First commercial crude oil strategic reserve to be built in India

The third-largest oil importer and consumer in the world, India, intends to construct its first commercial crude oil strategic storage facility as part of its attempts to bolster reserves as a safeguard against any interruption in supply.

The government-established Indian Strategic Petroleum Reserves Ltd (ISPRL), a special purpose vehicle tasked with developing and managing the nation’s strategic petroleum reserves, has released a tender document inviting bids for the construction of 2.5 million metric tons of underground storage at Padur in Karnataka. In its first phase, the ISPRL constructed a 5.33 million tonne strategic petroleum reserve in three locations: Visakhapatnam, Andhra Pradesh (1.33 million tonne), Mangalore, Karnataka (1.5 million tonne), and Padur, Karnataka (2.5 million tonne). The reserves are located in underground, unlined rock caverns.

At a cost of Rs 5,514 crore, Phase-II will construct a commercial-cum strategic petroleum reserve in underground unlined rock caverns along with related above-ground facilities, such as a dedicated single-point mooring and related offshore and onshore pipelines, to store 2.5 million tonnes of crude oil at Padur-II.

The government paid for the construction of the Phase-I storages.

The Padur-II will be built under a PPP (public-private partnership) approach, according to the ISPRL’s tender, with private firms designing, building, financing, and operating the facility.

“Maximum quantum of grant to be quoted for the project shall be capped to Rs 3,308 crore,” said the ISPRL. “A bidder who seeks a grant cannot offer any premium.”

Any oil business that wants to store oil may lease the storage from Padur-II’s operator in exchange for a price. Companies that store oil have the option to sell it to domestic refiners. However, India would have the first say over how much oil is used in an emergency. According to the document, bids must be submitted by April 22 and the tender must be granted by June 27. For Padur-II, the ISPRL is purchasing around 215 acres of land. India, which imports more than 85% of its oil, will deploy its strategic reserves in the event of a crisis including disruptions in the supply chain or armed conflict.

The Abu Dhabi National Oil Company (Adnoc) of the United Arab Emirates has contracted for half of the 2.5 million tonnes of storage capacity at Padur and the 1.5 million tonnes of space at Mangalore out of the Phase-I reserves. The 0.75 million tonnes of empty storage at Mangalore will be leased out, while the ISPRL has applied for the remaining 1.25 million tonnes at Padur.

0.33 million tonnes of the 1.33 million tonnes of storage capacity constructed at Visakhapatnam were built at the cost of and for Hindustan Petroleum Corporation Ltd (HPCL). HPCL has rented an additional 0.3 million tons of the remaining storage, with the remaining space to be leased out.