With crude prices low, new underground storage caverns come in handy

You tend to stock up when prices are low and how dismaying it would be if you don’t have space to keep the stuff!

Prices of crude oil that India buys dropped to $65.03 a barrel on May 5, the day India received a ‘trial’ delivery into its newly-built underground caverns, from $106.02 exactly a year ago. Today, India’s crude costs $48.70 a barrel.

Since then the Visakhapatnam caverns, which were created by scooping out 8 million cubic metres of rock weighing 21.5 million tonnes from 30 metres below sea level, have received two “parcels” of 2 million barrels each, and the third is waiting to be put in.

Rajan Pillai must be mopping his brow in relief, for, the caverns got ready for filling just as international crude prices began to fall.

“Once we put in the 2 million barrels,” says the CEO and Managing Director of Indian Strategic Petroleum Reserves Ltd, “we will have room for just 1.5 m more.” (The company is a subsidiary of Oil Industry Development Board, a Government body.) Since the fourth parcel of 1.5 mt is expected to happen shortly, India will soon have 7.5 million barrels (1.3 million tonnes) of crude oil as its “strategic reserve”. Almost all of the oil is owned by the Government of India (a small portion belongs to the refiner, HPCL.)

Now, the big question is, when will the other underground storage tanks be ready.  

Pillai says that the two caverns — at Padur (2.5 mt) and Mangalore (1.5 mt) — will be ready by December. In facts, the caverns have been dug out, it is the pipeline work that is as yet unfinished.

The three storage facilities can hold 13 days’ stock of India’s needs, compared with the 90-days-inventory that the International Energy Agency recommends. Even counting the petroleum stock of the refineries and in transit, India’s inventory would be far short of the IEA’s recommendations.

Hence Phase II in which ISPRL would create 12.5 mt of storage capacity at Padur, Chandikhol (Odisha), Bikaner (Rajasthan) and Rajkot (Gujarat). Chandikhol is likely to have underground concrete tanks. Bikaner is likely to be the cheapest to build. The region has mountains of salt underground. Pump in water, dissolve the salt, drain the water out and you get a cavern.

For Phase-II, ISPRL is awaiting approvals, says Pillai.

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