New Delhi: India may raise the capacity of the first stage of its planned strategic crude reserve by more than 30% to 9.75 million barrels after a study found this could be done at limited extra cost, an oil ministry official said.
The government wants to build a reserve totalling 36.65 million barrels by the end of 2010 to hedge against volatility in international crude oil markets and meet domestic demand in case of short-term supply disruptions.
As a first step, 7.33 million barrels—or one million tonnes (mt)—are to be stored at Visakhapatnam in Andhra Pradesh at a cost of around $159.5 million (Rs654 crore).
But back-up consultant SWECO of Sweden has suggested capacity there could be raised by 25-33% for a budget increase of around 15%, the official said on Tuesday.
Building the entire reserve, to be managed by Indian Strategic Petroleum Reserves Ltd (ISPRL), a subsidiary of state-run Indian Oil Corp., is expected to cost more than Rs2,500 crore.
“Yesterday, the government authorized ISPRL to examine the feasibility of increasing the capacity from one to 1.25 or 1.33mt,” the official, who did not wish to be identified, said.
A decision is expected by the end of July. Construction should begin by September and take no longer than three years.
Similar increases may be possible for the entire reserve.
“It is possible that 5mt (36.65 million barrels) can be increased to 6mt (43.98 million barrels) with marginal cost increase,” the official added.
The planned total reserve, sufficient to meet 15 days’ current demand, will be built at three locations along the eastern and western coasts.
The underground tanks at Visakhapatnam will store high sulphur crude, the processing of which is being targeted by refinery expansion in India to earn better margins.
Asia’s third largest oil consumer has said it eventually wants to double overall strategic capacity to 73.3 million barrels.