Abu Dhabi National Oil Company signed a preliminary agreement with the Indian Strategic Petroleum Reserves (ISPRL) to explore the possibility of storing its crude at the firm’s underground oil storage facilities in India.
ISPRL, an Indian government-owned company mandated to store crude for emergency, has 2.5 million-tonnes, or about 17 million barrels of oil capacity divided into four equal compartments at its Padur facility in south-western state of Karnataka, Adnoc said in a statement on Monday. Under the agreement, Adnoc could store crude in two compartments at Padur.
“India is an important oil market, and this agreement underscores the strategic energy partnership between the UAE and India, which leverages the UAE’s and Adnoc’s expertise and oil resources,” said Dr Sultan Al Jaber, UAE Minister of State and Adnoc Group chief executive.
“It is our firm hope that we will be able to convert this framework agreement into a new mutually beneficial partnership that will create opportunities for Adnoc to increase deliveries of high-quality crude oil to India's expanding energy market."
The agreement follows the arrival on November 4 of the final shipment of the initial delivery of Adnoc crude to be stored in another ISPRL underground facility in Mangalore, also in Karnataka, which will store 5.86 million barrels of Abu Dhabi oil.
India, the third-biggest Asian economy, and the UAE, which accounts for 4.2 per cent of the global crude production, have forged closer energy ties recently. Adnoc is the only foreign oil and gas company to invest, by way of crude oil in India’s strategic petroleum reserves programme.
In June, Adnoc and Saudi Aramco signed an agreement to jointly invest in a $44 billion (Dh161.61bn) refinery on the west coast of India. In April, Aramco signed an agreement to jointly develop the 1.2 million barrel per day Ratnagiri refining and chemicals complex in the western Indian state of Maharashtra with a group of Indian refiners, and will share its stake with Adnoc.
In February, Adnoc awarded an Indian consortium of three companies: ONGC Videsh, Indian Oil Company and Bharat PetroResources, a 10 per cent participating interest in Abu Dhabi’s offshore Lower Zakum concession.
India’s energy demand is forecast, by the International Energy Agency, to grow by more than any other country in the period to 2040, propelled by an economy that will grow to more than five times its current size. Indian energy consumption is expected to more than double by 2040, accounting for 25 per cent of the rise in global energy demand, and the largest absolute growth in oil consumption.
The country is more than 82 per cent dependent on imports to meet its crude oil needs, around 8 per cent of which is supplied by the UAE.
ISPRL has already built 5.33 million tonnes of underground storage capacity at three locations that can meet around 10 days of the country’s oil needs. The government of India, in June, announced the creation of two new reserves, a 4 million-tonnes storage facility at Chandikhol, in the eastern state of Odisha, and an additional 2.5 million tonnes facility at Padur.
Combined, the existing and newly announced facilities will provide around 22 days of emergency coverage for India’s crude oil requirements. By participating in the oil storage facilities, Adnoc will be able to efficiently and competitively meet demand in India, said the statement.