India will by early May fill its underground strategic oil storage with cheap crude available globally to shore up insurance against any supply or price disruption, the Petroleum Ministry said on Wednesday.
While the 5.33 million tonne of emergency storage -- enough to meet India's oil needs for 9.5 days -- was built in underground rock caverns in Mangalore and Padur in Karnataka and Visakhapatnam in Andhra Pradesh by the government, state-owned oil firms have been asked to buy oil at cheaper rates from the market and fill them up.
The first shipload of 1 million barrels of crude oil was brought by Indian Oil Corp (IOC) from the UAE earlier this week.
"Taking advantage of the low crude oil price, India is filling the strategic petroleum reserves (SPR) to their full capacity. The first consignment of 1 million bbls of crude procured through @IndianOilcl unloaded at Mangalore SPR of @ISPRL1," the ministry said in a tweet.
Oil prices have declined by more than 60 per cent since January and benchmark crude is still trading under USD 32 per barrel despite an unprecedented deal by the world's biggest producers to cut output to steady a market pummeled by the coronavirus.
The storages at Mangalore and Padur are half-empty and there was some space available in Vizag storage as well. These will now be filled by buying oil from Saudi Arabia, the UAE and Iraq.
"We are going the extra mile to meet India's energy security inspite of #Covid-19 challenge. More crude oil cargoes, at low prices, are lined up to reach Mangalore port during April and early May to completely fill the Mangalore and Padur SPRs," it said.
The Strategic Petroleum Reserve entity of India (ISRPL) built the underground storages as insurance against supply and price disruptions.
"Taking advantage of the low crude prices, ISPRL started filling India's Strategic Petroleum Reserves to enhance the energy security of the Nation. IOCL, BPCL & HPCL apart from MRPL are associated in this exercise to fill the three SPRs located at Visakhapatnam, Mangalore & Padur," ISPRL said in a separate tweet.
Mangalore storage has a total capacity of 1.5 million tonnes. Of this, half had previously been hired by Abu Dhabi National Oil Co (ADNOC) to store its crude oil. The remaining half is now being filled by oil brought by state-owned oil firms.
Padur, the biggest of the three storages, has a total capacity of 2.5 million tonnes (about 17 million barrels). ADNOC had in November 2018 signed up to hire half of this capacity but never actually stored oil in it. At present, government-sourced crude fills up half of the Padur capacity and and remaining 1.25 million tonnes of crude oil is now being sourced from Saudi Arabia.
The 1.33 million tonne Visakhapatnam storage has a small amount of unfilled space which would be filled with Iraq crude oil.
While the oil to be stored in the three caverns will belong to the government, the government isn't paying for it. State-owned Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) as well as Mangalore Refinery and Petrochemicals Ltd (MRPL) have been asked to source oil from the Middle-East countries for storing the caverns, sources said, adding the government will reimburse them of this cost at a later date.
India meets 83 per cent of its oil needs through imports. Its refiners maintain 65 days of crude storage, and when added to the storage planned and achieved by ISPRL, the Indian crude storage tally goes up to about 87 days. This is very close to the storage of 90 days mandated by IEA for member countries.