India opens Padur strategic reserves for foreign oil companies

After Abu Dhabi National Oil Corporation (Adnoc) started storing crude oil at Mangalore strategic reserves recently, the Union Cabinet on Thursday approved the filling of Padur strategic petroleum reserves (SPR) in Karnataka too by overseas national oil companies. 

The SPR facility at Padur is an underground rock cavern with a total capacity of 2.5 million tonnes (MT) having four compartments of 0.625 MT each. The filling of the SPR under public private partnership model is being undertaken to reduce budgetary support of Government of India.

The Indian Strategic Petroleum Reserves (ISPRL), a special purpose vehicle, has so far constructed and commissioned underground rock caverns for storage of total 5.33 MT of crude oil at three locations -- Vishakhapatnam (1.33 MT), Mangalore (1.5 MT) and Padur (2.5 MT). Adnoc is already storing 5.86 million barrels of oil at Mangalore facility.

The total 5.33 MMT capacity under Phase-I of the SPR programme is currently estimated to supply approximately 95 days of India’s crude requirement according to the consumption data for FY 2017-18. Government has given ‘in principle’ approval in June 2018 for establishing additional 6.5 MMT SPR facilities at Chandikhol in Odisha and Padur in Karnataka, which is expected to augment India’s energy security by 11.5 days according to the consumption data for FY 2017-18. India is the third largest consumer of crude oil with 80 per cent of its energy requirements met through imports.

In the month of October, petroleum minister Dhamendra Pradhan had said that Saudi Aramco and Abu Dhabi National Oil Corporation (Adnoc) -have shown interest in setting up the second phase of India's strategic crude oil reserves that may see an investment to the tune of Rs 110 billion. The concessionaire would also have access to the large Indian refining market and multiple other revenue streams.

The government was in talks with the Indian private players like Reliance Industries and Nayara Energy, too, to pick up stake in the project. 

By investing in the second phase of the strategic reserves, companies will enter into a treaty with the government, through which India will have the first right of refusal on the inventory in times of emergency.