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India sells oil from SPR

Updated: Sep 22, 2021

India has decided to commercialise its Strategic Petroleum Reserves (SPRs) to state-run refiners as it implements a new policy to enhance private participation in building its federal storage facilities by leasing out space. Here’s all you need to know about the government’s overhaul on petroleum reserve policy.

India ranks as the third-largest oil importer and consumer across the world that imports over 84% of its oil requirements and is now all set to replicate the Japan and South Korea models to commercialise its SPRs and re-export crude oil. India had changed its policy to permit the Indian Strategic Petroleum Reserves Ltd (ISPRL), which manages the federal oil inventories, to lease 30% of its overall 37 million barrels capacity to both Indian and foreign companies. The Central government has given a nod to ISPRL for trading oil equivalent to 20% of the overall SPR capacity within the Indian markets under the policy shift.

The ISPRL plans to gradually release 8 million barrels from the SPRs to free up space to lease to state-run Mangalore Refinery and Petrochemicals Ltd. (MRPL) and Hindustan Petroleum Corp (HPCL). ISPRL is going to sell around 5.5 million barrels of Upper Zakum oil stored in its Mangalore cavern to MRPL to safeguard against supply disruption. The chambers will be emptied to store a different grade of crude in them. MRPL and HPCL are expected to lease the space for 300,000 tonnes of crude oil in the Mangalore and Vishakhapatnam reserves respectively. The next plan of action is to lease out space in its 2.5 million tonnes of Padur storage.

After last year's global oil price crash, caused by a collapse in demand due to the COVID-19 pandemic, there has been a sharp rise in prices. Refiners faced higher costs for term supplies from the Middle East after a sudden surge in official selling prices by Saudi Aramco, following production cuts by the Organization of the Petroleum Exporting Countries and its allies (OPEC+). The aim of this policy amendment is to boost private participation in two new planned facilities and curb rising prices. Although the scale of India's oil release from the SPR is comparatively small, it can reduce imports of UAE oil.

By- Simarpreet Kaur & Sushant Banga


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