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State-owned Indian Strategic Petroleum Reserves Ltd (ISPRL), which operates India’s strategic crude oil storage, will make awards by December to lease around 1 million tons of crude oil storage space (7.3 million barrels) at two of the country’s three existing Strategic Petroleum Reserves (SPRs), around a fifth of the total SPR capacity.
This will enable the refilling of crude caverns even as escalating hostilities in the Gulf threaten disruptions in crude supplies, two industry sources said.
Two top officials from state companies said ISPRL is evaluating offers to rent out 224,000 tons (1.62 million barrels) of oil storage space in the Visakhapatnam crude storage facility on the southeast coast and one of the two caverns with a capacity of 760,000 tons (5.6 million barrels) in Mangalore on the southwest coast.
According to the ISPRL tender document, bids close on October 11.
The space will be leased for two years, with a one-year extension.
India has three SPRs at Visakhapatnam (9.7 million barrels), Mangalore (11 million barrels), and Padur (18 million barrels).
A top industry source said around 70 per cent of the existing SPR capacity is currently filled, with ISPRL holding about 60 per cent.
The rest of the capacity is empty because it is being leased out.
ISPRL has stored crude in Padur and part of Vizag, while UAE’s state-owned Adnoc has leased the second cavern in Mangalore.
India must expedite these tenders because its SPRs, which hold a fraction of the crude storage capacities in Western nations and China, are inadequate in an emergency.
Israel is reportedly preparing to attack Iran’s oil infrastructure, which could expand hostilities to other Gulf infrastructure, including the Straits of Hormuz, through which around 40 per cent of India’s oil and LNG imports pass.
“Oil storage is a critical part of energy security, and India has far less strategic storage than, say, China,” said Tilak Doshi, an international energy expert who has worked for global oil companies and think tanks.
The US and China have invested substantially in crude and gas strategic storage and are responsible for filling the caverns to ensure energy security.
New Delhi did not top up the SPRs to save on expenditure.
The government had initially planned to purchase Rs 5,000 crore worth of crude to refill storage facilities, but no expenditure was allocated in the federal budget for the FY24.
A government official said no allocation was made for FY25, based on the assumption that crude prices would remain below $100 per barrel this financial year, expecting instead that prices would hover around the $80 per barrel range.
Indian officials noted that individual refineries have storage capacities which, combined, account for over 80 days.
However, refinery officials clarified that these tanks are for operational and blending purposes and are not equivalent to SPRs.
In the event of a stoppage of crude flows, these tanks can meet only about two weeks of the facility's throughput.
Refiners typically do not invest in static storage due to the funds required.
Oil minister Hardeep Singh Puri said on Monday that energy availability could be affected if the situation in the West Asia worsens.
Storage talks
India imports around 4.7 million barrels per day (bpd) of crude, and the 39 million barrels of existing SPR capacity suffice for just 8.3 days—less than one-tenth of the duration available in many developed nations.
The country depends on imported crude to meet nearly 88 per cent of its needs.
UAE’s Adnoc, which had leased half of the Mangalore SPR capacity, is in talks with ISPRL to renew the lease for another seven years and to seek participation in the second phase of India’s SPR buildout, industry sources said.
ISPRL declined to comment.
ISPRL also awarded a tender in February to rent out 300,000 tons of the Vizag SPR to state-run refiner Hindustan Petroleum after New Delhi decided to reduce the government’s share of strategic crude storage and increase outsider participation.
“Our SPRs are very small, but we buy oil from 40 different countries,” said Narendra Taneja, a New Delhi-based energy expert.
“Our concern is not supply disruption; our concern is price volatility, vulnerability, and impact on the rupee.”
The government plans to build a combined 48 million barrel second phase of strategic storage at Padur and at Chandikhol on India’s east coast.
ISPRL is evaluating bids from another tender, which closed in August, to start building a 2.5-million-ton facility at Padur.
An industry source said it would take six years to build the facility.
Most of the land needed for the second SPR phase has been procured, an ISPRL official said.
But there is no clarity on the Chandikhol SPR in Odisha.
Despite securing approval over six years ago, construction was delayed because Karnataka and Odisha did not provide land, and New Delhi did not support the project using state funds.
Instead, it decided to involve the private sector.
India does not have strategic gas storage capacity, although the government has been considering it for years.
Doshi said that natural gas is typically stored in underground caverns and depleted oil or gas reservoirs, as in the US and Europe.
The International Energy Agency stipulates at least 90 days of static storage for member countries.
The US has nearly 800 million barrels of underground strategic storage, connected to ports via pipelines to refineries.
China has around 700 million barrels in storage and is building an additional 130 million barrels in caverns, with dedicated tankers, ports, and pipelines enabling it to buy distressed crude cheaply and store it.
Offers under check
