The Hindu : Crude reserves to be set up

Online edition of India's National Newspaper
Thursday, Jan 08, 2004

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Crude reserves to be set up

By Our Special Correspondent

New Delhi Jan. 7. In the light of oil security concerns, the Government today decided to set up 15 million tonnes of strategic crude reserves to meet 15 days consumption needs at an estimated cost of Rs.1,650 crores. Though the need for such a reserve has been discussed for many years, a decision has finally been taken now after a review of similar storages in the U.S. and Japan.

Disclosing this here today, the Parliamentary Affairs Minister, Sushma Swaraj, said that with liberalisation in the petroleum sector, oil security was essential. She said that earlier it was under the public sector and the need was not felt for creating such a reserve.

Briefing newspersons after a Cabinet meeting, she said that the capital cost would be around Rs. 1,650 crores for the construction of cavern storages and Rs. 5,000 crores for the five million tonnes of crude to be stored. The annual cost of servicing debt and operations would be around Rs. 800 crores. Regarding the financing mechanism for the project, she said it was decided by the Cabinet that this would be firmed up by the Petroleum Ministry after discussions with the Finance Ministry.The proposal envisages creating five million tonnes of strategic crude storages to be located in three rock caverns. Of these, two would be located near Mangalore and another near Visakhapatnam.

Later, the Petroleum Minister, Ram Naik, said the reserves would be in addition to the existing 60-days' tankage for crude oil and petroleum products with the oil industry. He said it would provide an emergency response mechanism in case of short-term supply disruptions. At present, the country has a high oil import dependency of around 69 per cent with around 67 per cent of crude imports coming from West Asia. During 2002-2003, about 82 million tonnes of crude valued at about Rs. 76,200 crores had been imported for domestic consumption.

Mr. Naik, who indicated that work on the reserves would begin by April, said the total crude storage capacity with domestic refineries was sufficient to meet 19 days consumption or about 5.7 million tonnes. The refineries also had tankages to provide for 45 days cover for petroleum products. He said the Indian Oil Corporation (IOC) would float a new company which would build, import and maintain the crude oil stocks.He said the present proposal was evolved after the Petroleum Ministry made a presentation to the Prime Minister. This was followed by a visit of the Minister and a technical team to the Bryan Mound Strategic Reserves in Texas in the U.S. to examine administrative and financial aspects of such storages.

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