Economy

Centre overhauls petroleum reserve policy to boost private interest

Reuters New Delhi | Updated on July 23, 2021

Private entities taking storage on lease will be allowed to re-export 1.5 mt of oil

India has decided to commercialise half of its current strategic petroleum reserves (SPRs) as the nation looks to enhance private participation in the building of new storage facilities, two government sources told Reuters on Thursday.

The shift in policy was approved this month by the Cabinet, they said. Allowing commercialisation of SPRs mirrors a model adopted by countries such as Japan and South Korea which allow private lesees, mostly oil majors, to re-export crude.

Tackling supply disruption

India, the world’s third-biggest oil importer and consumer, imports over 80 per cent of its oil needs and has built strategic storage at three locations in southern India to store up to 5 million tonnes (mt) of oil to protect against supply disruption.

Private entities taking storage on lease will be allowed to re-export 1.5 mt of oil stored in the caverns in the case of Indian companies refusing to buy the crude, they said.

Indian Strategic Petroleum Reserves Ltd (ISPRL), a company charged with building of SPRs, will be allowed to sell 1 mt crude to local buyers, they added.

So far Abu Dhabi National Oil Co (ADNOC) has leased 750,000 tonnes of oil storage in the 1.5-mt Mangaluru SPR.

India also plans to build strategic storage at Chandikhol in Odisha and Padur in Karnataka for around 6.5 mt of crude to provide an additional cover of 12 days of net oil imports, they said.

Tenders soon

The Cabinet earlier this month also decided to provide up to ₹8,000 crore of financial support, equivalent to about 60 per cent of the estimated cost, for building two new SPRs, they said.

ISPRL will soon float an initial tender for building the new reserves. “Whoever seeks less federal support will be considered for participation in the new caverns,” said one source.

Published on July 23, 2021

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