India to commission its first strategic oil reserve facility.

Vizag-Port

Visakhapatnam Port, soon to be allied with a large oil storage facility, India’s first.

India, a nation that is 79 per cent dependent on imports to meet its crude oil needs is building its first strategic oil storage facility. Underground storages at Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka in Southern India are set to store about 5.33 million tonnes of crude oil, enough to meet India’s oil requirements for 13 days.The Visakhapatnam facility will have the capacity to store 1.33 million tonnes of crude oil in underground rock caverns or cavities which are almost ten storeys tall and approximately 3.3 km long. The facility at Mangalore will have a capacity of 1.55 million tonnes and Padur facility will have 2.5-million tonnes storage.

In developing this facility petroleum stocks have been transferred from the Indian Oil Corporation (Indian Oil) to the Oil Industry Development Board (OIDB). The OIDB then created the Indian Strategic Petroleum Reserves Ltd (ISPRL) to serve as the controlling government agency for this strategic reserve. Media reports state that the ministry is studying various models for partnerships, including allowing partners to store oil and withdraw it for selling but with guarantees that they will replace it in times of need. This model is similar to the ones in Japan and South Korea in Asia and a number of European countries.

With the commissioning of Visakhapatnam storage, India will join nations like the US, Japan and China that have strategic reserves. According to the United States Energy Information Administration, approximately 4.1 billion barrels (650,000,000 m3) of oil are held in strategic reserves around the world, of which 1.4 billion is government-controlled. The remainder is held in private hands.

As a point of reference, China is planning state reserves of 475,900,000 barrels (75,660,000 m3) plus the planned enterprise reserves of 209,440,000 barrels (33,298,000 m3) which will provide around 90 days of consumption or a total of 684,340,000 barrels (108,801,000 m3 ). The largest strategic oil reserve in the world is in the USA with the capacity to hold up to 727 million barrels (115,600,000 m3) which would take 160 days to use fully.

These nations use the stockpiles not only as insurance against supply disruptions but also offer the opportunity to buy and store oil when prices are low and release them to refiners when there’s a rise in global rates. The Visakhapatnam facility will cost Rs 1,038 crore, Mangalore Rs 1,227 crore and Padur Rs 1,693 crore and the first facility is set to come online in 2014.

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