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Govt to build strategic energy storage capacity
By agencies
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Tuesday, 15 November 2005, 20:30 IST
NEW DELHI: In a bid to ensure energy security for the country, the petroleum ministry has proposed to create a 10 million ton strategic storage capacity for oil and a 15-day storage capacity for gas for the country, preferably on a public-private partnership basis, a newspaper said.
The plan to enhance the crude oil storage capacity to 10 million ton, as opposed to the initial plan of 5 million ton, comes at a time when an energy driver like China is also building up strategic stocks for crude. Both China and India are energy guzzlers and are largely dependent on imports to meet their energy needs, the Economic Times said.
The petroleum ministry will shortly take up the proposal with the finance ministry before it is placed before the Cabinet. A senior government official said, We are now looking at enhanced storage facilities in view of the volatility in the crude oil market and the geo-political disturbances in oil-rich countries.
It is proposed that the Oil Industry Development Board (OIDB) will fund the construction of the storage facility, which is likely to require investments of around $500 million. Oil refining and marketing companies will, however, be required to foot the bill for buying the crude. It is estimated that the cost of buying the required crude will be close to $1.27 billion. The maintenance cost of the strategic reserves about $81.8 million annually is proposed to be funded through the budget.
Strategic oil reserves have gained importance as they cater to the energy requirements of the country in the event of war, or when energy supplies are disrupted. The reserves are also used to balance the oil prices for domestic consumers in the event of extreme price fluctuations in the international oil market. It is in view of such things that countries like the U.S. keep strategic oil reserves of up to six months, the paper said.
The petroleum ministry has also directed OIDB to explore the possibility of building strategic natural gas storages to ensure continuity of supplies to downstream industries in case of short-term supply disruptions. Taking aggregate volumes of proposed piped gas imports of 200 MMSCMD (from Turkmenistan, Iran and Myanmar), it is proposed to study the feasibility of a storage facility for 3 BCM of gas to ensure at least 15 days supply.
A committee headed by the OIDB secretary and chaired by Gails CMD and the director general of hydrocarbons (DGH) will study the cost estimates and cite terms of reference to Engineers India (EIL) for preparation of a Project Feasibility Report (PFR) on the storage facility, the paper said.