India’s Strategic Oil Reserve

Context

The Rajasthani salt caverns are being investigated by a government-owned engineering business to see if strategic petroleum reserves can be created there.

Relevance – GS Paper 1 – Geography – Natural resources,

GS Paper 3 – Energy

Mains Question

What does “strategic petroleum reserve” mean to you? Why do nations keep these oil reserves? Talkon India’s potential to hold these reserves as well.  (150 Words)

Global strategic petroleum reserve

• The price of a product is decided by the demand-supply chain in the age of globalisation, which is what the global strategic petroleum reserve is. Because of the interconnectedness of the world’s oil markets, disturbances in one region are likely to have an impact on prices over a much wider region.
• Countries with reserves might enhance the amount of oil on hand in the case of a significant disruption caused by politics or a natural calamity by releasing a portion of their supplies. The increased supply would restrain the price rises brought on by the catastrophe.
• According to an agreement among IEA members, every nation that does not export more reserves than it imports is required to keep reserves equal to its average annual imports of crude oil for 90 days.

Strategic Oil reserves of India

• The endeavour to develop adequate emergency stocks along the lines of the reserves that the US and its Western allies established following the first oil crisis of the 1970s is represented by India’s strategic oil reserves.
• In order to meet the government’s goal of expanding the nation’s capacity for strategic oil storage, the government-owned engineering consultancy firm Engineers India (EIL) is researching the potential and viability of creating salt cavern-based strategic oil reserves in Rajasthan.
• India might obtain the country’s first oil storage facility built inside a salt cavern if the plan is realised. The three strategic oil storage facilities that are now in use by the nation are located in the states of Andhra Pradesh, Mangaluru, and Padur.
• To counteract significant supply interruptions in the global supply chain, nations build strategic crude oil reserves. India, the third-largest consumer of oil in the world, imports more than 85% of what it needs, therefore strategic petroleum reserves (SPR) could assist maintain energy security and availability in times of emergency or disruption in the world’s supply.
• The current SPR capacity of India is 5.33 million tonnes, or roughly 39 million barrels of crude, which can supply the country’s needs for 9.5 days. At Chandikhol in Odisha (4 million tonnes) and Padur (2.5 million tonnes), the nation is currently enlarging its SPR capacity by a total of 6.5 million tonnes.
• The Indian Strategic Petroleum Reserve (ISPRL), a special purpose company under the Petroleum Ministry, is responsible for managing India’s strategic oil reserves. As the project management consultant, EIL played a crucial role in establishing the nation’s current SPR.
• Salt cavern-based storage, which is thought to be less expensive and labour- and cost-intensive than rock caverns, might add a new, crucial chapter to India’s SPR history.

Do You Know?

• India has three strategically important oil deposits, located in the rock caves of Mangaluru, Padur, and Visakhapatnam.
• The state of Rajasthan is chosen for the salt-based cavern petroleum oil reserve project due to its geological and infrastructure advantages and is regarded as an ideal location.

Rock vs. salt cavern reserves: which are more abundant?

• In contrast to underground rock caverns, which are created through excavation, salt caverns are created using a method called solution mining, which entails pumping water into geological formations that contain significant salt deposits and dissolving the salt.
• Crude oil can be stored in the area once brine (water with dissolved salt) has been pumped out of the deposit. Compared to creating excavated rock caverns, the procedure is easier, quicker, and less expensive.Oil storage facilities built in salt caverns are also naturally well-sealed and designed for quick injection and extraction of oil.
• According to a report by the Massachusetts Institute of Technology’s (MIT) Environmental Solutions Initiative, this makes them a more desirable alternative than storing oil in other geological formations.
• These caves are ideal for storage because the salt that lines their interiors has a very low oil absorption, which offers a natural impermeable barrier against liquid and gaseous hydrocarbons. Furthermore, salt cavern-based storages can be built and maintained almost entirely from the surface, unlike rock caverns.
• Up to this point, the United States’ entire SPR programme has relied on storage facilities built in salt caverns. The US Strategic Petroleum Reserve is made up of four locations with deep underground storage caverns built in salt domes along the Gulf of Mexico coast in Texas and Louisiana. It is the largest emergency oil storage facility in the world.
• There are approximately 727 million barrels of strategic oil in the US; natural gas and liquid fuels are also stored in salt caverns around the world. They are also thought to be excellent for storing hydrogen and compressed air.

Potential for storing crude oil and petroleum products in India:

• Rajasthan, which has the majority of the country’s necessary salt deposits, is seen to be the most suitable region for the construction of strategic salt cavern storage facilities.
• The examination of the feasibility of salt cavern-based strategic storage in Rajasthan might be considered as a repeat of the proposal made ten years ago to establish a strategic oil reserve in Bikaner, according to EIL.There will soon be a refinery built in Barmer, and crude pipelines also exist in Rajasthan; such infrastructure is ideal for creating strategic oil reserves.
• However, neither EIL nor any other Indian company possessed the necessary technical know-how to construct a salt cavern-based system for strategic hydrocarbon storage.EIL recently partnered with Germany’s DEEP.KBB GmbH, a business that specialises in cavern storage and solution mining technologies, to overcome this access to technology divide.

Programme for Strategic Petroleum Reserves: Up to This Point –

• The endeavour to develop adequate emergency stocks along the lines of the reserves that the US and its Western allies established following the first oil crisis of the 1970s includes India’s strategic oil reserves.
• The International Energy Agency (IEA), a Paris-based autonomous intergovernmental organisation in which India is a ‘Association’ country, has authorised the government to release crude oil from the reserves in the event of supply disruptions caused by a natural disaster or an unanticipated global event that results in an abnormal increase in prices.

Conclusion

• The oil marketing companies (OMCs) in India have storage facilities for crude oil and petroleum products for 64.5 days, which means there is enough storage to meet approximately 74 days of the country’s petroleum demand.
• This is in addition to the SPR, which are sufficient to meet 9.5 days of oil requirement.
• The Abu Dhabi National Oil Company (ADNOC) stockpiled around 0.8 million tonnes of crude oil in the Mangaluru strategic reserve as part of India’s decision to commercialise its strategic petroleum reserves.
• In order to cut costs and maximise the reserves’ commercial potential, the government plans to create strategic reserves through public-private partnerships in the second phase of the strategy.