Strategic oil reserves to cost Rs 4,350 crore

India has decided to build 45 days' strategic crude reserves over the next three years to meet contingency requirements like disruption in supplies in the event of war.

The estimated capital cost of building storages to stock 15 million tonnes of crude is about Rs 4,350 crore (Rs 43.50 billion), while the inventory-carrying cost would be around Rs 1,800 crore (Rs 18 billion) per annum.

This was decided at a high-level meeting chaired by Prime Minister Atal Bihari Vajpayee on Monday.

A detailed presentation on India's preparedness in the petroleum sector was made at the meeting, which was also attended by Finance Minister Jaswant Singh, External Affairs Minister Yashwant Sinha, Divestment Minister Arun Shourie, Coal Minister Karia Munda, Commerce and Industry Minister Arun Jaitley, and Planning Commission Deputy Chairman K C Pant.

"There are two options to build strategic reserves. The first is the government gives grants for initial capital investment and the annual cost is recovered through the Oil and Industry Development Board cess. The other option is to levy a special cess on petrol and diesel that will contribute to the creation of the storage capacity as well as the inventory cost," Petroleum Minister Ram Naik said.

Consultants would be appointed to study the various options, he added.

Earlier, the petroleum ministry had mooted strategic reserves to meet 45 days' requirement in stages starting with storage capacity at Rajkot, Managalore and Vizag to stock 5 million tonnes crude.

Currently, the crude storage capacity with domestic refineries is 19 days (5.7 million tonnes).

Of the proposed tankage, 2.5 million tonnes will be at Rajkot, 1.5 million tonnes at Mangalore, and 1 million tonnes at Vizag. Besides, there are tankages to provide for 45 days' cover of petroleum products.

Naik's presentation also detailed the successes of the New Exploration Licensing Policy, including the recent hydrocarbon finds in the Krishna-Godavari basin and the Surat blocks.

Besides highlighting the policy regime for attracting private investment in exploration and production, the minister also listed the equity oil fields acquired abroad and the roadmap to offer more oil, gas and coal bed methane blocks for exploration in the forthcoming rounds of bidding.