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Foreign firms ready to rent crude vault

Taking Stock

New Delhi, Dec. 31: Over a dozen global companies are keen to rent the three storage facilities for crude oil.

The first storage facility in Visakhapatnam will be commissioned next month. The other facilities are in Karnataka — Mangalore and Padur.

Global oil companies who have shown interest include Total, Vitol, Statoil, Shell, Chevron, Kuwait Petroleum Corporation and Socar Trading SA.

Three commodity trading companies — Trafigura, Eni Trading & Shipping SPA and Glencore — have evinced interest. Apart from these entities, financial institutions such as ANZ, Standard Chartered, JP Morgan, Bank of Tokyo and Mitsubishi UFJ are in the queue.

The three facilities will store 5.33 million tonnes (mt) of crude oil, sufficient for 13-14 days. India meets almost 80 per cent of its requirements through imports, making it vulnerable to external shocks.

The Visakhapatnam facility will store 1.33mt of crude oil in rock caverns, which are huge underground spaces, almost 10-storey tall and about 3.5 km long.

A similar facility in Mangalore will have a capacity of 1.55mt and be completed by March.

The storage at Padur, with a bigger capacity of 2.5mt than Mangalore’s, will also be completed by March.

Oil ministry officials said various options were being considered for the optimal utilisation of the facilities. Besides renting them out, the government may mandate Indian Strategic Petroleum Reserves Ltd, which is building the facilities, to fill them up.

However, the second option means an additional government expenditure of Rs 25,000 crore, which will be a challenge given the tight fiscal situation.

The oil import bill during the last fiscal amounted to nearly $145 billion and is the primary cause for the record current account deficit. 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.

Global players have, however, sought clarity from the government on issues such as the re-export of crude to other nations, minimum crude that they need to hold, the grade of crude to be stored, exemption from state taxes and converting all the facility as free trade warehousing zones.

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