India to Establish First Privately Managed Strategic Petroleum Reserve by 2029-30

India is embarking on establishing its first privately managed strategic petroleum reserve (SPR) by 2029-30. This initiative aims to allow the operator the liberty to trade all stored oil, aligning with models seen in countries such as Japan and South Korea. India’s current SPR strategy involves partial commercialization, with plans to expand this approach with new SPR projects.

Expanding SPR Capacity and Commercialization Strategy

India plans to construct two new SPRs, including an 18.3 million barrels facility in Padur, Karnataka, and a 29.3 million barrels SPR in Odisha. These projects will involve private partners who will have the freedom to trade all stored oil locally. The government will retain the first right to the oil in case of supply shortages.

Tendering Process and Timeline

The Indian Strategic Petroleum Reserves Ltd (ISPRL) has initiated a tender process to assess interest from local and global companies for the Padur SPR project. The goal is to award the tender for design, construction, financing, operation, and transfer by September. The completion timeline is projected at 60 months from the initiation of the project.

Motivation Behind Expansion

India, being the world’s third-largest oil importer and consumer, seeks to bolster its SPR capacity to mitigate risks associated with global supply disruptions and price fluctuations. Additionally, expanding storage capacity aligns with India’s ambition to join the International Energy Agency (IEA), which mandates member countries to maintain a minimum of 90 days of oil consumption.

Cost Estimates and Funding Structure

ISPRL estimates the Padur SPR project, along with associated pipeline and import facility, to cost approximately 55 billion rupees ($659 million). The federal government is expected to contribute up to 60% of the total cost. The tender evaluation criterion prioritizes bidders requiring the lowest federal financing or offering the highest premium for the 60-year lease.