India to commercialise strategic oil reserve capacity

Market: Crude oil
26/07/21

India is planning to commercialise its strategic petroleum reserves (SPR) for the first time, including by generating revenue from leasing capacity and freeing up some of its stocks for trading.

State-controlled Indian Strategic Petroleum Reserves (ISPRL), which manages the country's strategic stocks, will trade the equivalent of 20pc of the reserves' capacity to hedge against price inflation or to supply refiners that are in urgent need of crude, ISPRL's chief executive HPS Ahuja told Argus.

Another 30pc will be leased to all third-party entities, Ahuja said. The commercialisation plans were approved by the cabinet.

The 50pc of capacity available for commercialisation is an addition to the government-to-government agreement between India and UAE, under which Abu Dhabi's state-owned Adnoc stores crude in the SPR at Mangalore. Adnoc has access to half the 11mn bl of capacity at Mangalore and can re-export the stored crude to third countries.

Two more strategic reserves will be constructed as part of the phase 2 expansion plan approved by the government. One is at Chandikhole in Odisha, with a capacity of 4mn t or about 29mn bl, while the other will be built at Padur in Karnataka with a capacity of 2.5mn t (about 18mn bl), Ahuja said.

"The Request for Proposal for building these storage facilities is under finalisation. An amount of 210 crore rupees ($28mn) was allocated in the budget of FY2020-21 under Phase II for land acquisition, and same has been disbursed to ISPRL," Rameswar Teli, India's oil and gas minister said in a written reply today in the Lok Sabha, the lower house of India's parliament.

Phase II covers commercial and strategic storage and will be done on a public-private partnership model, Ahuja added.

India's SPR has around 39mn bl of capacity, which Ahuja said meets about 9½ days of demand, with two other units at Vishakhapatnam (9.8mn bl) and Padur (18.4mn bl). India imports about 84pc of its crude needs.

By Sathya Narayanan

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