Some exclusive sources reported on Monday, March 16, 2020, that India was planning to fill up its strategic petroleum reserves (SPR) while the global oil prices have been dipping a record low due to the effects of Coronavirus outbreak.
Two sources from Indian officials told Reuters, the Indian government has decided to take advantage of the low prices of the global oil and would be talking to two major producers of global oil such as Saudi Arabia and the United Arab Emirates (UAE) for oil deals.
India’s Focus on Cheap Oil Reserve
Globally, the oil prices have declined significantly, since the overall demand for oil was curbed across the globe, due to travel restriction and closing of factories amid the fear of spreading the virus epidemic. The global oil price has slipped around 40% in March but the suppliers are presently growing since Moscow had refused to accept the suggestion of the Organization of the Petroleum Exporting Countries (OPEC) and its allies about oil output cut.
Following Russia’s refusal, the key OPEC producers, Saudi Arabia and Abu Dhabi have decided to continue their oil output at the lower prices which would allow oil-import countries to fill up their empty tanks at heavily discounted prices.
Being the world’s third-biggest oil importer and consumer, India imports about 80% of its oil needs and has strategic storage at three locations in the southern part of the country which can store up to 36.87 million barrels of oil or about 5 million tons to meet emergency oil supply.
An Indian official who refused to identify told Reuters, “It is an opportune time for us and for them (Abu Dhabi National Oil Company and Saudi Aramco) to finalize the deals and fill the SPRs…If there is any delay, we might fill the SPRs on our own.”
A second source, who also requested anonymity, said the Indian oil ministry has written a letter to the finance ministry seeking about a budget of Rupees 48-to-50 billion ($673.7 million) to buy oil in 8-9 very large crude carriers (VLCC) for the storage.
Oil Deals with the UAE and Saudi
According to Source, Indian Strategic Petroleum Reserves Ltd. (ISPRL), a company that is responsible for the building of strategic storage, has signed a memorandum of understanding (MOU) with the UAE’s national oil company, ADNOC for the lease of half of its 2.5 million tons in India’s Padur facility. Last year, the Indian company had signed a deal with Saudi Aramco for the lease of a quarter of Padur SPR.
The ISPRL has already signed a deal for the leased half of the 1.5 million tons capacity in Mangalore storage to ADNOC, which has the store capacity about 5.5 million barrels of Das oil in the cavern. Meanwhile, Padur has four compartments that can reserve oil about 4.6 million barrels each. The official said that the ISPRL has already received one VLCC with Arab Mix to fill one compartment and would get the second shipping of VLCC in April.
No immediate comment was available from ISPRL, India’s oil Co., and finance ministry while ADNOC and Saudi Aramco declined to comment when Reuters approached. Meanwhile, the official added, “This is the right time to fill the SPRs before prices start moving up.”
Similarly, US President Donald Trump also announced to take advantage of low pricing oil to meet the needs of US energy demand as well as to supply for the nation’s emergency needs.
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