India plans to build its first privately managed strategic petroleum reserve (SPR) by 2029-30, granting the operator the freedom to trade all of the stored oil, the chief executive of Indian Strategic Petroleum Reserves Ltd (ISPRL) said.
Allowing a fully commercial SPR mirrors the model adopted by countries such as Japan and South Korea, which allow private lessees, mostly oil majors, to trade the crude.
So far, India has allowed only partial commercialisation for its three existing SPRs in southern India, which have a combined capacity of 36.7 million barrels.
India plans to build two new SPRs – the first a 18.3 million barrels cavern at Padur in southern Karnataka state, and then a 29.3 million barrels SPR in eastern Odisha state – with private partners allowed to trade all of the oil locally.
The government will have the first right to the oil in the event of a shortage, said ISPRL chief executive L.R. Jain.
ISPRL, a company charged with managing India’s SPRs, last month issued a tender to gauge interest among local and global companies for the Padur SPR, Jain said.
“We hope to award the tender on a design, build, finance, operate and transfer basis by September and the SPR should be completed in 60 months from zero data,” Jain told reporters at an industry event.
India, world’s third biggest oil importer and consumer, is keen to expand its SPR capacity to hedge against global supply disruptions and price spikes.
Expanding oil storage capacity would also help India join the International Energy Agency (IEA), which requires its members to hold a minimum of 90 days of oil consumption.
The IEA said in February that India’s oil stocks, including SPR volumes, were enough to meet about 66 days of consumption.
ISPRL estimates the Padur SPR and linked pipeline and oil import facility would cost about 55 billion rupees ($659 million), with the federal government providing up to 60% of the total, Jain said.
The bidder requiring the lowest federal financing or paying the highest premium for the 60-year lease would be awarded the rights for the SPR, he added.
