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About The Strategic Petroleum Reserve

Context

Recently, the Ministry of Petroleum & Natural Gas provided valuable insights into the Strategic Petroleum Reserve Programme during a written reply in the Lok Sabha.

Relevance:

GS-III: Industry and Infrastructure

Dimensions of the Article:

  1. Strategic Petroleum Reserves
  2. Strategic Petroleum Reserves in India

Strategic Petroleum Reserves (SPRs)

  • Strategic Petroleum Reserves (SPRs) refer to reserves of crude oil that nations maintain to guarantee a consistent crude oil supply, particularly in the face of geopolitical instability or disruptions in oil availability.
Purpose and Importance:
  • SPRs serve the critical purpose of safeguarding against potential supply shocks caused by geopolitical events or other disruptions.
  • These reserves play a pivotal role in ensuring a continuous flow of energy resources to support a country’s economic progress and advancement.
Key Points:
  • Strategic Petroleum Reserves are stockpiles of crude oil held by countries.
  • They aim to ensure a stable oil supply during geopolitical uncertainties and supply disruptions.
  • These reserves are stored underground to maintain a reliable energy flow.
  • Their main role is to support a nation’s growth and development by providing consistent energy resources.
Benefits of SPRs:
  • Energy Security: SPRs provide a safety net against sudden supply disruptions, ensuring an uninterrupted energy supply.
  • Economic Stability: By releasing oil during shortages, SPRs help stabilize domestic fuel prices and prevent price spikes.
  • Geopolitical Preparedness: SPRs enhance a nation’s ability to respond to global energy dynamics and geopolitical developments.
  • Emergency Response: SPRs contribute to disaster management by ensuring essential energy resources are available during emergencies.

India’s Strategic Petroleum Reserves (SPR) Infrastructure and Capacity

  • Indian Strategic Petroleum Reserves Ltd. (ISPRL) was established by the Government of India as a Special Purpose Vehicle under the Ministry of Petroleum & Natural Gas in 2004.
  • The SPR infrastructure is a critical component of India’s energy security strategy, aimed at safeguarding against disruptions in oil supply.
Existing SPR Facilities:

India’s current underground SPR sites possess a collective capacity of 5.33 Million Metric Tonnes (MMT) of crude oil. These facilities are strategically located across two states:

  • Visakhapatnam, Andhra Pradesh: 1.33 MMT capacity
  • Mangaluru, Karnataka: 1.5 MMT capacity
  • Padur, Karnataka: 2.5 MMT capacity
Filling Strategy:
  • Taking advantage of favorable crude oil prices in April/May 2020, India efficiently maximized its existing SPR storage capacity. This tactical decision resulted in significant potential savings, estimated at approximately INR 5000 crore.
Expansion Plans and Commercial-Cum-Strategic Facilities:

In a noteworthy development, the Indian Government granted approval for the establishment of two additional commercial-cum-strategic SPR sites:

  • Chandikhol, Odisha: 4 MMT capacity
  • Padur, Karnataka: 2.5 MMT capacity (expansion)
  • These facilities, with a total storage capacity of 6.5 MMT, will operate through a Public-Private Partnership (PPP) model.

Transfer and Timeline: Upon the conclusion of the 60-year Concession Period, the entity granted the concession will transfer the SPR, along with associated infrastructure like Single Mooring Points (SPMs) and onshore/offshore pipelines, back to the Government of India.

Historical Context:
  • The roots of India’s SPR initiative trace back to the Gulf War in 1990. Faced with a significant energy
  • crisis during that period, India’s limited oil reserves posed a mere three-day buffer.
  • Though the crisis was averted at the time, the persisting risk of energy disruptions remained a continuous concern.
  • To address this energy security challenge, the administration under Atal Bihari Vajpayee proposed the establishment of strategic petroleum reserves in 1998.
  • Presently, with escalating energy consumption, the rationale for developing and maintaining such reserves becomes increasingly compelling.
Global Comparison:
  • In the realm of global strategic petroleum reserves, India’s infrastructure stands alongside other major economies:
  • United States: 714 million barrels
  • China: 475 million barrels
  • Japan: 324 million barrels
  • India’s commitment to strengthening its SPR infrastructure underscores the nation’s proactive approach to mitigating energy supply risks and ensuring stability in the face of global energy dynamics.

February 2024
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