India plans to store oil reserves in US
India may stockpile crude oil in US-based strategic reserves to shield itself from any supply disruptions arising out of geopolitical reasons and natural disasters, three people aware of the development said.
The US is increasingly becoming a key partners in India’s energy security. India has been importing oil and gas from the US since 2017, and discussions are underway to store crude oil in American strategic reserves, the people said on condition of anonymity.
In just two years, the US has become one of the top 10 sources of crude oil imports for India, they said. India imports over 80% of the crude oil it processes; it imported crude oil worth $101.4 billion in 2019-20.
“The proposal to store oil in the US is still at an initial stage. It may be discussed at the second ministerial meeting of the India and US Strategic Energy Partnership (SEP) between Indian petroleum minister Dharmendra Pradhan and the US energy secretary Dan Brouillette on Friday,” one person said.
The meeting, which was due to be held in Washington in April this year, got postponed because of the outbreak of the Covid-19 pandemic; it will take place on Friday through video conferencing, another person said. The SEP was formally announced during Prime Minister Narendra Modi’s visit to the US in June 2017.
The first ministerial meeting was held in New Delhi on April 17, 2018 between minister Pradhan and the then energy secretary Rick Perry.
“Ideally, India should have strategic reserves for at least 90 days. Although it is developing its own storage capacities, it can currently store 5.33 million tonnes (MMTs), or 39 million barrels of crude oil, in the three existing caverns, which is sufficient to meet 9.5 days’ requirements,” a third person said.
The three underground caverns are located in Vishakhapatnam, Mangalore and Padur. The government has approved the construction of two more strategic crude oil reserves with a total 6.5 million tonnes of capacity at Chandikhol in Odisha and Padur in Karnataka. The proposed facilities will provide additional storage capacity for 11.57 days of requirements.
Oil ministry officials confirmed that the two ministers will discuss various strategic matters of mutual interest, including investments in energy projects, on Friday, but declined to disclose details.
On Wednesday, Pradhan and Brouillette had co-chaired an industry-level interaction organised by the US-India Business Council (USIBC). On Tuesday, the Indian minister had interacted with industry under the US-India Strategic Energy Partnership, oil ministry officials said.
“The move to keep a stockpile of crude oil in the US-based strategic reserves is an extremely beneficial move. If the idea of maintaining a strategic reserve of petroleum is to mitigate risk and ensure energy security, the objective can be truly achieved by diversifying our strategy,” Anupam Manur, assistant professor at the think tank Takshashila Institution, said,
“It is in India’s interest to geographically diversify the storage of our petroleum reserves. Beyond this, we should also look at getting into strategic partnerships with Oman, UAE, Sri Lanka, and Japan for our SPR [strategic petroleum reserve] storage strategy,” he added.
Through the strategic energy partnership, the US and India collectively seek to enhance energy security, expand energy and innovation linkages across their energy sectors, bolster strategic alignment, and facilitate increased industry and stakeholder engagement in the energy sector, an oil ministry statement said.
Pradhan was quoted as saying in the statement that there had been a few collaborative efforts between Indian and American companies in the energy sector, but it was far below potential.
During these challenging times, India and the US have been working in close collaboration, be it in stabilising global energy markets or in collaborative efforts to address Covid-19, Pradhan said.
“In today’s turbulent world, one constant is – and always will be – the strength of our bilateral partnership,” the minister said.