Strategic oil storage facility to be commissioned in Jan

Govt has offered HPCL to mange the Visakhapatnam facility which will have the capacity to store 1.33 MT of crude oil

India's first strategic oil storage will be commissioned in January but it is still not clear as to who will operate the facility that has been built as insurance against supply disruptions.

India, which is 79% dependent on imports to meet its crude oil needs, is building underground storages at Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka to store about 5.33 million tonnes of crude oil. This is enough to meet nation's oil requirement for 13 days.

"The Visakhapatnam storage is to be commissioned in January 2014. But we dont yet have an agency which will buy crude oil, store and operate the facility," an official said.

The government has offered Hindustan Petroleum Corp Ltd (HPCL) the job of managing the Visakhapatnam facility which would have the capacity to store 1.33 million tonnes of crude oil in underground rock caverns or cavities which are almost ten storey tall and approximately 3.3 km long.

But HPCL is unwilling to take the job as it does not have the money to buy crude oil that is to be stored.

"HPCL has taken on rent 0.3 million tons of the storage for storing crude oil it imports for processing at the nearby Vizag refinery. For the remaining 1 million tons of storage which are to be used as strategic stockpile, it is unwilling to make any commitments," the official said.

The company wants the government to fund the cost of buying the 1 million tons of crude oil and it can then manage the facility on an annual fee, he said.

A similar facility in Mangalore will have a capacity of 1.55 million tonnes and would be mechanically completed by March 2014. A 2.5-million tonnes storage at Padur, near Mangalore, would be completed by end of current fiscal.

Operations of the Mangalore and Padur facility have been offered to Mangalore Refinery and Petrochemicals Ltd (MRPL).

The official said operations are being handed over to refinery that is nearest to the facility but cost of filling the storage is holding up the assignment.

With the commissioning of Visakhapatnam storage, India will join nations like the US, Japan and China that have strategic reserves. These nations use the stockpiles not only as insurance against supply disruptions but also to buy and store oil when prices are low and release them to refiners when there is a spike in global rates.

Originally, India Strategic Petroleum Reserves Ltd (ISPRL), the state-owned firm building the strategic stockpile, was to build the Visakhapatnam facility by October 2011 while the Mangalore storages were to be mechanically completed by November 2012. The storage at Padur was scheduled for completion in December, 2012.

The Cabinet had in January 2006 approved building of the strategic crude oil storages at a cost of Rs 2,397 crore but due to time overrun the capital required is now estimated at Rs 3,958 crore.

The Visakhapatnam facility will cost Rs 1,038 crore, Mangalore Rs 1,227 crore and Padur Rs 1,693 crore.