India is making a quick buck by selling some of the cheaply bought crude oil stored in the country’s strategic reserves to Mangalore Refinery and Petrochemicals (MRPL). This emptied reserve, that currently holds Upper Zakum grade crude oil (bought from Abu Dhabi), will be replenished with crude oil from Saudi Arabia, according to H P S Ahuja, the Chief Executive Officer (CEO) of Indian Strategic Petroleum Reserves (ISPRL).
ISPRL is a government-controlled company tasked with managing the country’s crude oil storage facilities while MRPL is a public sector undertaking. Both are under the administrative control of the Petroleum Ministry.
Business Standard had reported in August 2021 that storage space in India’s strategic petroleum reserves (SPRs) is being freed up to allow more commercial usage. This is being done by selling some of the already stored crude oil to and making more leasable space available in the ISPRL caverns.
Speaking to reporters at the side lines of India Energy Forum by CERAWeek, Ahuja said that the government has already sold 300,000 tonnes of the stored crude oil to MRPL at market price. This allows the government to rake in a significant margin over the purchase price of around $ 19 a barrel. Brent crude oil is currently trading at over $ 80 a barrel.
According to Ahuja, MRPL will take the balance crude oil by December-end, following which the entire 750,000 tonnes cavern will be leased to it.
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Efforts to fill up the strategic petroleum reserves were doubled when global crude oil prices crashed in April and May 2020. According to the Petroleum Ministry, this had resulted in a notional saving of Rs 5,000 crore to the exchequer. It is estimated that the average price at which crude oil was purchased for filling up the strategic reserves during this period stood at $19 a barrel, around one fourth of the present oil prices.
The three strategic storages at Visakhapatnam, Mangalore and Padur collectively store 5.33 million tonnes (MT) of crude oil. Visakhapatnam's storage has a capacity of 1.33 MT (9.77 million barrels), Mangalore has a capacity of 1.5 MT (11 million barrels) and Padur can stock 2.5 MT (18.37 million barrels). The combined cost of the three projects is pegged at Rs 4,098.35 crore. These reserves can meet around 9 to 10 days of India’s crude oil demand.
ISPRL’s Mangalore facility has two caverns of 750,000 tonnes capacity each. One such cavern has already been leased out to the Abu Dhabi National Oil Company (ADNOC) that has filled up the reserve.
India imports roughly 226 MT (1,656.58 million barrels) of crude oil every year. This meets around 84 per cent of India’s total crude oil requirement.