India's emergency oil stock storages face delay

India's emergency oil stockpile storage is facing a year's delay because of geological surprises encountered in construction of underground caverns that will be used to cushion the country against supply disruptions and price fluctuations.

The first of the 5.33 million tonne of storages at Vishkhapatnam, Mangalore and Padur were to be built by 2013.

"There are some issues we faced to build the underground cavern at Vishkhapatnam. While a smaller compartment with 0.3 million tonne will be commissioned as per schedule in March 2013, the bigger 1 million tonne cavern would be commissioned only a year later," said Rajan K Pillai, CEO of ISPRL, the firm building the strategic storages, said at the Petrotech 2012 Oil and Gas Conference.

Indian Strategic Petroleum Reserves Ltd, a subsidiary of Oil India Development Board (OIDB), is a special purpose vehicle that is building the strategic stockpile.

The 1.33 million tonne strategic storage under construction at Visakhapatnam will cost Rs 1,038 crore and was to be completed by October this year.

The Rs 732 crore, 1.5 million tonne Mangalore storage would be completed by December 2013. The third storage at Padur, with a capacity to stock 2.5 million tonne of crude oil and cost Rs 993 crore, would be ready by April 2014.

Pillai said studies have been initiated to construct space to store an additional 12.5 million tonne of strategic reserves.

Additional storage of 5 million tonne was being considered at Padur in Karnataka and 2.5 million tonne each at Chandikhol in Odisha, Rajkot in Gujarat and Bikaner in Rajasthan. The 12.5 million tonne of stockpile to be build would take at least 4-5 years to build, he said.

Sources said the Strategic Crude Oil Reserves are meant to take care of oil security concerns of the country and could be released to meet contingencies arising out of supply disruptions and cushion abnormal increase in prices.

An inter-ministerial empowered committee chaired by Oil Secretary will decide on releasing emergency stocks, they said, adding that the panel would include secretaries to the department of expenditure Secretary, home, Planning Commission, defence, National Security Council and shipping.

Currently, strategic storages are being built in underground rock caverns but in the next phase, salt cavern storage and underground concrete tank storages would also be considered.

Pillai said the 0.3 million tonne of smaller storage at Vizag would be used by state-owned Hindustan Petroleum Corp Ltd (HPCL) for stocking oil for its adjacent refinery.

China has already completed and filled 103 million barrels of storage in the first phase of its SPR plan. It is now working on a second phase of 169 million barrels of storage by 2013 and by 2016 will build a final phase of 228 million barrels of storage.