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Why is India Constructing Strategic Petroleum Reserves?

Dec 5, 2018 19:05 IST
    Site of Strategic Petroleum Reserve

    Bread, water, clothing and shelter are considered as the basic needs of the human beings. But now one more thing has been added in this list i.e. energy.

    In the beginning of civilization, humans have created fire from stone rubbing but now human’s have created thermal energy, solar energy and nuclear energy.

    But if we talk about the Indian condition in terms of petroleum energy; then i would say that india has miles to go.

    Today, India has to import 83% crude oil of its requirement which constitute 25% of total Indian import bill. The Petroleum Planning and Analysis Cell (PPAC), the oil ministry’s technical arm, said that the import bill of crude oil is estimated to increase by 42% from $88 billion in 2017-18 to $125 billion in 2018-19, considering the Indian basket crude oil price of $77.88/bbl and $/Rs. exchange rate of 72.22 for the balance part of the year.

    In the present scenario the concern of the Central government is the fluctuation in the price of crude oil in the international market. Therefore, there is a dire need for India to make petroleum reserves to ensure the country's energy security and avoid monetary loss due to price fluctuation.

    Why Rupee is falling against Dollar currently?

    Let us know in this article that where and why India is making petroleum reserves in the country;

    Crude oil is stored in the caves made in the ground. Stone caves are man-made and considered the safest place to deposit hydrocarbons.

    When the concept of petroleum reserves started in India?

    Due to the first Gulf War in the year 1990, crude oil prices in the international market had been very high, due to which India's Foreign Exchange Reserves have declined and India had foreign currency reserve just ($ 1.2 billion) to pay import bill of only three weeks. Indian government learnt a new lession from this incident.

    In order to get a long-term solution of this problem, the Atal Bihari Vajpayee Government had given the idea to construct oil reserves in India in 1998.

    Locations of Indian Petroleum Reserves?

    The construction and maintenance the strategic petroleum reserves (SPR) is given to the Indian Strategic Petroleum Reserves Ltd (ISPRL).

    In the first phase of starage development, ISRPL has built the underground rock caverns at Visakhapatnam, Mangaluru and at Padur.

    Visakhapatnam is located on eastern coast; other two locations Mangalore and Padur (near Mangalore) are located in western coast of Karnataka state. The under ground capacity of the Visakhapatnam storage is 1.33 MMT, Mangalore (1.5 MMT) and Padur-Kerala (2.5 MMT). The combined capacity of these three strategic reserves is 5.33 MT. The three projects had storage capacity for 13 days.

    In the second phase the government is planning to create 12.5 MT storage capacity at Padur, Chandikhol (Odisha), Bikaner (Rajasthan) and Rajkot (Gujarat).

    The storage capacity of the Chandikhol reserve is 40 lakh metric tons, Padur’s storage capacity would be 25 lakh metric tons.

    Why India Need Strategic Petroleum Reserves?
    India still needs to import 83% crude oil of its requirement which increase import bill of india which further widens the Current Account Deficit (CAD) of the country.

    The fluctuations in the price of the crude oil in the international market create an atmosphere of uncertainty in the country. So in this way the economic condition of the country is dependent on the oil importing countries i.e. Gulf countries which does not suit to a sovereign country like India.

    It is known that there is always a political upheaval in the gulf countries, which can create same kind of conditions our country. So to avoid any unprecedented development in the country; the government of India is building  Strategic Petroleum Reserves in the country.

    It is known that the current petroleum reserves of India are sufficient to fulfil just 13 days oil requirement of the country. But this is not sufficient to tackle any unpredicted event occurs in the international crude market. So India want to have petroleum reserves of 90 days. In order to ensure energy security for 90 days, India needs to build up additional petroleum reserves of 13.32 metric ton.

    As a summary, it can be said that construction of strategic petroleum reserves by India is a great way to secure country's energy security. These reserves would act like piggy bank for India in the event of war like situation in the gulf countries or other oil importers of India.

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