STRATEGIC CRUDE OIL RESERVE

STRATEGIC CRUDE OIL RESERVE

Subject: Economy

Context: India looks to expand its plan on strategic petroleum reserves overseas, say sources.

Concept:

• Strategic petroleum reserves are huge stockpiles of crude oil to deal with any crude oil-related crisis like the risk of supply disruption from natural disasters, war or other calamities.
• According to the agreement on an International Energy Programme (I.E.P.), each International Energy Agency (IEA) country has an obligation to hold emergency oil stocks equivalent to at least 90 days of net oil imports.
• In case of a severe oil supply disruption, IEA members may decide to release these stocks to the market as part of a collective action.
• India became an associate member of the International Energy Agency in 2017.
• India’s strategic crude oil storages are currently located at Visakhapatnam (Andhra Pradesh), Mangaluru (Karnataka), and Padur (Karnataka).
• The government has also given approval for setting up of two additional facilities at Chandikhol (Odisha) and Padur (Karnataka).
• The concept of dedicated strategic reserves was first mooted in 1973 in the US, after the OPEC oil crisis.
• Underground storage is, by far the most economic method of storing petroleum products because the underground facility rules out the requirement of large swathes of land, ensures less evaporation and, since the caverns are built much below the sea level, it is easy to discharge crude into them from ships.
• The construction of the Strategic Crude Oil Storage facilities in India is being managed by Indian Strategic Petroleum Reserves Limited (ISPRL).
• ISPRL is a wholly owned subsidiary of Oil Industry Development Board (OIDB) under the Ministry of Petroleum & Natural Gas.