India is set to maximize the use of its strategic petroleum reserves due to the recent slump in crude prices. This decision is advantageous in two significant ways: Firstly, India can purchase cheap oil for its reserves, and secondly, it aids in addressing the storage issues faced by refiners. Let’s decode this scenario in detail.
Understanding Strategic Petroleum Reserves
Strategic petroleum reserves are essentially massive stockpiles of crude oil, created to manage any crude oil-related crisis effectively. These emergencies include possible disruptions in supply arising from natural disasters, war, or other calamities that might hinder normal operations.
An agreement on an International Energy Programme (IEP) necessitates each International Energy Agency (IEA) country to have emergency oil stocks equivalent to at least 90 days of net oil imports. In a scenario where there is a severe oil supply disruption, IEA members can choose to release these stored stocks into the market as part of a collective action.
India became an associate member of the International Energy Agency in 2017, reinforcing its commitment to maintaining sufficient oil reserves.
Location of India’s Strategic Crude Oil Storages
Currently, India’s strategic crude oil storages are located at Visakhapatnam in Andhra Pradesh, Mangaluru in Karnataka, and Padur, also in Karnataka. The government has approved the establishment of two additional facilities at Chandikhol in Odisha and another at Padur in Karnataka, expanding the nation’s oil reserve capacities.
Origins of the Concept
The idea of dedicated strategic reserves was first introduced in 1973 in the United States, following the OPEC oil crisis. Since then, many countries have adopted this system to ensure energy security during unexpected supply disruptions.
Benefits of Underground Storage
Underground storage is currently the most economic method of storing petroleum products. Storing in underground facilities eliminates the need for large swaths of land, ensures less evaporation, and simplifies discharge of crude into them from ships, as the caverns are built much below sea level.
Management of Strategic Crude Oil Storage Facilities in India
The construction and management of the Strategic Crude Oil Storage facilities in India is under the purview of Indian Strategic Petroleum Reserves Limited (ISPRL). ISPRL is a wholly-owned subsidiary of Oil Industry Development Board (OIDB) under the Ministry of Petroleum & Natural Gas.
By embracing strategic reserves, India is demonstrating its commitment to ensuring energy security and stability for its citizens. This also paints a picture of foresight and preparedness for any potential oil supply disruptions in the future.
