India has saved Rs 5,000 crore in foreign currency after it capitalized on global low oil prices to fill its underground strategic oil storage to create insurance against any supply or price disruption, the petroleum ministry said on Wednesday.
While 5.33 million tonnes of emergency storage – enough to meet India’s oil needs in 9.5 days – were built in underground rock caves in Mangalore and Padur in Karnataka and Visakhapatnam in Andhra Pradesh by the government, in April, state-owned oil companies were asked to buy import oil, as global interest rates dropped to a low two-decade.
“By taking advantage of low crude prices due to the COVID-19 situation, India filled its strategic reserves to full capacity,” the ministry said in a tweet adding that this led to a forex saving of Rs 5,000 crore.
World oil prices had fallen after coronavirus demand.
The stores in Mangalore and Padur were half empty and space was also available in Vizag storage. These were filled by buying oil from Saudi Arabia, the UAE and Iraq.
The ministry said crude oil and LNG sourcing has been further diversified to strengthen India’s energy security.
Indian Oil Corp (IOC), the nation’s largest oil company, signed a long-term contract for the purchase of crude oil from the United States in 2019-20.
It also signed a first-term contract for the import of 2 million tonnes of crude oil from Rosneft from Russia in 2020, the ministry said.
“The first Russian cargo of 2 million barrels under the contract was received by the IOC in Paradip on April 8, 2020,” it said.
In just over two years, bilateral hydrocarbon trade with the United States increased from almost negligible in 2017 to 11 percent of total two-way trade, it says. “The United States is the 6th largest source of crude oil imports, while India has become the 4th largest export destination for the US crude.” However, it did not provide details.
The Strategic Petroleum Reserve Unit of India (ISRPL) built the underground warehouses in Mangalore and Padur in Andhra Pradesh and Visakhapatnam in Andhra Pradesh as insurance against supply and price disruption.
Mangalore storage has a total capacity of 1.5 million tonnes. Of these, half had previously been hired by the Abu Dhabi National Oil Co (ADNOC) to store its crude oil. In April / May, the remaining half was filled with oil brought by state-owned oil companies.
Padur, the largest of the three warehouses, has a total capacity of 2.5 million tonnes (about 17 million barrels). ADNOC had signed up to employ half of this capacity, but in fact never stored oil in it in November 2018. At present, the government with crude oil fills half of Padur capacity and the remaining 1.25 million tonnes of crude oil is now sourced from Saudi Arabia.
The 1.33 million tonnes of Visakhapatnam storage has a small amount of unfilled space filled with Iraqi crude.
While the oil to be stored in the three caves belongs to the government, the government does not pay for it. State-owned Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) as well as Mangalore Refinery and Petrochemicals Ltd (MRPL) were asked to procure oil from the Middle East for cave storage, sources said, adding that the government will reimburse them for these costs at a later date.
India covers 83% of its oil demand through imports. Its refineries maintain 65 days of crude storage, and when added to the ISPRL storage and procurement, the Indian crude storage goes up to approx. 87 days. This is very close to the 90-day mandate mandated by the IEA for member states.