India is considering filling its strategic crude oil reserve, joining the United States as the world’s top consumer begins to rebuild depleted stocks after a period of decline.
The South Asian nation plans to import about 1.25 million tonnes (9.2 million barrels) of oil to fill empty reserves, said people with knowledge of the matter, who asked not to be identified because the information it is not public.
The grades and timing are still under discussion, one of the people said. It is unclear whether India, which has become a major buyer of Russian crude since the invasion of Ukraine, will choose to buy cargoes from the OPEC+ producer or its traditional suppliers in the Middle East.
The U.S. and India are making plans to shore up reserves, as support for emergencies such as acute global disruptions or price spikes, as benchmark prices trade near their lowest in more than a year. Brent is about 45% off its 2022 peak as demand concerns hang over the market.
A spokesman for the oil ministry did not immediately return a phone call and text message seeking comment.
The South Asian nation plans to fill about a quarter of its reserve spread across two sites at facilities in Visakhapatnam on the east coast and Mangalore on the west coast. India has strategic storage at three locations with the capacity to hold about 5.33 million tonnes. The capacity is not much considering that India imported 232.4 million tonnes of crude in the year ended March 31.
India earmarked 50 billion rupees ($606 million) in its budget earlier this year to fill strategic reserves. The International Energy Agency said in February that the funds could cover purchases of about 10 million barrels of Russian crude, or about 7 million barrels of unsanctioned oil.
The last time it added to its strategic stocks in 2020 after oil crashed due to the Covid lockdown, it bought crude at an average price of $19 a barrel.
Little Interest
The Asian nation started a plan early last year to allow local and foreign companies to lease space that could hold about 8 million barrels at two underground locations. However, Indian refiners were unwilling to pay what the government was asking to lease the space, one of the people said.
Storage lease discussions were also held with Saudi Aramco and Abu Dhabi National Oil Co., but did not move forward, according to Parliament documents. Adnoc signed a deal in 2017 to lease some space, enough for almost 6 million barrels.
India is trying to increase its reserve capacity by 6.5 million tonnes, but progress has been slow due to land acquisition issues. The feasibility of storage caverns near Bharat Petroleum Corp’s Bina refinery is also being assessed. and the use of salt caverns in Bikaner near Hindustan Petroleum Corp.’s Barmer plant.
