ISPRL evaluating bids to build 2nd SPR phase at Karnataka's Padur

Rs 5,500 cr Budget provision for ISPRL could be diverted to building SPR facilities or cater to fuel subsidies because India's storages are nearly full

Indian Strategic Petroleum Reserve Limited (ISPRL) is evaluating bids from domestic companies to build India’s second strategic petroleum reserve (SPR) phase at Padur in Karnataka while simultaneously negotiating with the UAE’s Abu Dhabi National Oil Company (Adnoc) to renew a lease for a cavern in the existing Mangalore SPR facility that ends in May, a company official told Business Standard. The bids that closed in end-February were received in response to a tender.

 

ISPRL plans to review the bids for the 2.5 million tons capacity Padur SPR in the next two to three months, and it will take another 5 years to build out the facility after an award is made, an official said.

 

While ISPRL had marketed the tender globally to West Asian oil producers like Saudi Arabia and traders like Goldman Sachs and Vitol, there were no foreign bidders, industry sources said. New Delhi had relaxed controls over sale and export of oil from SPRs and offered tax benefits, including viability gap funding, to attract investors.

 

Officials of ISPRL declined to comment on details of bidders.

 

ISPRL plans to more than triple existing SPR capacity of over 5 million tons in 10 years to take it to 15 million tons, the official said. The move by ISPRL is timed to coincide with India’s plans to become a member of the International Energy Agency (IEA), which mandates 90 days of crude storage. The expanded SPR capacity should meet around 25 days of India’s current oil use, and together with commercial storage at refineries, India can easily meet the IEA requirements.

 

In February, Union Finance Minister Nirmala Sitharaman had announced a provision of ₹5,597 crore in the Budget for 2025-26 to pay ISPRL to refill the country’s strategic crude storage facilities in response to a Parliament committee report last year that urged the government to increase storage levels.

 

But much of that allocation may not be needed any more and could be diverted to building India’s second phase of SPR facilities or cater to fuel subsidies because ISPRL’s storages are nearly full, industry sources told Business Standard. The ISPRL official said that they will announce later how the funds will be used.

 

Much of India’s cavernous 5.33 million tons (39 million barrels) a year in SPR capacity is now filled with state-sponsored crude oil or belonging to companies which hired the facilities last year.

 

Nearly 70 per cent of all SPR capacity is filled with oil, with ISPRL-controlled storage nearly full, the official said. There is 200,000 tons of capacity in Visakhapatnam available for filling but ISPRL is yet to decide whether to lease out the capacity or fill it with state funds. ISPRL controls around 23 million barrels of capacity at Padur and Vizag, with the rest held by oil companies.

 

European benchmark Brent crude prices collapsed to $70 a barrel levels, the lowest since early September 2024.

 

At current oil prices, ₹5,500 crore could fetch you 9 million barrels, adequate to fill nearly a quarter of India’s existing SPR capacity at Visakhapatnam, Mangalore, and Padur. If you just consider ISPRL’s crude holding capacity — with the rest held by Adnoc, Hindustan Petroleum, and refiner MRPL — then the government’s grant is sufficient to fill nearly 40 per cent of the capacity.

 

The 18-million-barrel capacity Padur, controlled by ISPRL, is filled with Saudi Arabian grades, while most of the 5-million-barrel capacity available to ISPRL in one of the two caverns at Visakhapatnam is filled with Iraqi Basrah oil.

 

Hindustan Petroleum controls a 2.2-million-barrel capacity cavern at Vizag and has rented a similar capacity from ISPRL in the second cavern, both used to fill Iraqi crude oil. Adnoc controls one of the two caverns at the 11-million-barrel capacity Mangalore SPR, stocking it with grades including Murban; MRPL has leased the second cavern. The entities that have leased the facilities keep refilling and emptying the caverns at their convenience, with the government having first call on the crude in times of crisis.

 

New Delhi scrapped in late 2023 a budgetary allocation of ₹5,000 crore to fill SPRs to keep the fiscal deficit in check, but a geopolitical crisis last year involving Gulf oil supplies, India’s biggest regional source, exposed chinks in the storage armour.

 

New projects

 

India is keen to boost crude oil storage capacity to meet the requirements of IEA membership. Government officials estimate that India has around nine days of strategic storage and an additional 80 days of commercial storage in tanks at refineries.

 

ISPRL’s Chandhikhol facility in Odisha is delayed because of problems with land acquisition. Demarcation of land is going on and once the land is acquired, a tender will be issued, the ISPRL official said.

 

Meanwhile, ISPRL has hired Engineers India to make project reports for new facilities proposed under a third SPR phase. The first is a 40-million-barrel capacity salt cavern proposed in Bikaner, Rajasthan, where Hindustan Petroleum’s refinery is coming up. The second project is an SPR in Bina, Madhya Pradesh, where Bharat Petroleum’s refinery is located. There are also plans to build an additional cavern in Mangalore of around 12 million barrels capacity on land possessed by ISPRL for strategic storage, an official said.