Drawing lessons from the Iraq war, the government has decided to give a fresh push to the plan for building strategic oil reserves. The Ministry of Petroleum and Natural Gas is now working on a new proposal soon, and this time unlike the previous exercises, the plan is also expected to lay down some concrete guidelines on funding of the process to hike the strategic oil reserves.The Minister of Petroleum and Natural Gas Ram Naik is expected to hold a meeting on June 13 with the US Department of Energy. The meeting would take up the issue of how the US and other developed countries normally plan the process of building the reserves and funding the process. The US department of energy would also make a presentation before the petroleum minister. According to sources in the petroleum ministry, ‘‘The US department of energy had earlier too extended an invitation to the petroleum minister to hold discussion on the issue. It is on their invitation that the petroleum minister would hold discussion on the issue. Further, the petroleum ministry is also keen to use the US experience in the matter since their strategic reserves is at present best world over’’, sources added. The discussion would also take up the options of funding the process, sources said. Ram Naik is expected to be in Houston shortly for the roadshows of NELP IV.US stores most of their reserves in a place called Bryan Mount near Houston and Texas. US at present has a capacity to store crude reserves to the tune of 90 days or in capacity terms they can store around 200 million tonne. The average consumption of petro products in the US is the tune of around 900 million tonne, sources said. Further, US also has the option to use the huge reserves to control domestic prices in case of sharp rise in the international prices of crude oil.In comparison, India has just 15 days crude reserves and product reserves to the tune of 45 days. These reserves are with the refineries of the oil companies. India plans to build a strategic reserve under the direct control of the government which would have crude reserve capacity of 45 days. However, in the first phase the government plans to build reserves for 15 days. As per a study conducted by EIL on strategic reserves, to build a reserve capacity of 15 days it would require a capital cost of Rs 1,225 crore and a maintenance cost of around Rs 600 crore. The estimated capital cost for building storage for 45 days of crude requirement works out to Rs 4,350 crore and the maintenance cost is to the tune of Rs 1,800 crore. The cost of crude oil for the 45 days requirement would be to the tune of Rs 15,600 crore.Till date the main contentious issue has been the funding of the process. The ministry of petroleum and natural gas had considered two modes of funding—one time grant and cess on petrol and diesel. However, since cess would lead to a hike in the prices of petro products, the ministry is trying to explore other modes of funding, sources said.
