New Delhi, Sept. 29: The country’s crude storage facilities are almost ready and the oil ministry will now have to decide how best to fill them up to protect against supply disruptions.
India, which is 79 per cent dependent on imports for crude oil, is building underground storages at Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka to store about 5.33 million tonnes to meet the nation’s requirement for 13-14 days.
Officials said various options were being considered for optimal utilisation of the storage capacity.
One option is to rent out the facilities to foreign oil firms; the other is the oil ministry using its own resources to fill them up through India Strategic Petroleum Reserves Ltd, which is building the strategic stockpile and is under the ministry.
However, to fill up the storage, the country will have to spend over Rs 25,000 crore at current crude prices.
The oil import bill during the last fiscal amounted to nearly $145 billion and is the primary cause for the record current account deficit (CAD). With the government looking to contain fiscal deficit below 4.8 per cent of the gross domestic product this fiscal, the oil ministry will have to look at other sources for funding the storage than taking it from the finance ministry.
“Given the volatility in crude prices, the storage terminals are intended as a buffer for the economy. This should ideally be filled up when oil prices are at their lows,” analysts said.
Officials said the ministry was studying various models for partnerships, including allowing partners to store oil and withdraw it for selling but with guarantees that they will replace it in times of need. This model is similar to the ones in Japan and South Korea.
Sources said Abu Dhabi National Oil Company had offered to use the facility for free and pay only the operational and maintenance costs. The UAE firm, however, has given India the option of first right of refusal during the disruption of supplies. This means in case of any supply disruption, Indian firms will have the first right to use the crude.
India is also exploring the possibility of other Gulf-based suppliers such as Saudi Aramco, Kuwait Petroleum Corporation and National Iranian Oil Company using the facility as transit storage.
If the Gulf countries accept the offer, India can emerge as a regional hub in oil trade, and the country can also look at the option of rupee trade with some of the countries.
The second option is that state-owned oil firms buy crude whenever global prices dip, while the government will release the reserves in case of an abnormal spike in global prices.