Introduction

In a significant move to strengthen its energy security, India is considering renting storage space in Southeast Asia to store crude oil. The state-run Indian Strategic Petroleum Reserves Ltd (ISPRL) is evaluating strategic, logistical, and economic viability in locations such as Singapore, Japan, and South Korea. This initiative aims to ensure that India can access and maintain its energy reserves efficiently.

Strategic and Commercial Considerations

• Commercial viability and accessibility are critical factors in selecting the storage location.
• The decision to rent storage abroad aligns with India’s goal of increasing its strategic reserves.
• This is not India’s first attempt at storing crude oil internationally. In 2020, India and the US signed a memorandum of understanding to cooperate in strategic petroleum reserves operation and maintenance.
• The agreement included the possibility of India storing oil in the US Strategic Petroleum Reserve to bolster its stockpile.

Potential Locations and Viability

• Japan, South Korea, and Singapore are among the top contenders for storage locations.
• The viability of these sites will be assessed based on their strategic, logistical, and economic benefits.
• The possibility of utilizing reserves in the United Arab Emirates (UAE) is also being considered due to their strategic location outside the volatile Strait of Hormuz.
• ISPRL currently has a crude storage capacity of 5.3 million tonnes, spread across Visakhapatnam (1.33 million tonnes), Mangaluru (1.5 million tonnes), and Padur (2.5 million tonnes).
• Additionally, India is constructing new storage facilities in Chandikhol (Odisha) and Padur, which will add another 6.5 million tonnes of capacity.

Enhancing Energy Security

• The strategic petroleum reserves can be crucial during supply disruptions or emergencies, such as war or geopolitical turmoil.
• The Abu Dhabi National Oil Company (ADNOC) has already participated in Phase-I of India’s Strategic Petroleum Reserve (SPR) program, storing 5.86 million barrels of crude in Mangalore. ADNOC is also exploring further storage options in Padur.

• India’s pursuit of additional storage capacity abroad is also part of its efforts to meet the International Energy Agency’s (IEA) requirement of maintaining oil stock levels equivalent to at least 90 days of net imports.
• According to a January report by S&P Global, India’s total petroleum storage capacity is significantly lower than that of some IEA member nations.
• The increasing geopolitical risks and anticipated growth in refining capacity are prompting India to expedite the expansion of its storage facilities.

Global Partnerships and Future Prospects

• The exploration of international storage options is not limited to Southeast Asia.
• The Indian government is in discussions with various global partners to secure strategic petroleum reserves.
• Recently, the Centre was reported to be in talks with Norwegian energy giant Equinor to participate in India’s SPR program.
• This partnership aims to further enhance India’s energy security and diversify its storage options.
• Furthermore, storing oil in diverse geographic locations helps mitigate risks associated with geopolitical instability.
• By spreading its reserves, India can ensure a more reliable and uninterrupted supply of crude oil in times of crisis.
• This strategy also allows India to take advantage of favorable market conditions and pricing, optimizing the cost-efficiency of its energy procurement.

Domestic Storage Expansion

• Alongside its international initiatives, India continues to invest in expanding its domestic storage capabilities.
• The new facilities in Chandikhol and Padur will significantly increase the nation’s storage capacity.
• These efforts are part of a broader strategy to build a resilient and comprehensive energy infrastructure that can support India’s growing demand.
• The increased storage capacity will also enable India to better manage its energy resources, reducing dependency on immediate imports and providing a buffer during market fluctuations.
• This strategic reserve acts as an insurance policy, safeguarding the nation’s energy needs against unforeseen disruptions.

Conclusion

India’s proactive steps in exploring international oil storage options highlight its commitment to enhancing energy security. By strategically selecting viable locations and ensuring cost-effective storage solutions, India aims to build a robust reserve system capable of weathering global supply disruptions and emergencies. This initiative marks a crucial step towards securing the energy needs of the world’s third-largest energy consumer.