Abu Dhabi: India is planning to set up two more strategic oil reserves in order to increase energy security and insulate the country from the future energy shortages, Indian finance minister Arun Jaitley announced on Wednesday.
“As a phase two of this, strategic crude reserves- caverns to be set up in Orissa and Bikaner in addition to three existing facilities,” said Jaitely in his budget speech.
The strategic caverns are run by Indian Strategic Petroleum Reserves Ltd (Isprl), a special purpose vehicle set up by Oil Industry Development Board under the ministry of petroleum and natural gas.
Under Phase I of the storage programme, three facilities have been created at Vishakhapatnam, Mangalore and Padur, with a total storage capacity of 5.33 million metric tonnes (MMT). The storage facilities entails storage of crude oil in underground rock caverns.
Last week, Abu Dhabi National Oil Company (Adnoc) and the Indian Strategic Petroleum Reserves Ltd, agreed to establish a strategic crude oil storage in the southern Indian city of Mangalore with a storage of 5.86 million barrels of Adnoc crude oil.
India which imports about 80 per cent of its oil needs is vulnerable to supply disruptions arising due to conflicts in oil producing countries or possible disturbances in sensitive zones like Strait of Hormuz from where 40 per cent of Asian oil supplies pass through.
Jaitley also announced plans to merge 13 state owned oil companies to create a giant corporation that could be over $100 billion in valuation. The proposed conglomerate is expected to be at an equal footing with some of the world’s biggest oil giants.
“We propose to create integrated public sector oil major which will be able to match the performance of international and domestic private sector oil and gas companies. [Merger] will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for shareholders,” Jaitley said.
India has 13 government controlled oil companies. The Oil and Natural Gas Corporation Limited (ONGC) is the biggest. Other companies include Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum, Gas Authority of India Limited (GAIL), Oil India among others.
Meanwhile, Bank of America Merrill Lynch said on Wednesday said that if car penetration continues to increase and road infrastructure developments take off, oil transport demand will quadruple between 2014 and 2040 and India will lead global hydrocarbon consumption growth for decades to come.
“India will account for 10.8 per cent of global energy demand by 2040 while the country stood at 6.0 per cent in 2014,” the bank said in a note.