Crude Oil Price Cheaper Due To Coronavirus, India Building New Oil Reserves
Taking advantage of the fall in global crude prices, India has started preparations to replenish its oil reserves below ground. For this, crude oil will be procured from Saudi Arabia, United Arab Emirates and Iraq. According to sources, India’s Petroleum Minister Dharmendra Pradhan has recently spoken to his counterparts in these countries.
India has prepared emergency underground reserves of 53.33 lakh tonnes at Mangaluru and Padur in Karnataka and Visakhapatnam in Andhra Pradesh. This is sufficient to meet India’s 10-day needs. At present, Mangalore and Padur reserves are half empty, while the Visakhapatnam reserves are also empty. The Abu Dhabi National Oil Company had purchased half of Mangalore’s 1.5 million tonne storage capacity.
India is preparing to build a second oil reserve
India is preparing to build a second reserve: India has started preparations to create a second strategic oil reserve of 6.5 million tonnes capacity at Podhur and Chandikhol in Odisha. Once it is ready, India will have an oil reserve equivalent to an additional 11.5 days of consumption.
How much reserves the oil companies have with them?
Indian oil companies keep their separate reserves for the refinery. Their total storage capacity is sufficient for the country’s 65 days of oil consumption. However, they do not count as strategic oil reserves. This is the reason India is building strategic reserves.
Three-month reserves are required according to IEA
According to International Energy Agency (IEA) standards, all its member countries should have reserves equal to three months of consumption. However, according to IEA India’s current strategic reserves are only equal to 10 days, which is not enough.
The Finance Ministry will provide funds
The Finance Ministry will provide funds for storing 15 crore barrels of strategic reserves in Mangaluru, Vizag(Visakhapatnam) and Podur. For this, about Rs 2700 crore will be needed. In this, the Finance Ministry has agreed to give Rs 700 crore. The remaining amount will be levied on the oil companies, which will be paid later.
What are strategic reserves?
All countries keep their reserves for the availability of oil in emergencies. In the event of war or any other emergency, if the oil supplying nation refuses to supply oil, then this store is useful. India has built up strategic reserves with the UAE and Saudi Arabia.
