Budget 2025: Strategic petroleum reserves see Rs 5,597 cr allocation boost

Petroleum Ministry gets funding to explore sedimentary basins for hydrocarbons

The Budget has allocated Rs 5,597 crore to the petroleum and natural gas (PNG) ministry for phase II of the Indian Strategic Petroleum Reserves Ltd (ISPRL) project, aimed at turning two vast underground caverns into petroleum storage facilities.

 

The funds will go towards the construction of two commercial-cum-strategic reserves at Chandikhol, Odisha, of 4 million metric tonnes (MMT), and expansion of the Padur facility in Karnataka by 2.5 MMT.

 

A special purpose vehicle (SPV), ISPRL is a wholly-owned subsidiary of the Oil Industry Development Board (OIDB) under the PNG ministry.

 

It manages 5.33 MMT of strategic crude oil storages in three locations — Visakhapatnam in Andhra Pradesh, Mangalore and Padur (Near Udupi) in Karnataka.

 

 

The Vishakhapatnam facility with 1.33 MMT capacity was commissioned in June 2015. Mangalore (1.5 MMT) and Padur (2.5 MMT) were commissioned in October 2016, and December 2018, respectively.

Beyond the main funding, ISPRL has also been allocated Rs 235 crore for purchasing land in FY26, up from just Rs 50 crore in FY25, and Rs 100 crore for the construction of caverns.

 

The funds for the body have raised the overall allocation for the petroleum ministry, which received Rs 19,327 crore for FY26, up 21.3 per cent from the budgetary estimate of Rs 15,930 crore in FY25.

“By promoting energy storage, grid modernisation, and by expanding strategic oil reserves, the government is laying the groundwork for a resilient, diversified energy mix,” said Kapil Garg, managing director (MD) of oil & gas service provider Asian Energy Services Limited.

 

According to submissions made by the PNG ministry to Parliament, the three facilities combined provide for about 9.5 days of national crude oil requirement.

 

In addition, oil marketing companies (OMCs) in the country have storage facilities for crude oil and petroleum products for 64.5 days.

The Budget has provided Rs 592 crore for Mission Anveshan, the government's plan to appraise India's vast sedimentary basins for recoverable oil and gas resources.

 

Acquiring 2D and 3D seismic data, conducting geochemical surveys and drilling parametric wells, the missions had been off to a slow start in FY25, when it managed to spend only Rs 50 crore of its budgeted Rs 332 crore.

 

However, the latest Budget didn't reinstate the mega fund for energy transition in crude oil earlier promised to OMCs, and subsequently scrapped.

 

The Budget 2023 (for FY24) had earmarked a mega capital outlay of Rs 30,000 crore for priority capital investments in projects for energy transition, energy security, and achieving net zero emissions by 2070.

 

However, it was never disbursed, and the interim Budget, presented in February 2024, halved the fund to Rs 15,000 crore.

In the July Budget, it was done away with. The equity infusion was also deferred to the next financial year (FY25).

 

The oil and gas sector, along with railways, may stay muted on cutting down expenditure due to lack of any major positive announcement, said Deepak Ramaraju, senior fund manager at Shriram AMC.

 

Lease agreements ongoing

 

The government has also allowed ISPRL to lease or rent up to 30 per cent of overall oil storage capacity of caverns to Indian or foreign companies with the condition that in case of any exigency, the government will have the first right on the entire crude oil stored in the caverns.

 

It has also allowed the sale or purchase of crude oil up to 20 per cent by quantity of overall oil storage capacity of caverns to Indian companies.

Last year, the Abu Dhabi National Oil Company (ADNOC) signed a memorandum of understanding (MoU) with ISPRL, exploring additional opportunities for crude storage in India and the renewal of their storage and management agreement.

 

 ISPRL officials had earlier said it is preparing to lease out one of the 0.75 million tonnes-capacity storage caverns it operates in Mangalore. ADNOC has been storing crude in one of the caverns since 2018 and signed an agreement to use ISPRL's Padur facility as well.

The crude oil storages are constructed in underground rock caverns and are located on the East and West coasts. Crude oil from these caverns can be supplied to oil refineries either through pipelines or through a combination of pipelines and coastal movement. Underground rock caverns are considered as the safest means of storing hydrocarbons.

In a report released in December, 2023, the Parliamentary Standing Committee on Petroleum had recommended the setting up of more SPRs at a quicker pace.

 

It had asked the government to consider equipping refineries with smaller strategic storage capacities, such as for 2 to 3 days at 5 to 6 locations.This can bring up 15 to 20 days of additional capacity in a definite time frame.