State refiners fill up India’s strategic reserves with spare crude oil
Buying more crude to fill strategic capacity will benefit India as international crude oil prices are falling
Spare crude oil from state-owned refiners is helping India fill up its strategic storage capacity of 5.33 million tonnes (mt). The storage facilities at Mangaluru and Padur in Karnataka, and Visakhapatnam in Andhra Pradesh are likely to reach full capacity by the end of May.
Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL) and Mangalore Refinery (MRPL), are using around 2.1 mt, or over 15 million barrels, of their spare crude, for this purpose.
The storage capacities are run by the Indian Strategic Petroleum Reserves (ISPRL), a special purpose vehicle — a wholly-owned subsidiary of Oil Industry Development Board (OIDB). The state-owned refiners are currently running refineries at less than 50 per cent capacity.
Buying more crude to fill the strategic capacity will be advantageous for India now as international crude oil prices are falling. Price of Brent crude was seen around $25 a barrel at 5 pm on Thursday.
The three storage facilities — underground rock caverns commissioned ISPRL — have a total capacity of 5.33 mt of crude oil.
The Visakhapatnam facility has a capacity of 1.33 mt, Mangaluru (1.5 mt) and Padur (2.5 mt). The Abu Dhabi National Oil Company (Adnoc) has already stored around 0.82 mt at the Mangaluru facility.
According to government consumption data, the 5.33 mt capacity can meet around 9.5 days of the country’s crude oil needs. Two more reserves are being planned with a capacity of 4 mt at Chandikhol in Odisha and an additional 2.5 mt at Padur. This will increase the storage to 21 days.
In April, refiners invoked “force majeure” clauses against crude purchases from major suppliers like Saudi Arabia, the UAE, Iraq, and Kuwait, and asked for deferment of the volumes they were supposed to deliver.
“We had termed up more crude than we could process because the demand dropped suddenly. All refiners had some extra crude with them beyond the tanks. We thought, why we can’t fill this cavern with our crude instead of trying to get it from somewhere else, like Saudi, Adnoc or Iran. Hence, we are filling these capacities,” said R Ramachandran, director of refineries at BPCL.
According to sources, the storage capacities in Mangaluru and Padur with six caverns will be full by May 20. They will have crude from IOC, BPCL and MRPL refineries. “A majority of this crude is going to come from West Asian countries like Saudi Arabia. Our cargoes are filling it. The remaining storage at Vizag will also be full this month,” the ISPRL official added.
India is dependent on imports for 85 per cent of its crude oil requirements. During financial year 2019-20, India imported around 227 mt of crude worth about $102 billion. The lower crude oil price led to savings of around $10 billion for the country during the previous financial year, compared to the bill of $112 billion in 2018-19.