OIL CRISIS -INDIA

 

INDIA -STRATEGIC PETROLEUM RESERVES

The position of India in the Global Oil pricing stability is one of the main reasons the transit corridor of Persian Gulf has been opened for India. It is well stated in the Standing Committee report of 2024-25 on Petroleum and Natural Gas, “The Committee also learnt that in November, 2021, India released 5 million barrels of crude oil from its Strategic Petroleum Reserves in consultation and parallelly with other major global energy consumers to cool high oil prices. The provision in the budget had been made to replenish the reserves”

After the Trination War widened to the entire Arab Nations, at the home front, the Government of India came under severe attack on the shortage of LPG and Fuel stock and supply in the country.  

Most of the Politicians must be well aware that refining is a continuous process, The distance between fuel outlets and refineries   range from 6 to 18 hours or more. Supply replenishment in the country ranges from a week to a month or more. Widening the time gap of refilling is an advantage for retailers who get adequate time to maintain the delivery and stock chain.

Growth of Indian Automobile and surface transport was slow till the economic liberalisation in 1990s, and by 2012, roads of most urban areas became congested.   India relied on a minimum plan programme for infrastructure till the turn of the 20^th century, and the expansion of National Highways, fly overs and elevated roads, clover leaves, side lanes, service roads became part of the National Planning. Yet, the growth in the population that can afford automobiles to the public transport users grew in negative proportions, resulting in the higher demand for fuel.

Rural areas that depended on the conventional wood-based fuel were drawn to LPG cylinders to reduce the environmental impacts and improve life style. Yet, the Governments did not look into the pros and cons of the fuel crisis and the setbacks of  an unexpected break in the flow of Petroleum imports.

Petroleum is a closed subject in the country, out of sight of the public and most information agencies. Most publications deal either with technologies, new finds and the trading.   Altogether, India 23 refineries produce an average 5.7 million barrels per day which almost became balanced with the daily consumption by 2025 . Despite the introduction of Electric Vehicles, the demand in the coming decade may grow by another 2 to 7 mbpd.

With a hand to mouth situation between refining and daily consumption, India had to address the question of Strategic Petroleum Reserves. Country could have taken a major initiative towards SPR during the oil crisis of 1973 1nd 1979. The Iranian Revolution was a wake-up call for the fuel crippled countries to think of viable alternatives and storage to meet any sudden shock from the Arab world. The Oil workers strike of Iran in 1978 was another setback which culminated in the formation of the Revolutionary regime. The Iran Iraq war began shortly afterwards and lasted for seven years, which had affected the Oil market.  In another three years, Iraq invaded Kuwait. The gulf oil spill of 1991 was the worst disaster to be recounted.

The Government of India could have read the warning signals in 1990, if not in 1973 or 1979. The country did not address the need of strategic reserves and expanding the refining capacity with a long-term projection.  In 1998, Atal Bihari Vajpayee looked into the need for a strong policy on Energy Security, as the oil reserves in the country were not adequate for even three days. His cabinet Minister of petroleum and Natural Gas , Ram Naik took the matters forward to create Indian Strategic Petroleum Reserve Limited, the tough task of identifying the ideal rock formations, duly considering the seismicity was handed over to Engineers India  Limited and another Austrian Company.  

In 2020, during the Covid 19 outbreak, Narendra Modi Government utilised the market fall and filled the underground Strategic reserves, which were already operational.  The cheapest fill ever that can be imagined at 20 to USD per barrel!

The deep underground Natural storage caverns   cut through the rocks with no metal ensheathment is a world class craft of its own.  A part of the Mangaluru facility is reported to have been leased by a National Oil Company of UAE. However, in case of an oil crisis, India will take the stock of UAE.   Static Vaults in ISPRL storages are only to meet the demands when India is drawn into a war.  Half of the remaining storages are meant for the strategic reserves, with remaining leased and traded.

Refineries of India have a storage that can take the country for nearly 74 days and strategic reserves to another 5 days, with full installed capacity can take the country to nearly 9 days or little more.  Due to the gap in the considerations of oil reserves, India continues to be an associate member of the International Energy Agency, and has to meet another 15 days of reserve to be a full member.  However, when phase 2 of the ISPRL facilities are commissioned another 6,5 MMT crude will be added to the strategic stockpile.