India’s strategic oil reserves are set to be used by a foreign player for the first time, with a carrier of Abu Dhabi National Oil Company (Adnoc) likely to reach Mangalore port by May 21.
Petroleum Minister Dharmendra Pradhan and his UAE counterpart Ahmed Al Jaber, who is also the chief executive officer of Adnoc, will flag off a very large carrier with 2 million barrels of crude oil on Saturday, according to an official close to the development.
Adnoc is expected to store crude oil worth Rs 40-50 billion, based on prices in February, when the deal was signed. The company had signed a contract with the government to fill 0.75 million tonnes (mt) of space in the Mangalore strategic oil reserves cavern.
“The first consignment from the Abu Dhabi oil terminal is likely to reach India on May 21 at Mangalore port. We are expecting two more consignments to come after the monsoon,” another official close to the development said. Other global majors, including Kuwait Petroleum Corp, had also shown interest in investing in the country's strategic caverns. “Adnoc will fill one of the two compartments of the cavern, while oil marketing companies will use the second compartment,” he added.
India has three underground rock caverns at Visakhapattanam, Mangalore and Padur with oil storage capacity of 1.33 mt, 1.5 mt and 2.5 mt, respectively.
Strategic reserves were conceptualised to be used in case of volatility in the international market. At present, India has overall oil storage capacity of 66 days, and the strategic reserves will add another 10 days. The second set of strategic caverns is being planned at Chandikhol in Odisha and through an extension at Padur. “The Cabinet is likely to clear the second phase of the project soon,” he added.
The project is being implemented by a special purpose vehicle, Indian Strategic Petroleum Reserves Ltd. It is in talks with private players and global firms for participation in the second phase.
At present, India has an overall refining capacity of 247.6 mt, which is expected to rise to 414.35 mt by 2025. The country is the third-largest consumer of crude oil, and 80 per cent of its energy requirements are met through imports. According to the deal, India will have 65 per cent right over the crude oil that Adnoc will store in Mangalore, while the foreign company will be allowed to use the remaining 35 per cent for commercial purposes.