India will build its first strategic oil storage by January in an effort to insulate itself from supply disruptions, Oil Minister M Veerappa Moily said on Friday.
India, which is 79 per cent dependent on imports to meet its crude oil needs, is building underground storage at Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka to store about 5.33 million tonnes of crude oil. This is enough to meet nation's oil requirement for 13-14 days.
"The storage at Visakhapatnam is expected to be commissioned in January 2014," Moily said in New Delhi.
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 March 2014. A 2.5-million tonnes storage at Padur, near Mangalore, would be completed by end of current fiscal, he said.
With the commissioning of Visakhapatnam storage, India will join nations like the US, Japan and China that have strategic reserves. These nations use the stockpiles not only as insurance against supply disruptions but also to buy and store oil when prices are low and release them to refiners when there is a spike in global rates.
Originally, India Strategic Petroleum Reserves Ltd (ISPRL), the state-owned firm building the strategic stockpile, was to build the Visakhapatnam facility by October 2011 while the Mangalore storages were to be mechanically completed by November 2012. The storage at Padur was scheduled for completion in December, 2012.
"Visakhapatnam storage is 94.6 per cent complete, Mangalore is 89.2 per cent and Padur is 86 per cent complete," Moily said.
The Cabinet had in January 2006 approved building of the strategic crude oil storage at a cost of Rs 2,397 crore (Rs 23.97 billion) but due to cost and time overrun the capital required is now estimated at Rs 3,958 crore (Rs 39.58 billion).
The Visakhapatnam facility will cost Rs 1,038 crore, Mangalore Rs 1,227 crore (Rs 12.27 billion) and Padur Rs 1,693 crore (Rs 16.93 billion).
ISPRL has till date received Rs 2,529 crore (Rs 25.29 billion) from Oil Industry Development Board (OIDB) and Rs 100 crore (Rs 1 billion) from Hindustan Petroleum Corp Ltd (HPCL), officials said adding that the firm requires Rs 1,195 crore (Rs 11.95 billion) either from OIDB or the government to complete the projects.
ISPRIL would need Rs 490 crore in current fiscal and Rs 705 crore (Rs 7.05 billion) in the next, they said.