India begins selling crude oil from strategic reserves in monetisation push
This is being done to make space for HPCL and Mangalore Refinery and Petrochemicals, which will be leasing space in the ISPRL caverns for commercial use
Storage space in India’s strategic petroleum reserves (SPRs) is being freed up to allow more commercial usage. This is being done by selling some of the already stored crude oil to make space for Hindustan Petroleum Corporation (HPCL) and Mangalore Refinery and Petrochemicals (MRPL), which will be leasing space in the ISPRL caverns for commercial use.
Officials in the know told Business Standard that MRPL received 60,000 metric tonnes (60 TMT) of Upper Zakum crude oil (sourced from Abu Dhabi), from the Indian Strategic Petroleum Reserves (ISPRL) cavern on Wednesday.
ISPRL is going to sell around 5.5 million barrels of Upper Zakum oil, which is stored in its Mangalore cavern, to MRPL. This chamber will be emptied by February, so that MRPL can store a different grade of crude in it. MRPL will lease space for 300,000 tonnes of crude oil in the Mangalore reserve. HPCL is expected to lease around the same space in the Vishakhapatnam reserve.
The Centre had recently allowed ISPRL to commercialise up to a third of the crude oil stored in the SPRs. In all, ISPRL intends to offload eight million barrels of crude oil. The space freed up will then be leased to HPCL and MRPL.
Efforts to fill up the strategic petroleum reserves were doubled when global crude oil prices crashed in April and May 2020. According to the Petroleum Ministry, this had resulted in a notional saving of Rs 5,000 crore to the exchequer. It is estimated that the average price at which crude oil was purchased for filling up the strategic reserves during this period stood at $19 a barrel, around one third of the present oil prices.
The three strategic storages at Visakhapatnam, Mangalore and Padur collectively store 5.33 million tonnes (MT) of crude oil. Visakhapatnam’s storage has a capacity of 1.33 MT (9.77 million barrels), Mangalore has a capacity of 1.5 MT (11 million barrels) and Padur can stock 2.5 MT (18.37 million barrels). The combined cost of the three projects is pegged at Rs 4,098.35 crore. These reserves can meet around 9 to 10 days of India’s crude oil demand.
India imports roughly 226 MT (1,656.58 million barrels) of crude oil every year. This comprises around 84 per cent of India’s total crude oil requirement.
These reserves had also become a talking point when Saudi Arabia’s energy minister Abdulaziz bin Salman told India to use this cheaply bought crude as global prices rose in March 2021. He was responding to requests from India to hike production and keep crude oil prices in check. But crude oil prices have remained firm. Brent, the most popular benchmark for global crude oil trade, is close to $70 a barrel, up from around $50 a barrel at the beginning of 2021.