India plans to issue tenders for the second expansion phase of its strategic petroleum reserves imminently, as the world’s third-largest crude importer accelerates efforts to improve its energy security.
The country plans to build added storage in Chandikhole in Odisha state on the eastern coast as well in Padur in the southern Indian state of Karnataka with a total capacity to store 6.5 million metric tonnes.
The additional volumes will raise India's overall strategic reserves from 77 days to 90 days, which is the minimum required by the International Energy Agency to meet emergency needs.
“We are floating the RFPs [requests for proposal] let's say as soon as possible,” Indian petroleum minister Hardeep Singh Puri told The National in an interview in Abu Dhabi during Adipec.
South Asia's largest economy, which imports most of its energy needs, has a total of 5.33 million metric tonnes of strategic reserves, including commercial stocks held by Indian refiners.
“Countries are supposed to have a 90-day strategic reserve. We have now about 77 days so we are trying to augment that,” Mr Puri said.
The country currently maintains strategic petroleum reserves in three locations — in Mangalore and Padur in Karnataka as well in Visakhapatnam in Andhra Pradesh on the eastern coast.
With the second phase of expansion, India will be able to maintain 90 days of strategic reserves within “five years”, he said.
Ensuring energy security is a major concern for India, whose economy is forecast to grow 9.5 per cent this year and 8.5 per cent in 2022, according to the International Monetary Fund, after shrinking 7.3 per cent in 2020 because of the Covid-19 pandemic.
With rising demand for fuel to meet the needs of a growing population, locking affordable supply for the future is the main mandate for Mr Puri, who was appointed to his position three months ago by Prime Minister Narendra Modi.
India has an existing agreement with the UAE's Abu Dhabi National Oil Company to store crude in the country's strategic petroleum reserves in Mangalore. India has also signed preliminary agreements with Saudi Aramco to keep millions of barrels of crude in its underground storage facilities.
The country is also looking to lock in crude supplies by building an integrated refining and petrochemicals complex on the western coast. The planned $44 billion Ratnagiri project in Maharashtra state will have Saudi Aramco and Adnoc as joint developers, alongside state-backed Indian refiners.
However, the project has been delayed due to issues with land acquisition.
“I have had some discussions recently. My own sense is that if [there are] problems on land acquisition and land availability, we will have to make some hard decisions in terms of capacity. One proposal is to pare this down a bit. Those are hard decisions. We'll have to take them,” Mr Puri said.
The refinery was earlier earmarked to have a capacity of 60 million tonnes.
Mr Puri spoke out against high oil prices, which he blamed for the rise in inflation and for slowing the recovery of the world economy.
Key crude benchmarks Brent and West Texas Intermediate have rallied 60 per cent since the start of the year, which has prompted concerns from oil-consuming nations such as India and other net-importers.
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“My view is the pandemic period was difficult enough. Economic activity virtually ground to a halt. Today economic activity is being revived. The largest economy, the United States, is facing inflation figures which are the highest in 30 years. So I think the first assertion I make to everybody is that higher oil prices will lead to inflation, on which one has enough evidence,” Mr Puri said.
India recently pledged to reach net-zero emissions by 2070, two decades later than the timeline suggested under the Paris Agreement. However, the country plans to decarbonise its grid sooner and looks to generate up to 50 per cent of its electricity needs from renewables by 2030.
India along with China came under criticism following the latest Conference of Parties (Cop26) held in the UK city of Glasgow, with both countries singled out for slowing the global momentum towards phasing out coal.
Mr Puri said it was unfair to associate India with the dilution of the language surrounding future coal use.
“Please explain to me what the difference in terms of timelines is for phase out and phase down. I mean, nobody knows actually. I don't know where it came from. And India is being associated,” he said.
India, which generates 70 per cent of its power needs from coal is said to have helped to amend the Glasgow Climate Pact to insist on “phasing down” unabated coal power rather than ending the use of the polluting fuel completely.
“But I don't think that's an Indian position. In a multilateral bilateral negotiation, a lot of people are saying [things] and some statements get picked [up]” Mr Puri said.