ISPRL to invite global bids to trade in its oil reserves

New Delhi: State-run Indian Strategic Petroleum Reserves Ltd (ISPRL) is set to move to the next phase of commercializing its reserves and is likely to invite global expressions of interest (EoI) for a strategic partner by September for trading of crude from its reserves, said two people in the know of the developments.

The discussions are in the initial phase and ISPRL, a subsidiary of the Oil Industry Development Board, will soon carry out a survey for the feasibility of trading in its reserves, they added.

The development comes three years after the government allowed ISPRL to rent and trade a total of half its capacity.

Commercialization of ISPRL approved in 2021

The Union cabinet in July 2021 approved the commercialization of ISPRL by allowing ISPRL to undertake partial commercial activities with the crude stored in caverns under Phase-I of SPR (strategic petroleum reserve) programme by allowing it to use 30% of SPR capacity for renting and 20% of SPR capacity for trading purpose. 

Also Read: Life Insurance Corporation of India, Oil & Natural Gas Corporation & others hit 52 week high today ; Do you own any?

The sale of crude would be allowed to Indian companies only.

"ISPRL is allowed to trade up to 20% of the capacity. Although, so far trading has not taken a concrete shape, ISPRL will carry out a study and seek EoIs for a strategic partner for trading purpose," said one of the two people mentioned above, adding that the trading mechanism is yet to be finalized. 

The strategic partner would be a technology partner, the person added.

As part of the commercialization mandate, ISPRL has already leased out a capacity of 300,000 metric tonnes to state-run Hindustan Petroleum Corporation Ltd (HPCL) for three years in a strategic petroleum reserve in Vizag, Andhra Pradesh. 

Also Read: Government cuts down windfall tax on crude oil to ₹4,600 per tonne

It has also sought bids for renting out another 750,000 metric tonne capacity, the bids for which will be opened this month.

Another person said that work on trading is expected to gain momentum once the renting or leasing of capacities is completed.

Queries sent to ISPRL remained unanswered till press time.

In April, ISPRL, invited bids for constructing 2.5 million tonnes of underground storage at Padur in Karnataka, according to the tender document. This would be the first commercial crude oil strategic storage in the country as part of India's efforts to increase its inventory in a bid to avert supply disruptions.

ISPRL had in the first phase built a strategic petroleum reserve in underground unlined rock caverns for storage of 5.33 million tonnes of crude oil at three locations Visakhapatnam (1.33 million tonnes) in Andhra Pradesh and Mangalore (1.5 million tonnes) and Padur (2.5 million tonnes) in Karnataka. According to a parliamentary committee report on the review of India's crud oil import policy, the storage capacity accounts for 9.5 days of national demand of FY20. 

Currently, the estimated reserves of crude oil and petroleum products in India, stored by both private and public companies, including those created under phase-I of the SPR programme cover 74 days of imports.

The report of the standing committee on petroleum and natural gas presented in Parliament in December 2023 noted that the release or sale of strategic crude oil is carried out through an inter-ministerial empowered committee chaired by the secretary to the ministry of petroleum and natural gas. 

The release of commercial stock through leasing, renting or sale or purchase of crude oil is handled by a committee of directors as determined by ISPRL Board from time to time comprising directors of ISPRL.

"The authority for release of stock in the strategic portion of 50% of crude storage will vest with the Inter-Ministerial Empowered Committee," it noted.

India is constructing 6.5 million tonnes of storage at Chandikhol in Odisha and Padur.

Strategic petroleum reserves can be be used in times of supply disruption or emergency such as war or a global geopolitical situation.

The Abu Dhabi National oil Company (ADNOC), the national oil company of the UAE, joined Phase-I of the India’s SPR programme and has stored 5.86 million barrels of its crude in Mangalore. In 2018, it signed another MoU with ISPRL to explore storing ADNOC crude oil at ISPRL’s underground oil storage facility at Padur, which has a 2.5 million tonne capacity.