8-Nov-2018: Cabinet approves filling of Padur Strategic Petroleum Reserves at Padur, Karnataka by overseas National Oil Companies

The Union Cabinet has approved the filling of Padur Strategic Petroleum Reserves(SPR) at Padur, Karnataka by overseas National Oil Companies (NOCs). The SPR facility at Padur is an underground rock cavern with a total capacity of 2.5 million metric tonnes (MMT) having four compartments of 0.625 MMT each. The filling of the SPR under PPP model is being undertaken to reduce budgetary support of Government of India.

The Indian Strategic Petroleum Reserves Ltd. (ISPRL) has constructed and commissioned underground rock caverns for storage of total 5.33 MMT of crude oil at three locations namely Vishakhapatnam (1.33 MMT), Mangalore (1.5 MMT) and Padur (2.5 MMT). The total 5.33 MMT capacity under Phase-I of the SPR programme is currently estimated to supply approximately 9.5 days of India’s crude requirement according to the consumption data for FY 2017-18. Government has given ‘in principle’ approval in June 2018 for establishing additional 6.5 MMT SPR facilities at Chandikhol in Odisha and Padur in Karnataka, which is expected to augment India’s energy security by 11.5 days according the consumption data for FY 2017-18.

17-Oct-2018: Opportunity for Public Private Partnership (PPP) in Indian Strategic Petroleum Reserves Program

Government of India’s one of the key initiative towards energy security of the country - the strategic petroleum reserves program, envisions creation of additional crude oil reserves facilities in Private Public Partnership (PPP) mode and the road show for the same was launched by Dharmendra Pradhan, Minister of Petroleum and Natural Gas(MoP&NG) and Skill Development and Entrepreneurship (SDE).

On world energy landscape, India is the 3rd largest consumer of energy and also the 3rd largest importer of crude oil in the world. With Indian economy growing rapidly, energy demand is forecasted to grow more than any other country in the world in the next two decades. India has a very large requirement of petroleum fuels. Demand for petroleum products has been increasing at a CAGR of 5.5% from 2013 to 2017. He said that our domestic production will be unable to meet our ever increasing domestic demand of petroleum fuels and petrochemicals and India will continue to depend on imports for foreseeable future.

In last one year, we have also faced severe headwinds by way of rising oil prices. Since October 2017, crude prices have gone up 50% in US Dollar terms and 70% in Indian Rupee terms. Much of it is to do with geo-political events imposed on the World. We have to mitigate the impact and use the challenge as an opportunity. One of the mitigation measure is to create enough strategic reserve within the country to store adequate crude physically within the country. This will not only help in avoiding disruption in case of supply side disruptions, it will also help in reducing price volatility.

With the objective to meet the energy security, Government of India formed Indian Strategic Petroleum Reserves Limited (ISPRL), a SPV under Ministry of Petroleum and Natural Gas. To further improve strategic reserve, the union cabinet granted approval for establishing additional 6.5 MMT of strategic petroleum reserve which will be able to provide extra 12 days of supply. After a detailed study considering technical and commercial factors, two locations - Chandikhol in Odisha and Padur in Karnataka have been selected as the optimum location for these SPRs. These two SPRs will add strategic petroleum reserves of 12 days in addition to 10 days of reserves achieved in Phase I. Indian refiners maintain 65 days of crude storage, and when added to the storage planned and achieved by ISPRL, takes the Indian crude storage tally to 87 days. This is very close to the storage of 90 days mandated by IEA for member countries. On the issue of Phase-II, he said that these are large investments requiring more than 1.5 billion US dollars of capital, and the Government plans to develop this under PPP framework.

Background: Government of India has decided to keep the nation ahead  in the quest for  securing its vital crude oil buffer inventory by seeking to almost double the capacity of its underground storage caverns through the ambitious Phase-II programme which seeks Public Private Partnership in India’s emerging Hydrocarbon Sector.

Indian Strategic Petroleum Reserves Ltd. (ISPRL), a SPV created for the purpose of building the SPRs has successfully completed and commissioned the Phase I SPRs program.

The Union Cabinet has now accorded in principle approval for the Phase-II SPR program which entails creation of additional storage facilities of  6.5 MMT of crude oil to be stored in underground rock caverns at Chandikhol in Odisha and Padur in Karnataka with an envisaged investment outlay of Rs.11,000 Crores(US$ 1.6 Billion). The Investment model seeks partnership through DBFOT (Design, Build, Finance, Operate and Transfer) and offers prospective concessionaire the  rights on the crude oil inventory as per an agreed term where the  Government of India will have the first right of refusal on the inventory in  times of exigencies. As a key takeaway the Concessionaire will have access to the large Indian refining market and multiple other revenue streams.

Underground storage of crude oil is more secure, safe, economical and environmental friendly than conventional above ground storage tanks. Many other developed countries have created crude oil reserves in different types of underground storage facilities. Conceived during early 2000s, the Indian Strategic Petroleum Reserves Ltd. (ISPRL) was created by Government of India as a Special Purpose Vehicle under MoP&NG in 2004 to give wings to its vision of  building  the first of its kind strategic crude oil storages in India and to insulate the country from a volatile  crude oil supply market,  supply disruptions and future oil shocks. The crude oil storages are constructed in underground rock caverns and are located on the east and west coast of India namely Visakhapatnam, Mangalore and Padur. Crude oil from these storage installations are envisaged to cater to the Indian refineries either through pipelines or a combination of pipelines and coastal shipment.

With a total investment of USD 600 Million towards the construction of   Phase I SPRs, the facilities at Visakhapatnam with a storage capacity of 1.33 MMT witnessed a successful part commercialisation of 0.3 MMT storage capacity. HPCL has taken over the 0.3 MMT storage capacity as part of its refinery stock holding and operation, thereby unlocking the land parcel for the ongoing refinery expansion program; the facilities at Mangalore with a storage capacity of 1.5 MMT recently witnessed a successful G2G collaboration where in ADNOC is storing 5.86 MM bbl at Mangalore SPR facility. The facilities at Padur with a storage capacity of 2.5 MMT has also been commissioned and is ready to take in crude oil inventory including through PPP mode for filling and operation of the inventory.

The Phase-II SPR program has been planned to create additional storage capacity to cater to the wider refining and consuming hubs in the unforeseen event of a longer period of supply disruption. The envisaged PPP model promises valuable  incentives to  an array  of stakeholders looking to profit from this business alliance ranging from supply side assurance of downstream refiners;  logistics and location advantage; availability of low cost underground storage facility as an economical storage alternative; reduced captive above ground storage with flexibility of multiple grade crude oil and multiple revenue streams; suitable land parcel and geological setting for creation of SPR, promising opportunity for financing, to a foreseen certainty of cash flows due to sustained Oil & Gas demand  market .

ISPRL, the strategic arm of the Ministry of Petroleum and natural Gas, Govt of India is soliciting commercial partnerships for the Phase II SPR program and expects a keen interest from large energy stake holders both from India and abroad. To elicit expressions of interest from a wider spectrum of energy industry, investors and financing partners ISPRL is organising road shows at New Delhi, Singapore and London.

27-Jun-2018: Cabinet approves establishment of additional 6.5 MMT Strategic Petroleum Reserves at Chandikhol in Odisha and at Padur, Karnataka

The Union Cabinet has approved establishment of additional 6.5 Million Metric Tonne (MMT) Strategic Petroleum Reserve (SPR) facilities at two locations, i.e. Chandikhol in Odisha and Padur in Karnataka, including construction of dedicated SPMs (Single Point Mooring) for the two SPRs. The SPR facilities at Chandikhol and Padur will be underground rock caverns and will have capacities of 4 MMT and 2.5 MMT respectively. Government had announced setting up of two additional SPRs during the budget announcement for 2017-18.

The in principle approval is to take up the project under PPP model to reduce budgetary support of Government of India. The terms and conditions of such participation, would be determined by M/oP&NG in consultation with Ministry of Finance after conducting road shows to elicit requirements of market, including prospective investors.

ISPRL has already constructed underground rock caverns for storage of 5.33MMT of crude oil at three locations, viz. Vishakhapatnam (1.33 MMT), Mangalore (1.5 MMT) and Padur (2.5 MMT). The total 5.33 MMT capacity under Phase-I of the SPR programme is currently estimated to supply approximately 10 days of India’s crude requirement according to the consumption data for FY2016-17. Cabinet’s approval for establishing additional 6.5 MMT Strategic Petroleum Reserve facilities will provide an additional supply of about 12 days and is expected to augment India’s energy security.

The construction phase of the SPRs at Chandikhol and Padur is likely to generate significant direct & indirect employment opportunities in the states of Odisha and Karnataka.

12-May-2018: ADNOC ships first cargo for Indian strategic oil reserve at Mangalore

Abu Dhabi National Oil Company (ADNOC) shipped the first oil cargo for India’s strategic petroleum reserve at Mangalore. The first consignment of 2 million barrels of ADNOC crude for the Mangalore cavern was loaded in the presence of oil minister Dharmendra Pradhan and ADNOC Group Chief Executive Sultan Al-Jaber.

Indian Strategic Petroleum Reserves Ltd (ISPRL) had then signed an agreement with ADNOC which allows the firm to store 5.86 million barrels of crude in the strategic facility at Mangalore at its own cost.

India, in a bid to hedge against energy security risks as it imports most of its oil needs, is building emergency storage in underground caverns to hold 36.87 million barrels of crude. ISPRL has built 5.33 MT, around 39 million barrels, of strategic crude oil storage at three locations -- Vishakhapatnam, Mangalore and Padur. The Vishakhapatnam storage has capacity of 1.33 MT or 9.77 million barrels, Mangalore has a capacity of 1.5 MT or 11 million barrels and Padur can stock 2.5 MT 18.37 million barrels.

India can use the entire available crude oil stored by ADNOC in the Mangalore facility during an emergency situation. The Agreement with ISPRL also allows ADNOC to sell part of the crude oil to Indian refineries on commercial basis while adhering to mutually agreed minimum crude storage which is for the exclusive use of the Indian government.

6-Mar-2017: Cabinet approves signing of the Definitive Agreement on Oil Storage and Management between Indian Strategic Petroleum Reserve Ltd (ISPRL) and Abu Dhabi National Oil Company (ADNOC) of UAE

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its ex-post facto approval for signing of the Definitive Agreement on Oil Storage and Management between Indian Strategic Petroleum Reserve Ltd (ISPRL) and Abu Dhabi National Oil Company (ADNOC) of UAE.

According to the Agreement, the ADNOC will fill up 0.81 MMT or 5,860,000 million barrels of crude oil at ISPRL storage facility at Mangalore, Karnataka.

Out of the crude stored, some part will be used for commercial purpose of ADNOC, while a major part will be purely for strategic purposes. The signing of the Agreement will augment India's energy security.

India and UAE are strategic partners. The investment by ADNOC is a major investment from UAE under the High Level Task Force on Investment (HLTFI) and the first investment by UAE in India in the energy sector.

8-Feb-2017: Phase I of Strategic Petroleum Reserve (SPR) programme at 3 locations has capacity of 5.33 MMT

The Minister of State (I/C) for Petroleum & Natural Gas Shri Dharmendra Pradhan informed the Rajya  Sabha in a written reply today that as part of Phase I of Strategic Petroleum Reserve (SPR) programme, SPR facilities are at three locations viz. Vishakhapatnam, Mangalore and Padur with a total capacity of 5.33 MMT.

On 25 January 2017, the Definitive Agreement on Oil Storage and Management was signed between Indian Strategic Petroleum Reserve Ltd (ISPRL) and Abu Dhabi National Oil Company (ADNOC) of UAE for filling up one of the two caverns at Mangalore SPR facility. The other cavern at Mangalore has already been filled by Government. He also informed that the Indian Strategic Petroleum Reserve Ltd (ISPRL) which is the SPV for construction of SPR facilities invited preliminary Expression of Interest (EoI) from reputed international parties for filling up of Padur SPR facility.

 Shri Pradhan informed in his reply that there is 63 days of existing storage based on estimated commercial reserve of crude oil, petroleum products and gas. The total 5.33 MMT reserve of Phase-I of the SPR programme is currently estimated to supply approximately 10.5 days of India’s crude requirement according to the consumption during 2015-16.