India to Build First Commercial Crude Oil Strategic Storage

India aims to bolster its strategic petroleum reserves (SPRs) by constructing its first privately managed storage facility in partnership with a private company by 2029-30.

Private Management and Trading Freedom

• India plans to establish its inaugural privately managed strategic petroleum reserve (SPR) by 2029-30, granting the operator the liberty to trade all stored oil.
• This approach mirrors the models adopted by countries like Japan and South Korea, allowing private lessees, predominantly oil majors, to engage in crude oil trading.

Expansion Plans and Commercialization

• India has previously allowed only partial commercialization for its existing three SPRs, collectively possessing a capacity of 36.7 million barrels.
• The nation intends to construct two new SPRs: an 18.3 million barrels cavern in Padur, southern Karnataka, followed by a 29.3 million barrels SPR in eastern Odisha, with private partners permitted to trade all stored oil domestically.

Strategic Imperatives and Global Positioning

• As the world’s third-largest oil importer and consumer, India seeks to enhance its SPR capacity to mitigate global supply disruptions and price fluctuations.
• The expansion of oil storage capacity also aligns with India’s aspiration to become a member of the International Energy Agency (IEA), necessitating members to maintain a minimum of 90 days of oil consumption.

Cost Estimates and Financing Mechanism

• ISPRL estimates the Padur SPR, alongside its associated pipeline and oil import facility, to cost approximately 55 billion rupees ($659 million).
• The federal government is expected to provide up to 60% of the total financing, with the bidder requiring the lowest federal financing or offering the highest premium for the 60-year lease securing the rights for the SPR.