India plans to cushion oil shock by increasing strategic oil reserves

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HPS Ahuja, chief executive of India's strategic oil reserve, said that despite some delays caused by the unprecedented novel coronavirus crisis, India would press ahead with its plan to more than double its strategic oil reserve (SPR) and the country would soon attract interest from potential investors in its ambitious second phase of expansion.

H.P.S. Ahuja, CEO and managing director of India's Strategic Petroleum Reserve Co., Ltd. (ISPRL), said he hoped to obtain final approval from the Ministry of Oil as soon as possible, after which the company would be able to make a request to participate in the construction of strategic oil reserve sites in two other locations in India.

"the epidemic has caused some delays and obstacles, but we should be able to make progress soon. We already have a complete plan, and once our proposal gets the final green light from the government, we can start the project work. "

In the first phase, India established strategic reserves in three locations with a total capacity of 5.33 million tons, including 1.33 million tons for Visakhapatnam, 1.5 million tons for Mangalore and 2.5 million tons for Padur in Karnataka. All three facilities have been put into use.

For the second phase, the Federal Cabinet has approved the construction of an additional 6.5 million tons of strategic reserves in two locations-4 million tons in Chandikho, in Orissa and 2.5 million tons in Padur.

The second phase of the strategic partnership will be based on the model of cooperation between the government and social capital. The first phase of the reserve space has been fully filled to meet India's 9.5 days of crude oil demand. The second phase will be added for another 12 days.

"Private and international companies are very interested in participating in the second phase of the expansion of resources for special programmes. Once we apply for participation, it is expected that many companies will be interested in investment.

ADNOC, the UAE national oil company, currently stores 5.86 million barrels of crude oil at its Mangalore facility, Ahuja said.

Given India's weak oil demand last year as a result of the novel coronavirus epidemic, ADNOC urged the Indian government to allow it to export some of its oil reserves.

As a result, India's oil ministry said in October that ADNOC was now the only overseas producer to store oil in caves in southern India and could re-export crude oil to other countries "with the priority reserved by the government".

"this helps to increase the level of investment interest of international producers. India's policy of allowing oil producers to hold large strategic oil reserves to re-export crude oil will attract producers to take up storage space.

The change in the policy of allowing re-export has brought India in line with major Asian oil consumers such as Japan and South Korea. International oil producers store oil in Japan and South Korea and re-export it from these facilities. Before the policy change, overseas companies that wanted to store oil in Indian territory were allowed to sell only 35 per cent of their production commercially and only to domestic refineries.

A key factor is that this policy decision will give oil producers the flexibility to independently decide how to deal with up to 50 per cent of their strategic oil reserves. They will retain the option of selling or re-exporting to domestic companies in India, depending on their business interests. "

After the outbreak of COVID-19, oil demand dropped sharply, which led to a sharp drop in oil prices. India's domestic emergency supplies mainly came from the Middle East. The caves are fully filled and the current second wave of outbreaks has not disrupted oil supplies, Ahuja said.

"crude oil shipments have been going on normally during the second wave of the epidemic, although we are now witnessing concerns about shipping, crew replacement and other factors," it said. Therefore, there is no need to draw on strategic reserves.

It said it had not heard of how many crude oil shipments had been cancelled or diverted.

As a result of the regional blockade, short-term oil demand will be affected, but demand should rebound. Refiners have reduced their business, but not by much.

S & P Global Platts Analysis cut its forecast for year-on-year oil demand growth in 2021 for the second time and now expects full-year growth of 350000 b / d, down from 400000 b / d in April and 440000 b / d in March.

(Indian Oil Corp.), India's flagship state-owned oil refiner The average operating rate of all nine independent refineries was 100 per cent in March, compared with 98 per cent in the same period a year earlier and 101 per cent in February. However, due to blockades in many parts of India and a slowdown in domestic demand, refineries are currently operating at 90 per cent capacity.

With the acceleration of novel coronavirus's spread across India, local communities are in urgent need of resources and support.