The Ministry of Petroleum and Natural gas recently shed light on the Strategic Petroleum Reserve Programme in a written reply in the Lok Sabha, providing critical information about the current status and future prospects of the initiative.
A Look at Strategic Petroleum Reserves
Strategic Petroleum Reserves (SPRs) are essentially mass storage facilities for crude oil, maintained by countries to ensure consistent crude oil supply in situations of geopolitical uncertainty or supply disruptions. These reserves play a pivotal role in preserving the uninterrupted flow of energy resources necessary for a nation’s growth and development.
As part of the International Energy Programme agreement, every nation belonging to the International Energy Agency (IEA) is mandated to maintain emergency oil reserves equivalent to a minimum of 90 days of their net oil imports. This agreement empowers IEA members to release these stocks on the market as a collective action in the event of severe oil supply disruption. As a result of joining the International Energy Agency as an associate member in 2017, India has since been obligated to similarly maintain reserves.
Current State of SPR Infrastructure and Capacity in India
The Indian Strategic Petroleum Reserves Ltd., a Special Purpose Vehicle, was established by the Government of India under the Ministry of Petroleum & Natural Gas in 2004. The existing underground SPR facilities in India have a combined capacity of 5.33 million metric tonnes (MMT) of Crude Oil, strategically located across two states: Andhra Pradesh and Karnataka.
During low crude oil price periods, such as in April/May 2020, India seized the opportunity to fill its existing SPR facilities to their full capacity, resulting in significant notional savings amounting to around INR 5000 crore.
Expansion Plans and Commercial-Cum-Strategic Facilities
To further boost the nation’s energy security, the Government of India, in July 2021, approved the establishment of two additional commercial-cum-strategic SPR facilities. Together, these new facilities have a total storage capacity of 6.5 MMT and will operate under a Public Private Partnership model.
Transfer and Timeline
At the end of the 60-year concession period, the concessionaire is required to transfer the SPR, along with associated infrastructure such as Single Mooring Points (SPMs) and pipelines, back to the Government of India.
Historical Context of SPRs in India
The concept of establishing strategic petroleum reserves in India sprouted during the Gulf War in 1990 when India experienced a significant energy crisis with only three days’ worth of oil reserves at hand. While the crisis was successfully averted then, the idea gained traction in 1998 under the administration of Atal Bihari Vajpayee as a long-term solution to potential future energy disruptions.
Leading Countries in SPRs
At present, the United States leads the world in terms of SPRs with 714 million barrels, followed by China with 475 million barrels, and Japan with 324 million barrels. As India’s energy consumption continues to increase, the need for strengthening such reserves is increasingly emphasised.