Rajya Sabha TV- In Depth: Strategic Petroleum Reserve
(TOPICS COVERED: GENERAL STUDIES III – SCIENCE AND TECHNOLOGY)
The Government of India is planning to increase its oil reserves at a time when there is immense volatility in global crude oil prices. It plans to build underground caverns that can hold 6.5 million tons of crude at two locations – Odisha and Karnataka. Such Global strategic Petroleum Reserves are crude oil inventories held by the government of a particular, as well as private industry, to safeguard economy and national security during an energy crisis.
An underground cavern for oil storage
GLOBAL STRATEGIC PETROLEUM RESERVE
- A strategic reserve is the reserve of a commodity that is held back from normal use by governments/ organisations/ businesses to cope with unexpected events.
- Such strategic reserves can be held for petroleum, Uranium, Helium, grains, Gold, etc.
- All members of the International Energy Agency (IEA) must have a strategic petroleum reserve equal to 90 days of the previous year’s net oil imports for their respective countries. Only net-export members of the IEA are exempt under this.
- About 1 billion barrels of oil are held in strategic reserves globally.
- Global oil consumption is 0.1 billion barrels/ day. So, 4.1 billion barrels is equivalent to 41 days of production.
- USA has world’s largest such reserves. Majority of the remainder reserves are held by IEA members and some non-IEA countries like China also hold large reserves.
INTERNATIONAL ENERGY AGENCY (IEA)
Map showing IEA members, candidates for accession and association member states
- IEA is a Paris-based autonomous intergovernmental organization established in the framework of ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (OECD) in 1974 in the wake of the 1973 oil crisis.
- 1973 oil crisis took place between October 1973 and February 1974 as the prices of oil increased from US$3 to US$12 per barrel globally. It was influenced by oil embargo by two important oil organisations – ORGANISATION OF ARAB PETROLEUM EXPORTING COUNTRIES (OAPEC) AND ORGANISATION OF PETROLEUM EXPORTING COUNTRIES (OPEC).
- IEA responds to the physical disruptions in the supply of oil and gives statistics about the international oil market and other energy sectors.
- IEA focuses on “3Es” of effectual energy policy: energy security, economic development, and environmental protection.
- The Organisation for Economic Co-operation and Development (OECD) is an intergovernmental economic organisation with 36 members, founded in 1961 to stimulate economic progress and world trade.
- Only the OECD members can become members of the IEA. As of October 2018, IEA has 30 member states. India has joined the IEA has an association country.
STRATEGIC PETROLEUM RESERVE (INDIA)
- The Indian Strategic Petroleum Reserve (ISPR) is an emergency fuel storage maintained by INDIAN STRATEGIC PETROLEUM RESERVES LIMITED under the MINISTRY OF PETROLEUM AND NATURAL GAS (MOP&NG).
- Ministry of Petroleum and Natural Gas is responsible for exploration, production, refining, distribution, marketing, import, export, and conservation of petroleum, natural gas, petroleum products and liquefied natural gas in India.
- India imports 82% of its oil needs.
- Strategic crude oil storages are at Mangalore (Karnataka), Visakhapatnam (Andhra Pradesh) and Padur (Kerala) as per Phase I. They have fuel storage of total 5. 33 MMT (Million Metric Tonnes) enough to provide 10 days of consumption.
- Government of India is planning to set up two more such caverns at Chandikhole (Odisha) and Udupi (Karnataka) as per phase II by Public-Private partnership. This will give an additional 6.5 million tons of the oil reserves equivalent to 12 days of consumption. Thus, a total of 22 days (10+12) of oil consumption will be available by ISPR.
- Crude oil from underground rock caverns (considered safest for storage of Hydrocarbons) can be supplied to refineries through pipelines and ships.
- Indian refiners also maintain crude oil storage (industrial stock) of 65 days. Thus, a total of 87 days (22 by ISPL + 65 by Indian refiners) of oil consumption will be made available in India after completion of Phase II by ISPR. This will be very close to 90 days mandate by the IEA.
India was hit economically during the Gulf war in 1990s. It faced foreign exchange crisis as oil prices increased a lot at the time. India averted the crisis by the policy of Liberalisation, Privatisation and Globalisation. But, to cope up with crude oil volatilities in future, the Atal Bihari Vajpayee government came up with the concept of oil reserves in 1998. As such, increasing its oil reserves at present to reach the IEA mandate of 90 days is a welcome step as oil meets a large amount of energy requirements of India.