Indian Strategic Petroleum Reserves Ltd (ISPRL) awarded a bid to Megha Engineering & Infrastructures Ltd (MEIL) to construct the country’s first strategic petroleum reserve (SPR) in the private sector.
In Padur, Karnataka, MEIL was awarded the contract to construct and run a 2.5 million metric tonne (MMT) SPR. At current prices, the anticipated cost of filling the ₹5,700 crore project with crude oil is ₹11,020 crore.
Domestic and international companies were invited to submit bids for the second stage of SPR development at Padur by ISPRL. According to sources in March, no international companies took part in the bidding, even though it was advertised to traders like Vitol and Goldman Sachs and Middle Eastern oil giants like Saudi Aramco. ISPRL has not made the final bidders’ details public.
The government expanded tax incentives, such as viability gap funding (VGF), and relaxed regulations on the sale and export of oil from SPRs in an effort to draw in investors. The VGF was limited to ₹3,420 crore, or 60% of the project cost. MEIL’s bid, which was slightly below this cap, defeated two unidentified domestic competitors to win the project.
This is India’s largest-ever private sector investment in strategic oil reserves, with the goal of greatly boosting the nation’s energy security. When full, the new facility should increase India’s current crude oil stockpile, which now only covers 8-9 days of consumption.
It is anticipated that ISPRL will sign the contract with Megha and provide a 214-acre block of land in Padur at no cost in order to construct the storage facility.
In order to guarantee disaster preparation, the contract can also mandate that the business fill a portion of the cavern. In addition, the project calls for the construction of onshore and offshore pipelines as well as specialized loading and unloading facilities.
Megha can recoup its investment by trading the crude it holds and renting out storage space to the government or oil firms. While trading gives larger profits but carries more risk and needs experience, leasing will provide the business with a consistent cash flow. About 39 million barrels of SPR capacity are currently available in India, and they are housed in underground caves near Visakhapatnam, Mangaluru, and Padur.
China has more than 1,200 million barrels in reserves, compared to 727 million in the United States. In ten years, ISPRL intends to more than triple the current SPR capacity, which is more than 5 million tons, to reach 15 million tons.
ISPRL’s action is timed to align with India's aspirations to join the International Energy Agency (IEA), which requires 90 days of storage for crude. India can easily meet the IEA standards with the help of commercial storage at refineries and the increased SPR capacity, which should cover about 25 days of the country's current oil consumption.
ISPRL’s action is timed to align with India's aspirations to join the International Energy Agency (IEA), which requires 90 days of storage for crude. India can easily meet the IEA standards with the help of commercial storage at refineries and the increased SPR capacity, which should cover about 25 days of the country's current oil consumption.
Indian oil-producing PSUs have diversified their crude basket by getting oil from several locations, such as the Middle East, Africa, North America, and South America, in order to guarantee the security of crude supply and lower the danger of reliance on any one area. In order to guarantee continuous supplies and protect against price volatility, India has also inked a number of long-term agreements for the purchase of LNG.