The Hindu Business Line : Strategic oil reserves: 3 firms in race for advisor's job

Reserves storage
The Government has identified two port cities to build the three tanks - at Mangalore (1.5 MMTPA) and Visakhapatnam (one MMTPA) and one is near Mangalore (2.5 MMTPA).
The construction of the strategic reserves is to enhance the energy security of the country and to safeguard against short-term supply disruptions.
Petroleum Ministry has kickstarted the process of preparing a feasibility study for strategic storage of natural gas.

New Delhi , Aug. 13

Treading cautiously, the Government is inching towards building strategic oil reserves in the country. Taking one such step, Engineers India Ltd (EIL), which is the advisor for Indian Strategic Petroleum Reserves Ltd (ISPRL), has received response from global consultancy firms for the project.

Three consultancy firms - one each from the US, France and Sweden - have been shortlisted, sources told Business Line. A meeting to consider the proposals is likely to be convened within a week.

EIL had invited bids for a back-up consultant to oversee the setting up of three tanks to store emergency crude oil stocks of five million metric tonnes per annum (MMTPA). The Government has identified two port cities to build the three tanks.

Two of the selected sites are at Mangalore (1.5 MMTPA) and Visakhapatnam (one MMTPA) and one is near Mangalore (2.5 MMTPA).

Bids opened on May 16 and were supposed to close on June 16. However, since EIL was not satisfied with the response received, it extended the bid closure date to July 24, the sources said.

The ownership of the strategic oil reserves recently came directly under Government control, with IOC transferring its equity share in ISPRL, a special purpose vehicle, to the Oil Industry Development Board (OIDB).

The company had created ISPRL with an equity infusion of Rs 1 crore in June 2004.

Though the actual cost of filling up the strategic crude oil storage would be based on the prevailing international prices of crude, it is estimated that setting up a five MMTPA reserves will cost around Rs 11,270 crore over nine years, including the cost of imported crude. The operational cost will be around Rs 90 crore annually.

With the Government deciding to fund the creation of the reserves from the existing cess on domestic crude oil production, consumers have so far been spared any additional price burden.

The Oil Industry (Development) Act provides for the collection of cess as a duty of excise on indigenous crude oil and natural gas. However, the cess currently levied only on production of domestic crude.

The OIDB, established in 1975, renders assistance to the oil industry by way of payment of loans for projects and disbursement of grants for R&D, besides other developmental activities.

The construction of the strategic reserves is to enhance the energy security of the country and to safeguard against short-term supply disruptions.

Meanwhile, the Petroleum Ministry has kickstarted the process of preparing a feasibility study for strategic storage of natural gas.

At a meeting of the committee on preparation of pre-feasibility report/detailed feasibility report for strategic storages of natural gas, held in June, a presentation was made by the back-up consultant PB Energy Storage Services (PBESS) of Houston, covering various aspects of reservoir and salt storage concepts.

The presentation also dealt with the international scenario of underground gas storage vis-à-vis the US experience.

The committee requested GAIL to provide details related to existing and proposed national and trans-national gas pipeline networks, including the data on the demand and supply of gas requirements region wise.