New Delhi:In what will help boost India’s energy security programme, the first consignment of 2 million barrels of crude oil from United Arab Emirates (UAE) reached the strategic petroleum reserve at Mangaluru on Monday.
The oil cargo from state-run Abu Dhabi National Oil Co. (ADNOC), the only one to partner with India on its crude oil reserve programme till date, is for filling up one of the two strategic petroleum reserve (SPR) caverns built by Indian Strategic Petroleum Reserve Ltd (ISPRL) at Mangalore.
“The filling up began with the two million barrels reaching Mangalore today. ADNOC will bring additional crude oil and fill up the Mangalore cavern later this year," India’s petroleum ministry said in a statement on Monday.
The oil storage facility will enable ADNOC meet market demand across Asia at a time when the global energy architecture is changing, with buyers at the centre of growth plans of oil majors. The development also assumes importance given that UAE supplies 6% of India’s crude oil imports.
Of the 39 million barrels of strategic crude oil storage facility built by India, the world’s third largest oil importer, 5.86 million barrels will be supplied by ADNOC that can be used during an emergency. ISPRL has an agreement with ADNOC under which the latter will store crude oil at its own cost. This agreement was signed during Prime Minister Narendra Modi’s visit to UAE in February this year.
“Further, as an incentive for storing crude oil at its own cost, the agreement allows ADNOC to sell part of the crude oil to Indian refineries during normal times," the statement said.
“ADNOC’s investment by way of crude oil in Indian SPR facility is the first time that a private, including a foreign entity, is filling up an Indian SPR cavern with crude oil," it added.
The US has also evinced interest to collaborate with India on its crude oil reserve programme as part of a strategic energy partnership that covers sectors such as oil and gas, power, renewable energy and coal.
India’s strategic crude oil storages are located at Visakhapatnam (1.33 million tonnes), Mangalore (1.5 million tonnes) and Padur (2.5 million tonnes).
“The entire Vishakhapatnam facility and one of the two caverns at the Mangalore facility have been filled with crude oil under government funding. The second cavern at Mangalore facility is now being filled by ADNOC of UAE at its own cost under the agreement with ISPRL," the statement said.
This comes at a time when there has been a spike in oil prices with President Donald Trump pulling the US out of a 2015 historic accord with energy-rich Iran that was inked to curb the Islamic Republic’s nuclear programme in return for ending sanctions. Also, factors such as Opec and Russia cutting supplies, falling production in Venezuela and geopolitical tensions have fuelled the rally in international crude oil prices.
Diesel and petrol prices on 21 May reached Rs67.82 per litre and Rs76.57 per litre respectively in Delhi, a record high.
The cost of the Indian basket of crude, which averaged $47.56 and $56.43 per barrel in FY17 and FY18, respectively, rose to an average of $69.30 in April 2018, according to data from the Petroleum Planning and Analysis Cell (PPAC). The price was $77.43 a barrel on 18 May. The Indian basket represents the average of Oman, Dubai and Brent crude. Retail prices of petrol and diesel in India track the global prices of these auto fuels, not crude, although they are broadly linked to crude oil price trends, which have firmed up.