Govt allocates Rs 4,948 cr for filling strategic oil reserves

Govt allocates Rs 4,948 cr for filling strategic oil reserves

Taking advantage of lower oil prices, the government today allocated Rs 4,948 crore to full India's maiden strategic oil reserves to insulate itself from supply disruptions.

India, which is 79 per cent dependent on imports to meet its crude oil needs, is building emergency stockpiles with millions of barrels of crude that mirror the reserves that the US and its western allies amassed after the first oil crisis of 1973 to 1974.

Underground storages are being built at Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka to store about 5.33 million tonnes (28 million barrels) of crude oil. This is enough to meet nation's oil requirement for 11 days.

Briefing reporters about the decisions taken by the Cabinet Committee on Economic Affairs (CCEA), Telecom and IT Minister Ravi Shankar Prasad said, "Rs 4,948 crore allocation for Gross Budgetary Support (GBS) to the scheme for the Indian Strategic Storage Programme for storage of crude oil by Indian Strategic Petroleum Reserves Ltd (ISPRL) as been approved."

This money would be used to buy crude to fill up the just completed Visakhapatnam (Vizag) storages.

Indian Oil Corp (IOC) this week already bought two ship loads of Iraqi crude to fill this storage and the Cabinet sanction would allow payments to be made for the purchase.
Visakhapatnam facility would have the capacity to store 1.33 million tonnes of crude oil in underground rock caverns. Huge underground cavities almost ten storey tall and approximately 3.3 km long are being built.

A similar facility in Mangalore will have a capacity of 1.55 million tonnes and would be mechanically completed by June 2015. A 2.5-million tonnes storage at Padur, near Mangalore, would be completed by July, he said.

The Finance Ministry has provisioned Rs 2,399 crore in the Supplementary Demands for Grants for buying crude oil to fill the Vizag facility. This money was enough to buy 6.5 million to 7 million barrels of crude as against Vizag capacity to hold 10 million barrels of crude.

Against this backdrop, the CCEA sanctioned a larger sum of Rs 4,948 crore which would be used to meet "the entire cost for filling crude oil in Visakhapatnam cavern," he said.
Any money left after filling Vizag, would be used "for filling up the strategic part of the caverns which are being constructed at Mangalore and Padur," he said.

As this money would not be sufficient to meet the filling cost, the Ministry of Petroleum and Natural Gas has been asked to continue exploring alternative models for financing the remaining cost to fill the Mangalore and Padur caverns.

"This will include commercial utilisation by other interested parties," an official statement said.

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