Strategic Petroleum Reserve India

In News: India, the world’s third largest crude oil importer has an existing storage capacity of 5.3 million tonnes at Visakhapatnam, Mangalore and Padur, built at an investment of $600 million in the first phase. This is operational and can support 9.5 days of net imports

About SPR programme:

• To ensure energy security, the Government of India had decided to set up 5 million metric tons (MMT) of strategic crude oil storages at three locations namely, Visakhapatnam, Mangalore and Padur (near Udupi). 
  • These strategic storages would be in addition to the existing storages of crude oil and petroleum products with the oil companies and would serve as a cushion during any external supply disruptions.
• In the 2017-18 budget, it was announced that two more such caverns will be set up at Chandikhol in Jajpur district of Odisha and Bikaner in Rajasthan as part of the second phase.
• The construction of the Strategic Crude Oil Storage facilities is being managed by Indian Strategic Petroleum Reserves Limited (ISPRL), a Special Purpose Vehicle, which is a wholly owned subsidiary of Oil Industry Development Board (OIDB) under the Ministry of Petroleum & Natural Gas.
• The crude oil storages are constructed in underground rock caverns and are located on the East and West coast of India. 
• Crude oil from these caverns can be supplied to the Indian Refineries either through pipelines or through a combination of pipelines and ships. 
• Underground rock caverns are considered the safest means of storing hydrocarbons. 
• The estimated cost of the project was around Rs.2400 crore at September 2005 prices. This excluded the cost of filling the crude oil in the caverns. 
• Approval of the Union Cabinet was obtained to enhance the capacity at Visakhapatnam to 1.33 MMT and to permit utilization of the additional 0.3 MMT compartment by Hindustan Petroleum Corporation Limited (HPCL) on a proportionate cost sharing basis. As a result of this approval, the strategic storage capacity is 5.03 MMT. 
• ISPRL will operate the storage facilities as custodian of core critical sovereign crude oil reserves apart from operating the facilities as custodian of crude oil of any other entity that the Government may determine. 
• International Energy Agency members maintain emergency oil reserves equivalent to at least 90 days of net imports. 
  • India will have oil reserves equivalent to at least 87 days of net imports, once the $1.6 billion second phase of Indian Strategic Petroleum Reserves, which aims to add 12 days of crude storage, is operational. 
  • These facilities together will help support 22 days of India’s crude oil requirements. Indian refiners also maintain 65 days of crude storage, taking the total tally to 87 days.

Need for strategic oil reserves:

• In 1990, as the Gulf war engulfed West Asia, India was in the throes of a major energy crisis. By all accounts India’s oil reserves at the time were adequate for only three days. While India managed to avert the crisis then, the threat of energy disruption continues to present a real danger even today.
• It is unlikely that India’s energy needs will dramatically move away from fossil fuels in the near future. Over 80% of these fuels come from imports, a majority of which is sourced from West Asia. This is a major strategic risk and poses a massive financial drain for an embattled economy and its growing current account deficit.
• To address energy insecurity, the Atal Bihari Vajpayee government mooted the concept of strategic petroleum reserves in 1998. Today, with India consuming upwards of four million barrels of crude every day (January 2015 figures), the case for creating such reserves grows stronger.