India’s government has recently approved the establishment of two additional facilities as part of its Strategic Petroleum Reserves (SPR) programme. This move comes in the wake of India filling up its strategic petroleum reserves in 2020 due to plummeting crude prices. The new and existing facilities, as well as the SPR initiative itself, hold significant implications for the country’s oil storage capacity, energy security, and strategic planning.
Overview of New Facilities and Future Plans
The newly approved facilities, classified as commercial-cum-strategic installations, will collectively provide a total storage capacity of 6.5 Million Metric Tonnes (MMT) of underground storage. These plants will be located at Chandikhol in Odisha (with a 4 MMT capacity) and Padur in Karnataka (offering 2.5 MMT). India will develop these facilities in collaboration with private firms under the second phase of the SPR Programme.
Existing Facilities under SPR Programme
Phase I of the SPR Programme saw the Indian Government setting up petroleum storage facilities, boasting a total capacity of 5.33 MMT, across three sites: Visakhapatnam (1.33 MMT), Mangaluru (1.5 MMT), and Padur (2.5 MMT). These reserves are primarily strategic, meaning the crude oil stored here will come into use during oil shortage situations, subject to the Indian Government’s decisions.
About Strategic Petroleum Reserves (SPR)
Strategic petroleum reserves act as large-scale crude oil repositories designed to address crude oil-related emergencies such as supply disruption caused by natural disasters, war, or other crises. As per the International Energy Programme (I.E.P.) agreement, each International Energy Agency (IEA) member country must maintain emergency oil stocks equivalent to a minimum of 90 days’ worth of net oil imports.
India’s Association with the SPR Concept
India became an IEA associate member in 2017. The dedicated strategic reserves concept first emerged in the United States in 1973 following the OPEC oil crisis. Underground storage has emerged as the most cost-efficient method of storing petroleum products as it negates land requirement, minimises evaporation, and facilitates crude discharge from ships due to the caverns’ positioning much below sea level.
Role of ISPRL in India’s SPR Construction
The Indian Strategic Petroleum Reserves Limited (ISPRL), a wholly owned subsidiary of Oil Industry Development Board (OIDB) under the Ministry of Petroleum & Natural Gas, oversees the construction of India’s Strategic Crude Oil Storage facilities.
India’s Future Oil Storage Projections
Once the new facilities become operational, they will ensure availability of a total of 22 days (10+12) worth of oil consumption. Combined with the 65-day crude oil storage maintained by Indian refiners, India will possess approximately a total of 87 days (22 via strategic reserves + 65 by Indian refiners) of oil usage after Phase II of the SPR programme gets completed. This figure aligns closely with the IEA’s 90-day mandate.
Why India Needs SPRs
India requires a robust SPR network due to the current capacity’s limitations in managing unexpected events in the international crude market. With 86% of the country relying on oil and daily oil consumption touching nearly 5 million barrels, building resilient petroleum reserves is crucial for enhancing India’s energy security and minimizing financial losses.
Proposed Strategies for India’s Energy Security
As part of future strategic planning, India should consider acquiring energy assets abroad. Diversifying oil contracts across several countries can prevent any single region’s monopoly while exploring alternative energy sources can also be beneficial. India must also address the issue of 90% foreign transports for its oil imports by acquiring its own fleet of oil carrier vessels.
