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Kuwait Petroleum explores storing crude in Indian strategic reserves
Summary
- India’s plan to augment strategic reserves is aimed at ensuring energy security during geopolitical tensions which tend to disrupt supplies and drive up prices, as seen in 2022 during the peak of Russia’s war in Ukraine.
Kuwait’s state-owned explorer and refiner is evaluating storing crude in Indian underground caverns under the second leg of the government’s programme to boost strategic petroleum reserves in the world’s third biggest oil importer.
Participation of Kuwait Petroleum Company in phase 2 is one of the new areas of cooperation being explored, the external affairs ministry said in its reply to the parliamentary committee's query on cooperation between India and the Gulf Cooperation Council (GCC). The information was shared with KPC on 10 November 2022 and the company has shown interest in storing its crude in the facilities of state-run Indian Strategic Petroleum Reserve Ltd (ISPRL), it said.
The status report on action taken by the government on the parliamentary panel's recommendations was submitted on Tuesday.
India’s plan to augment strategic reserves is aimed at ensuring energy security during geopolitical tensions which tend to disrupt supplies and drive up prices, as seen in 2022 during the peak of Russia’s war in Ukraine. Such reserves can be used in times of emergency.
The Union cabinet approved the construction of caverns along with single-point moorings and pipelines under phase II at Chandikhol, Odisha (4 million metric tonne) and Padur, Karnataka (2.5 MMT) in public-private partnership in 2021. ISPRL has since been engaging with the GCC countries.
The external affairs ministry said that ISPRL has also informed Saudi Aramco and Abu Dhabi National oil Company (ADNOC), the national oil company of the UAE, about the opportunity to participate in the second round.
ISPRL, the custodian of caverns storing critical sovereign crude oil reserves, also operates facilities for any other entity approved by the Centre. It also coordinates for releasing and replenishing strategic crude oil stock during supply disruptions through an empowered committee of the Government of India.
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In the first phase, ISPRL created underground rock caverns to store 5.33 million tonne of crude across three locations: Visakhapatnam, Andhra Pradesh (1.33 million tonne), and Mangalore (1.5 million tonne) and Padur (2.5 million tonne) in Karnataka.
ADNOC joined phase I to store 5.86 million barrels of its crude in Mangalore. In 2018, it signed another memorandum of understanding (MoU) with ISPRL to explore storing crude at its underground facility at Padur.
The parliamentary panel on external affairs, in its report in January this year, had suggested that the government should actively engage with the GCC countries to secure their participation in phase II of its strategic petroleum reserve programme as these nations contribute almost 35% of India’s oil and 70% of gas imports.
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On the panel's recommendation of exploring more long-term contracts for oil and gas, the ministry replied India is also eyeing a term contract with Oman, the nation’s 12th largest supplier of oil, apart from existing deals with Saudi Arabia, the UAE, Qatar, Kuwait, and Bahrain.
"These strategic engagements underscore India's efforts to secure a stable and diversified energy supply and strengthen diplomatic and economic ties with prominent energy-producing nations in the region," the ministry said, adding that it continues to explore more such opportunities.
The external affairs ministry, in its reply to the parliamentary panel, also said that to broaden the scope of strategic reserves beyond national borders, ISPRL signed an MoU with Oman Tanking Terminal Company LLC (OTTCO) on 25 June 2023 to conduct feasibility studies for ISPRL's potential involvement in phase 1 of the Ras Markaz project through equity partnership or leasing storage space.
"This endeavour presents a distinctive opportunity to establish strategic storage beyond India, particularly with an oil-producing nation," it said.
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The efforts to get into a term contract with Oman coincide with the free-trade talks between the two countries. Earlier, Mint reported that negotiations have concluded, and the signing of the agreement would follow soon. As of September, India has imported crude worth $649.46 million from Oman in the current fiscal (FY25), a nearly five-fold surge from $132.15 million a year earlier, showed data from the commerce ministry.
