India seeks investors for building 2nd phase of strategic oil storage
New Delhi: The government Wednesday began roadshows to attract investors for building its second phase of strategic oil storage at a cost of over Rs 11,000 crore that would more than double the emergency cover against any supply disruption to 22 days.
India, which is over 83 per cent dependent on imports to meet its oil needs, built the first phase of 5.33 million tonnes of emergency storage in underground rock caverns in Mangalore and Padur in Karnataka and Visakhapatnam in Andhra Pradesh. It now plans to build another 6.5 million tonnes of storage at Padur and Chandikhol in Odisha.
Oil Minister Dharmendra Pradhan said the second stage of strategic oil storages will be built on a public-private partnership where the investor would take the responsibility of constructing, filling up and operating the cavern.
Roadshow in the national capital, which will be followed up with similar meets in Singapore and London later this month, would drum support from oil traders and producers would use the storage to stock their oil and sell it to refineries in the region on commercial terms.
India will have the right of first refusal to buy the crude oil stored the facilities in case of an emergency, he said.
H P S Ahuja, chief executive of Indian Strategic Petroleum Reserve Ltd, the special purpose vehicle of the oil ministry, said the building of the storages would take 6-8 years.
Together with inviting investors for the second phase of reserves, the government is also seeking bids for storing crude at the Padur facility built in phase-1.
While a third of the Visakhapatnam facility has been hired by Hindustan Petroleum Corp Ltd (HPCL), Abu Dhabi National Oil Co (ADNOC) and government of India has filled the storage at Mangalore. Padur remains empty.
"We are a 4.5 million barrel per day consuming market, with the refining capacity of 5 million barrels per day. Demand for petroleum products has been increasing at a compounded annual growth rate of 5.5 per cent from 2013 to 2017," Pradhan said.
India is adding 330,000-380,000 barrels per day to global oil demand -- around 20 per cent of the incremental global demand.
"Our domestic production will be unable to meet our ever-increasing domestic demand of petroleum fuels and petrochemicals and India will continue to depend on imports for foreseeable future," he said.
During last one year, the world's third largest oil importer faced severe headwinds by way of rising oil prices.
"Since October 2017 crude prices have gone up 50 per cent in US dollar terms and 70 per cent in Indian rupee terms. Much of it is to do with geopolitical events imposed on the World. We have to mitigate the impact and use the challenge as an opportunity," he said.
Pradhan said one of the mitigation measures is to create enough strategic reserve within the country to store adequate crude physically within the country.
"This will not only help us in avoiding disruption in case of supply side disruptions, but it will also help in reducing price volatility," he said.
To further improve strategic reserve, the union cabinet granted approval for establishing an additional 6.5 million tonnes of strategic petroleum reserve which will be able to provide an extra 12 days of supply, he said.