The government is reviewing the status of its strategic petroleum reserves (SPR) as analysts do not see an immediate solution to the high rally in global crude oil prices, which has been exacerbated by low production by OPEC nations, world economy inching back to normalcy as well as geo-political tensions.

India imports more than 84 per cent of its crude oil requirement.

The government is reviewing the position of the SPRs as the current high price rally is expected to continue for at least the next 6 months.

The review will take into account the progress in the second phase of the petroleum reserve programme.

SPRs are stockpiles of crude oil held by the government to use in case of any crisis or emergency, a senior government official said.

“The global prices of crude oil continue to remain high with no near term respite, particularly with the ongoing stand-off between Russia and Ukraine. It is being felt that position of the reserves needs to be reviewed for possible action if there is a need to top them up. The Russia issue is expected to further disrupt the European oil and gas market and there can be some implications for India,” the official added. The official did not specify the current status of the SPRs.

SPR Programme

State-run Indian Strategic Petroleum Reserve (ISPRL) has established crude oil storage facilities with a capacity of 5.33 million tonnes (MT) at – Vishakhapatnam (1.33 MT), Mangaluru (1.5 MT) and Padur (2.5 MT) – under Phase I of the SPR programme. This is equivalent to around 38 million barrels and can serve India’s crude requirement for 9.5 days.

Under Phase II of the petroleum reserve programme, the government in July last year approved establishing two additional commercial-cum-strategic reserves with a total storage capacity of 6.5 MT at Chandikhol (4 MT) and Padur (2.5 MT) under the public-private PPP mode. When completed, these reserves will meet an additional 12 days of India’s crude requirement.

To commercialise the Phase-I of SPR, Abu Dhabi National oil Company (ADNOC) from UAE joined the SPR programme. The agreement was implemented with ADNOC for storing about 800,000 tonnes of crude oil in Mangalore.

Taking advantage of low crude oil prices in April and May 2020, The Ministry took rapid action in filling these reserves completely, leading to a saving of ₹5,000 crore for the Government.

India’s traditional suppliers like UAE and Saudi Arabia were helpful in providing additional quantities of crude oil for filling the SPRs.

However in November last year, India said it will release about 5 million barrels of crude oil from its strategic petroleum reserves, in line with the US and Japan, to cool international oil prices.

High oil prices

The petrol and diesel prices in the country has not been revised for more than three months now largely due to the ongoing state assembly elections including in politically important states of Uttar Pradesh and Punjab.

The only revision happened in November 2021, when the government reduced the excise duty on diesel by ₹10 a litre and on petrol by Rs 5 per litre, resulting in an equivalent reduction in retail pump rates.

At present Petrol is ₹95.41 per litre and Diesel is selling at ₹86.67 a litre in Delhi. The Indian basket of crude oil rose from $71.32 a barrel in December 1, 2021 to $89.41 a barrel on January 31, 2022.

Analysts said that there have been huge fluctuations in global crude oil prices in the past few months due to various global events including lower than expected production restorations by OPEC nations, increase in demand as world economy recovers from disruption caused due to the Covid-19 pandemic, geo-political tensions, lower than usual inventory levels in major consuming nations, effects of reduced investments in crude oil production facilities over the past few years, among others.

The Brent spot price for crude oil (international benchmark) hit $97 per barrel on February 7, 2022, which is the highest nominal price (not adjusted for inflation) since September 17, 2014, the US Energy Information Administration (EIA) said in a February 16 release.

International prices of petrol considered in pricing in the country rose from $79.55 per barrel (bbl) on December 1, 2021, to $102.40 per barrel on January 31, 2022. Similarly, global prices of diesel considered in pricing rose from $78.48 per barrel to $104.62 a barrel during the same period, Petroleum Minister Hardeep Singh Puri said in a written reply in Rajya Sabha earlier this month.

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