The Telegraph
Monday , February 25 , 2013
Since 1st March, 1999
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UAE answer to oil burden

New Delhi, Feb. 24: Finance minister P. Chidambaram will have to make a budgetary allocation of around Rs 20,000 crore for the oil ministry to fill up the 5.3-million-tonne (mt) strategic crude reserve, which will be ready for use in 2013-14.

Alternatively, the government will have to consider the offer made by Abu Dhabi National Oil Company to use the facility for free and pay only for the operational and maintenance costs.

The UAE firm, however, has given the government the first right to use the crude in case of disruption in supplies.

“The offer seems interesting as the government would be saving precious forex in filling up the strategic crude reserves and would be able to use the crude oil in case of disruption. In addition, they would also be paying the operational and maintenance costs,” a senior oil ministry official said.

However, the Abu Dhabi firm’s proposal to use the facility for free has sparked concern. The ministry had hoped that the Gulf-based firm would pick up an equity stake in Indian Strategic Petroleum Reserves Ltd (ISPRL), the owner, or use the facility on rent.

Officials said the UAE had been one of the largest crude suppliers, and they needed to see how the strategic reserve could be used when there was a sudden spurt in global prices.

Crude supplies from the UAE rose to 316,000 barrels per day (bpd) in 2011-12 from 295,000 bpd in 2010-11. There are indications of a considerable increase in imports from the Gulf nation this fiscal because of a reduction in shipments from Iran following payment issues.

The 1.33mt strategic storage at Visakhapatnam is scheduled to be completed this year at a cost of Rs 1,038 crore. The Rs 732-crore, 1.5mt Mangalore storage will be completed by December, while the third storage at Padur, with a capacity to stock 2.5mt oil and entailing an investment of Rs 993 crore, will be ready by April 2014.

India, which imports about 80 per cent of its crude requirements, is building underground storages to store about 5.33mt oil, which will meet the country’s need for 13-14 days.

At present, the country has a 3-3.5mt reserve held by Bharat Petroleum Corporation Ltd, Hindustan Petroleum Corporation Ltd and Indian Oil Corporation.

The government is considering raising the storage capacity to 15mt to cover the requirement for 45 days in a phased manner.