The Hindu Business Line : Cabinet approval awaited for creation of strategic oil reserves — Expenditure panel cleared proposal in Nov

WORK on the proposed strategic crude oil reserves of five million tonnes at three locations in the country is expected to begin soon with the Ministry of Petroleum and Natural Gas planning to approach the Cabinet Committee on Economic Affairs (CCEA) for clearance.

According to official sources, the Expenditure Finance Committee (EFC) considered the project proposal at its meeting held in November and has recommended it for the consideration of the CCEA.

In addition to the existing storage capacity, the Government has taken a decision to build strategic storage facilities for 5 MT of crude oil, enough to meet 15 days' requirement, at three locations, namely, Mangalore (1.5 million tonnes), Visakhapatnam (1 million tonnes) and at a location south of Mangalore (2.5 million tonnes).

The Standing Committee on Petroleum and Natural Gas had, in its report, also recommended that the Government should expedite the process of preparation of bid documents, tendering, awarding of contracts for detailed engineering and construction of reserves in a stipulated time. The Ministry had informed the Committee that a special purpose vehicle (SPV), Indian Strategic Petroleum Reserves Ltd (ISPRL), has been incorporated in June 2004 and sites at Mangalore and Visakhapatnam had been identified for storage reserves of 1.5 MMT and 1 MMT, respectively. The project is expected to take 48 months for completion from the date of contract. The cost of the project was estimated at Rs 1,360 crore for the two locations.

The storage capacity of public sector oil companies in the country as on April 1, 2004 was crude oil 6297.5 TKLs (thousand kilo litres), products (excluding LPG) 20623.9 TKLs and LPG (including joint ventures) 501.1 TMT (thousand metric tonnes).

Meanwhile, the Petroleum Ministry is also examining the prospects of creating more strategic storage capacity for both crude oil and gas. As per the proposal, the Oil Industry Development Board (OIDB) would fund the construction of the storage facility.

In October 2005, the Ministry constituted the two committees, the first committee was for preparation of Pre-Feasibility Report (PFR)/Detailed Feasibility Report (DFR) for setting up of strategic natural gas storage facilities comprising members from OIDB, GAIL, Directorate-General of Hydrocarbons (DGH) and Engineers India Ltd. The second committee was for working out details of depleted oil and gas fields for providing technical data of depleted fields, for setting up of strategic natural gas storage facilities, comprising members from DGH, ONGC, OIL and EIL.

In the light of expected increase in the import of natural gas from cross border sources through LNG and transnational gas pipelines, there is an urgent need to initiate action to build strategic natural gas storage (SNGS) for ensuring continuity of natural gas supplies to downstream industries in case of possible short term gas supply disruptions.

The preparation of Pre Feasibility Report/Detailed Feasibility Report is being taken up by OIDB for setting up of Strategic Natural Gas Storage. The estimated cost of the study was Rs 3 crore, official sources said.