Next oil reserves plan by Sept, to see Rs 14K-crore investment: ISPRL

Request for proposal document awaiting Centre's nod

The next phase of India's strategic petroleum reserves programme will begin soon with the issuing of the request for proposals (RFP). It would require an investment of around Rs 14,000 crore for developing 6.5 million tonne (MT) of reserves in this phase.   

According to H P S Ahuja, managing director (MD) and chief executive officer (CEO) of the India Strategic Petroleum Reserves (ISPRL), RFP will be issued by September 2021. 

The focus this time will be on the public-private partnership (PPP) model. However, the central government will continue to have the first right of using the stored crude oil during unforeseen circumstances.

In the first phase, 5.33 MT of strategic crude oil storages were built at three locations — Visakhapatnam, Mangalore and Padur. Visakhapatnam's storage has a capacity of 1.33 MT (9.77 million barrels) of crude oil, Mangalore has a capacity of 1.5 MT (11 million barrels) and Padur can stock 2.5 MT (18.37 million barrels). The total cost of all the three projects is estimated at Rs 4,098.35 crore. These reserves can meet around 9 to 10 days of India’s crude oil demand. India imports roughly 226 MT (1,656.58 million barrels) of crude oil every year. This comprises around 84 per cent of India’s total crude oil requirement.

Commenting on the present status of these reserves, Ahuja told Business Standard, “The ISPRL reserves are presently at full capacity. This means there is around 39 million barrels of crude oil in three strategic reserves being stored in the country to weather against unfavourable situations.”

India had doubled efforts to fill up the strategic petroleum reserves when global crude oil prices had crashed in April and May 2020. According to Petroleum Minister Dharmendra Pradhan, this had resulted in a notional saving of Rs 5,000 crore to the exchequer. It is estimated that the average price at which crude oil was purchased for filling up the strategic reserves during this period stood at $19 a barrel, around one third of the present oil prices.

These reserves had recently become a talking point when Saudi Arabia’s energy minister Abdulaziz bin Salman told India to use this cheaply bought crude as global prices rose in March 2021. He was responding to requests from India to hike production and keep crude oil prices in check. But crude oil prices are firming up again. Brent, the most popular benchmark for global crude oil trade, is now close to $70 a barrel, up from around $50 a barrel at the beginning of 2021.

Ahuja said, “The crude oil in ISPRL is to be tapped only when there are global crude oil supply disruptions or if a geo-political scenario emerges. There is no price defined to trigger using the crude oil stored here.”

For the second phase, the Union Cabinet has given its approval to build a further 6.5 MT of strategic petroleum reserves at Chandikhol (4 MT) in Odisha and at Padur (2.5 MT) in Karnataka. It is expected that the second phase will add another 12 days of strategic crude oil storage to the country.