India Commercialises Petroleum Reserves: In what appears as a major change in the policy with respect to energy security in India, the central government has started to commercialise its Strategic Petroleum Reserves(SPR) by generating revenue from leasing capacity and freeing up some of its stocks for trading.
The central cabinet approved this move in July.
The Indian Strategic Petroleum Reserves Ltd (ISPRL) will use 20% of the reserves’ capacity to hedge against price inflation or to supply refiners that are in urgent need of crude.
Another 30% of its overall 37 million barrels capacity will be leased to Indian and foreign companies.
Private entities taking storage on lease will be allowed to re-export 1.5 million tonnes of oil stored in the caverns in the case of Indian companies refusing to buy the crude.
So far, the ISPRL has started to sell about 5.5 million barrels of Upper Zakum oil from the UAE, which is stored in its Mangalore cavern at MRPL. It is seeking to empty the chamber by February, as MRPL plans to store a different grade of crude in it
So far, Abu Dhabi National Oil Co (ADNOC) has leased 750,000 tonnes of oil storage in the 1.5-million-tonne Mangalore SPR.
India also plans to build strategic storage at Chandikhol in Odisha and Padur in Karnataka for around 6.5 million tonnes of crude to provide an additional cover of 12 days of net oil imports to the current 74 days along with up to 60% financial support for the estimated cost in building the new caverns.
India’s SPR has around 39mn bl of capacity, which meets about 9½ days of demand. In addition, oil marketing companies (OMCs) in the country have storage facilities for crude oil and petroleum products for 64.5 days, thus the current total national capacity for storage of crude oil and petroleum products currently is 74 days.
What is an SPR? Why is it Required?
As a long-term solution to the forex crisis during the Gulf War in the early 1990s, the GOI then decided to have oil reserves in 1998.
Indian Strategic Petroleum Reserves Limited is a Special Purpose Vehicle that manages the construction of Strategic Crude Oil Storage Facilities. ISPRL is a subsidiary of the Oil Industry Development Board (OIDB) under the Ministry of Petroleum & Natural Gas.
Strategic petroleum reserves are substantial stockpiles of crude oil to meet the emergencies of supply shocks of crude oil and also protect against a sudden rise in prices in imports or any other bilateral issues with respect to the country.
India currently imports +80% of its crude oil requirements.
The construction of strategic petroleum reserves is a way to enhance India’s energy security by using SPRs like piggy banks for emergencies.
