India has received the first parcel of crude oil from Iran to partly fill the strategic storage in southern India as part of the Strategic Petroleum Reserves (SPRs) storage.
The first parcel of 2 million barrels of Iranian oil was imported by Mangalore Refinery and Petrochemicals Ltd (MRPL) with the help of very large crude carrier (VLCC) Dino.
India is planning to fill half of the storage with 6 million barrels of Iranian oil while continuing talks with United Arab Emirates and Saudi Arabia for the remainder. The second parcel of such reserve will be procured by Bharat Petroleum Corp.
Why it is important for India to have strategic storage?
- India imports around 80% of its crude oil requirement from the international market. Most of these imports come from Middle East which is unstable region.
- Any price aberrations in crude oil prices have a direct impact on the Indian economy especially upon the current account and inflation amounting to strategic risks.
- Thus, it is necessary for India to have SPRs which will act as a valuable buffer against short term oil supply disruptions and global price shocks.
- Since 2003, the Central Government has commissioned the strategic oil reserves to maintain nation’s energy as well as economic security.
- The erstwhile Planning Commission in its Integrated Energy Policy, 2006 also had recommended to maintain a reserve equivalent to 90 days of oil imports for strategic-cum-buffer stock purposes.
- The recommendation was based on identification that any supply, market and technical risks in global supply chain of oil may become major threat to India’s energy security.
India is building emergency SPR storages in vast underground caverns at three locations in southern India to store about 5.33 million tonnes of crude oil enough crude to cover almost two weeks of demand. They are located are in Visakhapatnam, Mangalore and Padur.