to shore up crude oil stockpiles to hedge against global supply disruptions and price spikes, India, the world's third biggest oil consumer and importer, has begun the tendering process to build its first commercial crude oil strategic storage.

India’s current strategic petroleum reserves (SPRs) of 5.33 million tonnes (mt) or 36.5 million barrels of crude were built by the Indian Strategic Petroleum Reserves Ltd (ISPRL) in the first phase. It can meet approximately 9.5 days of national demand. Located at Vishakhapatnam (1.33 mt), Mangalore (1.50 mt) and Padur (2.5 mt), these three SPRs were constructed in underground unlined rock caverns, which are considered as the safest means of storing hydrocarbons.

So far, India has allowed only partial commercialization for its three existing SPRs in southern India. In new SPRs, private partners will be allowed to trade all of the oil locally.

Under the second phase, ISPRL is building a commercial-cum-strategic petroleum reserve, called Padur-II, 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 a cost of Rs. 5,514 crore. The contract is expected to be awarded by 27 June.

Unlike Phase-I storages, which were built at government expense, the Padur-II will be constructed in a PPP (public-private partnership) model where private parties will design, build, finance, and operate the storage. ISPRL is acquiring about 215 acres of land for Padur-II.

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.

In Phase-II, India also plans to build a 29.3 million barrels SPR in eastern Odisha.

Expanding oil storage capacity would also help India join the International Energy Agency (IEA), which requires its members to hold a minimum of 90 days of oil consumption. The IEA said in February that India's oil stocks, including SPR volumes, were enough to meet about 66 days of consumption.

India’s move to commercial SPR brings it in line with similar policies adopted with other biggest crude buyers in Asia such as Japan and South Korea.

Editor