Oil worth over INR 5,000 crore at a current price of around $30 a barrel will be purchased by India to top up its strategic oil reserves. Boasting a total capacity of 5.33 million tons (MT) of oil, three petroleum reserve caverns have been created by the Indian Strategic Petroleum Reserves Ltd (ISPRL) will be filled by the deliveries scheduled in April-May.
For the lease of half of its 2.5 MT at the Padur facility, a Memorandum of Understanding (MoU) has been signed by the ISPRL with the ADNOC. To help towards the initiative of building larger strategic oil capacities, filling reserves at such low oil prices is the best strategy. The government is set to benefit in another way apart from the lower global oil prices; the Gulf oil producers have indicated that they would also offer a good discount on oil prices. About $600 million could be saved by the government if just over half of the existing strategic reserve capacity is filled with Gulf oil. Currently, half of the 5.33 MT of India’s strategic petroleum reserve is full. Once the government provides it with the requisite budget, the ISPRL will go ahead with the purchase. BPCL, IOC and other PSU oil marketing companies may also be asked to contract oil for storage in the reserves.