India will soon move to a high energy table and ensure its energy security needs by creating two new strategic oil storage facilities that will come up at Chandikhol in Odisha and Bikaner in Rajasthan.
This was announced by union Finance Minister Arun Jaitley announced in his Budget for 2017-18.
India’s economy and fiscal maths is sensitive to the fluctuations in global oil prices as the country imports 80% of its oil requirements. Creation of such strategic crude oil storages is a step that will eventually insulate India from the impact of high oil prices in times of any global crisis.
The two new facilities announced at Odisha and Rajasthan are in addition to the three facilities that already exist in the country as underground storages in rock caverns at Visakhapatnam (1.33 million tonnes), Mangalore (1.5 MT) and Padur (2.5 MT).
The new storage at Chandikhol will be an underground rock cavern while the one at Bikaner will be an underground salt caverns. Phase-II storage will have a total capacity of 10 million tonne, which includes 4.4 MT storage capacity at Chandikhol and 5.6 MT at Bikaner.
“For strengthening our energy sector, Government has decided to set up Strategic Crude Oil Reserves. In the first phase, three such Reserves facilities have been set up. Now in the second phase, it is proposed to set up caverns at two more locations, namely, Chandikhole in Odisha and Bikaner in Rajasthan. This will take our strategic reserve capacity to 15.33 million tons,” Jaitley said in his Budget speech.
Welcoming the move, union minister of state for oil and gas Dharmendra Pradhan said this will enhance India’s energy security “taking our strategic reserve capacity to 15.33 MMT.” This, he said, will increase India’s storage capacity to meet the consumption requirement of about 90 days which is at par with the international benchmarks.
While announcing creation of the two new startegic oil facilities in the Budget proposals, the finance minister also exempted income of foreign company, that will book a capacity in the strategic storages, from sale of leftover stock.
“With this, India will move to the high energy table of the world,” Pradhan was quoted by news agency PTI. “We have a lot of learning from the first phase construction. We plan to do the second phase in 3-4 years,” he added.
Strategic storages provide a country with two-fold advantage. Firstly it ensures utilisation of reserves in times of high oil and gas prices and secondly they can be used in the event of supply disruptions following unforeseen events like a natural disasters or a war like situation.
Last week, UAE’s national oil company ADNOC signed an agreement to hire half of the capacity of India’s maiden strategic oil storage at Mangalore. Under an agreement, Abu Dhabi National Oil Company (ADNOC) will hire half of the 1.5 million tonnes Mangalore facility.
Indian Strategic Petroleum Reserves Ltd (ISPRL) – the special purpose vehicle building the oil storages, and ADNOC had signed an agreement following talks between Prime Minister Narendra Modi and Abu Dhabi’s Crown Prince Sheikh Mohamed bin Zayed al-Nahyan.
ADNOC will stock 0.75 MT or 6 million barrels of oil in one compartment of Mangalore facility. Of this, 0.5 MT will belong to India and it can use it in emergencies. ADNOC will use the facility as a warehouse for trading its oil.
The 1.33 MT Visakhapatnam storage and 2.5 MT Padur stockpile together with 1.5 MT Mangalore storage will be enough to meet nation’s oil requirement of about 10 days.