Petroleum Minister Dharmendra Pradhan said on Wednesday that two global oil majors -- Saudi Aramco and Abu Dhabi National Oil Corporation (Adnoc) -- have shown interest in setting up the second phase of India's strategic crude oil reserves that may see an investment to the tune of Rs 110 billion.
Two projects, with a combined capacity of 6.5 million tonnes (mt), will be coming up at Chandikhol in Odisha and Padur in Karnataka on public private partnership mode. Sources confirmed that the government was in talks with Indian private players such as Reliance Industries and Nayara Energy, too, to pick up stake in the project.
This development came on a day when India tabled its concerns over higher crude oil prices before the Organization of the Petroleum Exporting Countries (Opec). A delegation of the supplier group led by Secretary-General Mohammed Sanusi Barkindo met Pradhan and Indian companies. Based on one estimate, with every rise of $10 per barrel in crude prices, GDP growth will reduce by 0.2-0.3 percentage points, while the current account deficit will increase by 0.4 percentage points of the GDP and WPI inflation will climb up by 1.7 percentage points.
Later in the day, addressing the media on the sidelines of a roadshow by Indian Strategic Petroleum Reserves (ISPRL), Pradhan said that the project would ensure additional reserves of 87 days -- close to the 90 days mandated by the International Energy Agency for its members.
"Two oil majors -- Saudi Aramco and Adnoc -- and some trading companies, too, have shown interest in the phase-II of strategic reserves project," the minister said. Adnoc is already storing 5.86 million barrels of oil at the Mangalore facility.
ISPRL has already constructed underground rock caverns for the storage of 5.33 mt of crude oil at three locations -- Vishakhapatnam (1.33 mt), Mangalore (1.5 mt) and Padur (2.5 mt). The total 5.33 mt capacity under Phase-I of the programme is currently estimated to supply approximately 10 days of India's crude requirement. The Cabinet's approval for establishing additional 6.5-mt strategic petroleum reserve facilities would provide an additional supply of about 12 days and was expected to augment India's energy security, the statement said.
The investment model seeks partnership from companies through DBFOT (design, build, finance, operate and transfer) and offers the prospective concessionaire the rights on the crude oil inventory according to an agreed term where the Government of India will have the first right of refusal on the inventory in times of exigencies. The concessionaire would also have access to the large Indian refining market and multiple other revenue streams.
At present, India has an overall refining capacity of 247.6 mt, which is expected to rise to 414.35 mt by 2025. On the other hand, India is the third largest consumer of crude oil with 80 per cent of its energy requirements met through imports.