New Delhi: India will have oil reserves equivalent to at least 87 days of net imports, once the second phase of Indian Strategic Petroleum Reserves, which aims to add 12 days of crude storage, is operational.

Strategic crude oil reserves, which are typically state-funded and meant to tackle emergency situations, allow a country to tide over short-term supply disruptions. International Energy Agency (IEA) members maintain emergency oil reserves equivalent to at least 90 days of net imports.

“Creating storage facilities is an important part of India’s energy security efforts," said petroleum minister Dharmendra Pradhan at the launch of the road show for the second phase in New Delhi that will require an investment of $1.6 billion under the public-private-partnership (PPP) mode.

Bids to fill Padur strategic petroleum reserves with 19 million barrels of oil will be invited over the next few months. At a time of growing uncertainty in global oil markets, such reserves will help India to manage supply and price risks as part of its evolving energy security architecture. Abu Dhabi National Oil Co (Adnoc), the state-run oil company of the United Arab Emirates (UAE), is the only one to commit to India’s crude oil reserve programme till date.

“The number of days of reserves will not be a static because as our demand keeps increasing, the number of days of our reserve will also change. In today’s demand scenario, refineries have an inbuilt capacity of 65 days, 10 days have been added under the phase one, with the phase two will be adding 12 days. While IEA’s benchmark is of 90 days, by the time it is completed, the gap may get extended further. We will think of more storage facilities then," Pradhan said.

The IEA has been keen that India, the world’s third largest energy-consuming nation, becomes a member of the world’s premier energy monitor.

India has an existing storage capacity of 5.3 million tonnes (mt) at Visakhapatnam (1.33mt), Mangaluru (1.5 mt) and Padur (2.5mt) built at an investment of $600 million. The National Democratic Alliance (NDA) government in June approved the construction of an additional 6.5mt of strategic crude oil reserves at Chandikhol in Odisha and Padur in Karnataka. These facilities together will help support 22 days of India’s crude oil requirements.

Indian refiners also maintain 65 days of crude storage, taking the total tally to 87 days.

“The envisaged PPP model promises valuable incentives to an array of stakeholders looking to profit from this business alliance ranging from supply side assurance of downstream refiners; logistics and location advantage; availability of low cost underground storage facility as an economical storage alternative; reduced captive above ground storage with flexibility of multiple grade crude oil and multiple revenue streams; suitable land parcel and geological setting for creation of SPR, promising opportunity for financing, to a foreseen certainty of cash flows due to sustained oil and gas demand market," the government said.

The Organization of the Petroleum Exporting Countries (Opec), which accounts for about 40% of global production, is of the view that the global demand is expected to increase by 33% or 91 million barrels oil equivalent per day (mboed) between 2015 and 2040. According to the Indian government, the country’s petroleum products demand has been growing at an compound annual growth rate (CAGR) of 5.5% between 2013 and 2017.

Pradhan said that India’s domestic production will be unable to the country’s ever increasing domestic demand and the country will continue to depend on imports for foreseeable future.

Since October 2017, crude prices have jumped 50% in dollar terms and 70% in rupee terms . This comes in the backdrop of impending sanctions on Iran. India, the third largest global energy consumer and also the third largest crude importer is a top buyer of Iranian oil. Of the 220.4 million metric tonnes (million MT) of oil imported by India in 2017-18, about 9.4% was from Iran.

Pradhan said that he has raised the consumers’ point of view of the world at the third Opec-India dialogue on Wednesday.

Mohammad Sanusi Barkindo, secretary general, Opec will put India’s point of view in the producers group, the minister said.

India, which is reeling under the impact of high oil prices, has said that some Opec members have not made good their June decision to increase output by about one million barrels per day (bpd) or about 1% of global supply.

Barkindo on Wednesday added that this dialogue would not have been at a better time than now and the grouping has remained focussed in assuring that markets remains well supplied.