Cabinet go-ahead to pvt investment in strategic oil reserves

The Union Cabinet cleared a proposal to allow private investment in phase-II of a strategic crude oil reserves, of around 6.5 million tonnes (mt), at Chandikhol in Odisha and Padur in Karnataka.

The facilities at these two places will be underground rock-caverns and will have capacity of four mt and 2.5 mt, respectively.

This comes two days after Abu Dhabi National Oil Corporation expressed interest in taking space at the Padur reserve. “The cost of the projects will be decided afte engineering studies and factoring in land acquisition costs,” said officiating finance minister Piyush Goyal on Wednesday.

In February, Business Standard had reported that some Indian private refiners were in talks with Indian Strategic Petroleum Reserves Ltd (ISPRL) for stake in upcoming projects. And, that Cabinet clearance was expected soon.

ISPRL has already constructed underground rock caverns for storage of 5.33 mt of crude oil at three locations — Visakhapatnam (1.33 mt), Mangaluru (1.5 mt) and Padur (2.5 mt). This 5.33 mt in the Phase-I of the programme is estimated to suffice for 10 days of India’s requirement. Cabinet approval for establishing the additional 6.5 mt will provide additional supply of about 12 days, the government stated.

The statement further said, “The in-principle approval is to take up the project under the public-private participation model, to reduce budgetary support of the Government of India. The terms and conditions would be determined by the ministry of petroleum and natural gas, in consultation with the ministry of finance, after conducting road shows to elicit requirements of the market, including prospective investors.” The project estimated to cost ~100 billion.

Export credit

The Cabinet also took a couple of decisions aiming to strengthen export infrastructure. It approved capital infusion of ~ 20 billion to the Export Credit Guarantee Corporation. To be provided over three years, this is meant to enhance insurance coverage for shipment by small and medium enterprises (they take 85 per cent of its money) and push export Africa, Central Asia and Latin America.