Context: The Union Cabinet has approved the filling of Padur Strategic Petroleum Reserves (SPR) in Karnataka by overseas National Oil Companies (NOCs).

Key facts:

The filling of the SPR will be under PPP model and is being undertaken to reduce budgetary support of Union Government. The SPR facility at Padur is underground rock cavern with total capacity of 2.5 million metric tonnes (MMT) having four compartments of 0.625 MMT each.

Background:

• India has built 5.33 million tons of underground reserves in three locations, including Padur, under an earlier phase that can meet 9.5 days of the country’s oil needs. The government purchased crude to fill the caverns in Visakhapatnam in Andhra Pradesh and half of another facility in Mangalore in Karnataka, while leasing out the other half to Abu Dhabi National Oil Co.

About SPR programme:

• To ensure energy security, the Government of India had decided to set up 5 million metric tons (MMT) of strategic crude oil storages at three locations namely, Visakhapatnam, Mangalore and Padur (near Udupi). These strategic storages would be in addition to the existing storages of crude oil and petroleum products with the oil companies and would serve as a cushion during any external supply disruptions.
• In the 2017-18 budget, it was announced that two more such caverns will be set up Chandikhole in Jajpur district of Odisha and Bikaner in Rajasthan as part of the second phase.
• The construction of the Strategic Crude Oil Storage facilities is being managed by Indian Strategic Petroleum Reserves Limited (ISPRL), a Special Purpose Vehicle, which is a wholly owned subsidiary of Oil Industry Development Board (OIDB) under the Ministry of Petroleum & Natural Gas.

Need for strategic oil reserves:

• In 1990, as the Gulf war engulfed West Asia, India was in the throes of a major energy crisis. By all accounts India’s oil reserves at the time were adequate for only three days. While India managed to avert the crisis then, the threat of energy disruption continues to present a real danger even today.
• It is unlikely that India’s energy needs will dramatically move away from fossil fuels in the near future. Over 80% of these fuels come from imports, a majority of which is sourced from West Asia. This is a major strategic risk and poses a massive financial drain for an embattled economy and its growing current account deficit.
• To address energy insecurity, the Atal Bihari Vajpayee government mooted the concept of strategic petroleum reserves in 1998. Today, with India consuming upwards of four million barrels of crude every day (January 2015 figures), the case for creating such reserves grows stronger.