Private Indian refiners likely to get stake in crude oil reserves

The government is planning to take private Indian refiners as partners for the next phase of building strategic crude oil reserves. 

The project, estimated to cost Rs 100 billion, is likely to be done on a public-private partnership mode. Private refiners Reliance Industries and Essar might join hands with the government to build and run these reserves.

According to a person close to the development, Cabinet clearance would be required to take private refiners as partners. Indian Strategic Petroleum Reserves (ISPRL), that runs these underground caverns, has already received interest from some of these companies. “Such storage capacities will help private players to minimise the risk of volatility in international crude prices. There could also be swapping of crude oil by private companies, if required,” said an industry official.

India has oil stored in three underground rock caverns at Visakhapatnam (1.33 million tonnes), Mangaluru (1.5 mt) and Padur (2.5 mt). The second phase is to come up at Chandikhol in Odisha and through an extension in Padur. One of the earlier locations was Bikaner in Rajasthan, but this was later shifted to Padur for strategic reasons.

For private participation, the government would appoint a consultant soon. A bidding process would follow. “As of today, we have oil storages for about 66 days. The strategic storage adds another 10 days,” Petroleum Minister Dharmendra Pradhan had recently said. Phase-II of the strategic storage will have total capacity of 10 mt.

Abu Dhabi National Oil Company (ADNOC) will send a crude oil consignment for the Mangaluru reserves by May. ADNOC would store crude oil worth Rs 40-50 billion under a contract signed with India. The company will send three large oil carriers (VLCCs) to fill the 0.75 mt storage in Mangaluru. It will fill one of the two compartments of the facility. “OMCs (oil marketing companies) will bring crude oil for the other compartments. The cost will be later reimbursed by the government,” an official said.

At present, India has refining capacity of 247.6 mt, expected to rise to 414.35 mt by 2025. This makes India the third largest petroleum consuming country, with 80 per cent of its crude oil requirement being met through import.