India to lease strategic oil storage space as government alters Rs 5,000 crore plan

Strategic oil storage leasing: The Union Government has decided to lease out space in its underground rock caverns, originally intended for a Rs 5,000 crore plan to fill parts of strategic oil storages, news agency Reuters reported quoting a top executive, on Tuesday, February 6, 2024.

India Strategic Petroleum Reserve Ltd (ISPRL) has constructed underground storages in Visakhapatnam, Andhra Pradesh, and Mangalore and Padur in Karnataka, with a combined capacity of 5.33 million tonnes of oil. These reserves are intended for use in emergencies like supply disruptions or wartime scenarios.

Abu Dhabi National Oil Company (Adnoc) of the UAE has already secured half of the 2.5 million tonnes storage capacity at Padur and 1.5 million tonnes at Mangalore. The remaining 1.25 million tonnes at Padur has been filled by ISPRL, while 0.75 million tonnes of vacant storage at Mangalore will be available for lease, as confirmed by ISPRL CEO and Managing Director LR Jain during the India Energy Week event.

Of the 1.33 million tonnes of storage at Visakhapatnam, 0.33 million tonnes were initially allocated to Hindustan Petroleum Corporation Ltd (HPCL). HPCL has since hired an additional 0.3 million tonnes, leaving the rest of the storage space open for leasing, Jain added.

Jain announced that ISPRL will soon issue an expression of interest for leasing out the storage facilities.

While the government had allocated Rs 5,000 crore in the 2023-24 Budget for filling the vacant slots in the caverns, this plan was deferred by mid-year. The interim budget for 2024-25 presented in the Lok Sabha last week did not allocate funds for this purpose.

Highlighting the lease terms, Jain said that although companies like Adnoc can store oil in these facilities, India will have the first right to use the stored oil, particularly in emergencies.

Additionally, companies like Adnoc typically utilise such storage to hold oil for further sale to users.

Looking ahead, ISPRL is exploring plans to build an additional 5 million tonnes of storage in the second phase under a public-private partnership model. Land acquisition for this expansion is currently underway.

As the world's third-largest oil importer and consumer, India relies on imports for over 85 percent of its oil needs. The decision to expand strategic storage aims to safeguard against supply disruptions and bolster the nation's energy security.

(With Reuters inputs.)