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India to use low priced oil from Saudi and UAE to fill strategic reserves

India to use low priced oil from Saudi and UAE to fill strategic reserves

New Delhi, April 9 - Neftegaz.RU. Capitalising on low global oil prices, India will fill its underground strategic oil reserves with oil from Saudi Arabia, the UAE and Iraq as it shores up supplies to meet any supply or price disruption. India has built 5.33 million tonnes of emergency storage - enough to meet its oil needs for 9.5 days.

Oil Minister Dharmendra Pradhan had in the last few days held talks with his counterparts in Saudi Arabia and the UAE with a view to shoring up supplies.

Abu Dhabi National Oil Co (ADNOC) had previously hired half of the 1.5 million tonnes of Mangalore storage. It has stored for its commercial purposes 0.75 million tonnes of oil at Mangalore and the remaining space was empty, sources said adding the UAE's Upper Zakum crude will be bought for storing in the empty space.

Padur, the biggest of the 3 storages, has a total capacity of 2.5 million tonnes (about 17 million barrels). ADNOC had in November 2018 signed up to hire half of this capacity but never actually stored oil in it. Government-sourced crude fills up half of the Padur capacity currently and 1.25 million tonnes of crude oil from Saudi Arabia is planned to be sourced for filling up the empty space.

Padur storage has 4 compartments of 0.625 million tonnes each. The 1.33 million tonnes Vishakhapatnam storage has a small amount of unfilled space which would be filled with Iraq crude oil, they added.

While the oil to be stored in the 3 caverns will belong to the government, the government isn't paying for it. State-owned Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) have been asked to source oil from the 3 Middle-East countries for storing the caverns, sources said, adding the government will reimburse them of this cost at a later date.

In Phase-II, India plans to build an additional 6.5 million tonnes of facilities at Chandikhol in Odisha and Padur, which is expected to augment the emergency cover against any supply disruption by another 11.5 days.

Sources said foreign oil firms are allowed to hire the storages and use them to stock their oil and sell it to refineries in the region on commercial terms.

India, which meets 83 % of its oil needs through imports, will have the right of first refusal to buy the crude oil stored in the facilities in case of an emergency, they said.

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