Cabinet nod to foreign companies for storing oil at Padur storage

The Cabinet has approved filling up of the underground strategic oil storage at Padur in Karnataka by foreign oil companies, who could use it as a storage for trading in the region but will have to part with the oil in case of an emergency in India.

The Indian Strategic Petroleum Reserves Ltd. (ISPRL) has constructed and commissioned underground rock caverns for storage of total 5.33 million tonnes of crude oil at three locations – Visakhapatnam (1.33 million tonnes), Mangalore (1.5 million tonnes) and Padur (2.5 million tonnes).

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 have filled the storage at Mangalore. The 2.5 million tonnes Padur facility remains empty. Padur storage has four compartments of 0.625 million tonnes each.

The Union Cabinet headed by Prime Minister Narendra Modi approved the filling of Padur storage by overseas national oil companies, informed Law and IT Minister Mr. Ravi Shankar Prasad.

“The filling of the strategic petroleum reserves (SPR) under public-private-partnership model is being undertaken to reduce budgetary support of government of India,” an official statement said. Oil traders and producers could use the Padur storage to stock their oil and sell it to refineries in the region on commercial terms.

The total 5.33 million tonnes capacity under Phase-I of the Strategic Petroleum Reserves (SPR) programme is currently estimated to supply about 9.5 days of India’s crude requirement. Mr. Prasad said the storing of oil by foreign firms will help save the government Rs. 10,000 crore in filling cost.

In the Phase-II, India plans to build an additional 6.5 million tonnes facilities at Chandikhol in Odisha and Padur in Karnataka, which is expected to augment the emergency cover against any supply disruption by another 11.5 days.

Indian refiners maintain 65 days of crude storage, and when added to the storage planned and achieved by ISPRL, takes the Indian crude storage tally to about 87 days. This is very close to the storage of 90 days mandated by IEA for member countries.

Deal with ADNOC

According to unconfirmed reports, ISPRL is likely to ink a deal with Abu Dhabi National Oil Co. (ADNOC) for leasing out half of Padur storage. It will be the second such deal with ADNOC, which is already storing oil at the Mangalore strategic storage in Karnataka. In return for allowing ADNOC to store its crude at a strategic reserve site, the country will not have to pay for the imports, only accessing the oil in emergencies.