Financial Daily from THE HINDU group of publications
Friday, Apr 08, 2005
Financial Daily from THE HINDU group of publications Friday, Apr 08, 2005 |
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Outlook Industry & Economy - Petroleum IOC, Saudi Aramco plan merchant storage oil terminal — Drop plans for facility to store crude reserves Archana Chaudhary
Mumbai , April 7 INDIAN Oil Corporation and Saudi Aramco, the world's largest oil company, have dropped the idea of building strategic crude storage facility for India. With crude oil prices reaching record highs of more than $55 a barrel, the two companies may instead build a merchant storage terminal to sell crude oil to other oil companies. Saudi Aramco, which produces more than eight million barrels of crude a day, had announced in January this year, that it would team up with IOC to help set up a strategic crude oil storage terminal. But with climbing crude prices the two companies may put up a merchant crude storage terminal at an Indian port, that will allow access to Indian and foreign oil companies. "This option is commercially more viable," said Mr N.K. Nayyar, IOC's Director - Business Development. The two companies have not yet decided the cost or size of the commercial venture. According to senior Indian Oil officials, setting up a strategic storage for crude at a time when crude prices are at record highs will not be financially viable. Most analysts agree. "Both India and China have been talking of building huge crude reserves. But when prices are at $50-55 a barrel, recovering costs could be troublesome," said a senior analyst at an Indian broking firm. "Saudi Aramco has in principle agreed to put up a commercial terminal. We have sent them a proposal detailing our ideas and are awaiting their response," Mr Nayyar said. The idea of a merchant crude storage terminal is relatively new with only one other similar storage along the Korean coastline. According to the IOC proposal, it will provide land and port for setting up the terminal while Saudi Aramco, which controls more than one-fourth the world's proved oil reserves, will bring in inventories. The companies will set up a joint venture in which Saudi Aramco will participate in managing the terminal. Indian Oil had earlier announced plans to float a special purpose vehicle for setting up underground oil storage facilities. The capital cost for the storage was envisaged at Rs 1,650 crore, for storing a 15-day crude inventory worth roughly Rs 5,000 crore. Currently, the total crude oil storage capacity can meet the country's oil requirement for 19 days.
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