Strategic Petroleum Reserves and Energy Security Needs
Context:
Indian Strategic Petroleum Reserve Limited (ISPRL) is currently assessing bids from domestic firms for the construction of the second phase of India’s Strategic Petroleum Reserve (SPR) at Padur, Karnataka.
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- Simultaneously, ISPRL is in discussions with the Abu Dhabi National Oil Company (Adnoc) to renew a lease for a cavern at the existing Mangalore SPR facility, which is set to expire in May.
- The bidding process, which concluded in late February, was aimed at selecting a partner for the 2.5 million-ton capacity SPR at Padur.
- To attract investment, the Indian government eased restrictions on the sale and export of crude from SPRs and introduced incentives like tax benefits and viability gap funding.
Expanding Storage to Meet IEA Requirements
- ISPRL plans to more than triple its current SPR capacity from 5 million to 15 million tons over the next decade.
- This expansion aligns with India’s ambition to join the International Energy Agency (IEA), which mandates that member countries maintain at least 90 days of crude storage.
- The increased SPR capacity is expected to cover approximately 25 days of India’s oil consumption, and when combined with commercial storage at refineries, it would allow India to meet IEA requirements.
- In February, Finance Minister Nirmala Sitharaman allocated ₹5,597 crore in the 2025-26 Budget to refill the country’s strategic crude reserves.
- This decision followed a parliamentary committee’s recommendation to enhance storage levels.
Current Storage Status and Oil Holdings
- India’s SPR capacity currently stands at 5.33 million tons (39 million barrels), with nearly 70% of this volume filled.
- ISPRL-controlled storage is almost at full capacity, with only 200,000 tons available at Visakhapatnam.
- At present, ISPRL manages 23 million barrels of SPR capacity at Padur and Visakhapatnam, with additional storage held by oil companies.
- The 18-million-barrel Padur facility, operated by ISPRL, is stocked with Saudi Arabian crude, while the 5-million-barrel capacity in one of the two Visakhapatnam caverns contains Iraqi Basrah oil.
- Hindustan Petroleum holds a 2.2-million-barrel cavern at Visakhapatnam and has leased an equivalent volume from ISPRL for storing Iraqi crude.
- In Mangalore, Adnoc operates one of the two 11-million-barrel caverns, storing Murban crude, while MRPL has leased the second cavern.
International Energy Agency (IEA)
It is a Paris-based intergovernmental organisation established in 1974 under the Organisation for Economic Co-operation and Development (OECD). Initially created to ensure the security of oil supplies following the 1973-1974 oil crisis, the IEA’s mandate has expanded over time to address broader energy issues, including climate change, energy efficiency, and sustainable energy transitions. The IEA has 31 member countries, primarily industrialised nations, and 13 associate countries, which together represent over 75% of global energy demand. Countries like India, China, and Brazil participate in IEA activities through associate membership, enhancing cooperation on energy security and sustainability. The IEA requires its member countries to maintain strategic petroleum reserves equivalent to at least 90 days of their net oil imports. This collective reserve system ensures that member countries can respond effectively to supply disruptions.
Geopolitical Concerns and Future Projects
- In late 2023, the Indian government scrapped a ₹5,000 crore allocation intended for SPR refilling to manage the fiscal deficit.
- However, a geopolitical crisis affecting Gulf oil supplies—India’s primary import source—highlighted vulnerabilities in India’s strategic reserves.
- Looking ahead, India is determined to enhance its crude oil storage capacity to meet IEA membership criteria.
- Officials estimate that India currently has nine days of strategic storage, supplemented by 80 days of commercial storage at refineries.
The planned SPR at Chandikhol, Odisha, is facing delays due to land acquisition issues. Officials are currently demarcating land, and once the acquisition process is completed, ISPRL will proceed with issuing a tender for its construction.
