National oil firms in Middle East keen to hire storage in India

New Delhi: National oil companies of Saudi Arabia, Iran, Kuwait and UAE have evinced interest in hiring a part of the under-construction strategic oil storages being built on the west coast but first want India to liberalise policy by allowing export of crude oil. India, which is 79 percent dependent on imports to meet its crude oil needs, recently built a 1.33 million tonne underground oil storage at Visakhapatnam in Andhra Pradesh.[caption id=“attachment_1008073” align=“alignleft” width=“380”]  Representational image. Reuters[/caption] Caverns totalling 4 million tons at Mangalore and nearby Padur in Karnataka will be built by December to guard against crude price shocks and supply disruptions. UAE’s Abu Dhabi National Oil Company (ADNOC) and Kuwait Petroleum Corp (KPC) as well as Saudi Aramco of Saudi Arabia have expressed interest in storing about 2 million tonne of crude oil in the caverns on the west coast, a senior official said. While the Mangalore strategic storage is at in a SEZ that allows duty free import of oil, Padur caverns are in domestic tariff area (DTA) where oil can be imported by paying applicable import duty which currently is zero. But rules currently do not permit export of crude oil from either DTA or SEZ, the official said, adding that the Middle East national oil firms want India to amend rules so that they can store oil at the caverns and export it when they get customers or good price for it. The oil companies want to use the caverns on the west coast for commercial storage of oil which they can use to supply to refiners like Mangalore Refinery and Petrochemcials Ltd or to a third country. MRPL buys large quantity of crude oil from Iran and Kuwait. The official said models to lease out the storage were being worked out and the cabinet approval will be required for allowing export of crude oil from the storages. The storages at Visakhapatnam, Mangalore and Padur will be enough to meet nation’s oil requirement of about 10 days. Visakhapatnam facility, which has already started being filled, has capacity to store 1.33 million tonnes of crude oil in underground rock caverns. Huge underground cavities, almost ten storey tall and approximately 3.3 km long are being built. The 1.5 million tonnes Mangalore facility and 2.5 million tonnes unit at Padur will be commissioned by December when a pipeline bringing crude from high-sea is completed. India join nations like the US, Japan and China that have strategic reserves. These nations use the stockpiles not only as insurance against supply disruptions but also to buy and store oil when prices are low and release them to refiners when there is a spike in global rates. PTI