Govt mulls way to stockpile strategic crude oil reserves

The Government is planning to shortly firm up a policy on building strategic crude oil reserves for the country. Engineers India Limited (EI...

The Government is planning to shortly firm up a policy on building strategic crude oil reserves for the country. Engineers India Limited (EIL) has already submitted a report to the ministry of petroleum and natural gas, suggesting various models for building crude oil reserves.

However, the government is still debating over the issue of costs incurred in building these strategic oil reserves. Issues before the government are: Should the national oil companies be asked to build these reserves?, should there be a separate fund for creating strategic oil reserves? or whether a special provision be made in the Budget for creating oil reserves? Senior Indian Oil Corporation (IOC) officials said EIL’s report has listed three ways of building oil reserves. These are by way of having cavern facilities (which are underground storage facilities), inland storage facilities and storing crude in steel tankers.

According to chairman and managing director, IOC, M.S. Ramachandran, “IOC has proposed 15 days of strategic crude oil stockpile on the lines similar to that of the US to meet emergencies. There is no need to build reserves of petroleum products given the excess refining capacity in the country. We have more than around 110 mt of refining capacity in the country and at any given time, we can process crude and make products out of it. We should instead go for crude storage capacity.”

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Ramachandran said that IOC has suggested building strategic crude oil storages at five places in the country. However, he declined to give details on the investment required to build such tankages.

He further said the oil companies were keeping their tankages full to meet eventualities arising out of a possible US strike on Iraq.

“Crude oil supplies to the country have never been disrupted, even during the heights of Iran-Iraq war in 1980s and the 1991 Iraqi invasion of Kuwait. We source crude from 40-odd suppliers. We have been broadbasing our supply lines and in eventuality of any supply line being choaked we have sufficient fall back options,” he said adding India would not face any difficulty in getting its requirement of crude oil.

India, which imports roughly 70 per cent of its over 100 million tonnes crude oil demand, presently has tankages to stock 30-day supply of crude. While the idea of holding strategic reserves was being explored in the light of spurt in international crude prices, IOC has begun futures trading in crude.