Context

Indian Strategic Petroleum Reserves Ltd (ISPRL) has invited bids for constructing 2.5 MT of underground storage of crude oil at Padur in Karnataka paving way for India’s first commercial crude oil strategic storage.

Padur II Reserve Project: A Strategic Petroleum Reserves Project

• The Padur II reserve will be a part of Phase-II of the Strategic Petroleum Reserves Project.
• Phase II: It will build an additional 6.5 MMT of Strategic Petroleum Reserves in underground unlined rock caverns along with above ground facilities.
  • It will include offshore and onshore SPM and associated pipelines at two locations Chandikhol (4 MMT) in Odisha and at Padur (2.5 MMT) under Public Private Partnership (PPP) model.
• The Phase-I storages were built at government expense.

The Padur II Reserve Project

• Storage capacity: It will store 2.5 million tonnes of crude oil at a cost of ₹5,514 crore.
• Construction Model: It will be constructed in a PPP (public-private partnership) model where private parties will design, build, finance, and operate the storage.
  • The operator of Padur-II will lease out the storage to any oil company wishing to store oil and charge a fee. The companies storing oil can sell it to domestic refiners. But in case of an emergency, India will hold the first right on oil usage.
• ISPRL acquired about 215 acres of land for Padur-II.

Strategic Petroleum Reserves (SPRs)

• Mandated by IEA membership: Strategic Petroleum Reserves needs to be maintained by every nation belonging to the International Energy Agency (IEA) as per the terms of the International Energy Programme (I.E.P.) agreement.
  • Countries are required to maintain emergency reserves of oil amounting to a minimum of 90 days’ worth of their net oil imports.
  • The U.S., China, and Japan are leading crude oil consumers and maintain the largest strategic reserves.
• Present capacity: India’s existing strategic storage is of 5.33 million tonnes (39 million barrels) meeting  approximately 9.5 days of national demand.
• Objective: To ensure the country’s energy security,by building a strategic reserve of oil which can be used in case of emergency situations.
• Implementing Agency: Indian Strategic Petroleum Reserve Limited (ISPRL) It  is a wholly owned subsidiary (WOS) of Oil Industry Development Board (OIDB), which is a Body Corporate is a  special purpose vehicle created by the government for building and operating strategic petroleum reserves in the country.