IEW 2025 INTERVIEW: India eyes Oman, other nations as potential oil storage options: ISPRL

India is looking at Oman and other Middle Eastern countries as potential strategic oil storage options while also pushing for reserves at home, as it looks to accelerate capacity expansion amid geopolitical tensions, the chief executive officer of Indian Strategic Petroleum Reserves Ltd. said.

India's expansion push at home and overseas would take the country closer to the strategic oil storage requirements mandated by the International Energy Agency over the medium to longer term, L.R. Jain, the CEO of ISPRL, told S&P Global Commodity Insights during the India Energy Week conference held from Feb. 11-14 in New Delhi.

"Oman is one of the places we are considering. We could also look at other Middle Eastern destinations in the future to hold oil at SPRs, although nothing concrete has been finalized," Jain said.

India's strategic petroleum reserves currently provide about 9.5 days of total net oil imports. In addition, state-run oil companies hold storage facilities for crude oil and petroleum products for 64.5 days of total net imports. Hence, the current total national capacity for storage of crude oil and petroleum products stands at 74 days of total net imports.

On the other hand, IEA member countries are required to ensure oil stock levels equivalent to no fewer than 90 days of their net imports.

"Our expansion plans both in India and overseas will help to widen the SPR network. Our strategic vision is to take our SPR capacity to a level much higher than what it is today," Jain said.

India aims to triple its strategic petroleum reserve capacity over the next decade, lifting the SPR capacity from less than 5.5 million mt currently to more than 15 million mt in the next 10 years, Jain said.

Next phase of expansion

India's vulnerability is increasingly evident, particularly in light of the disruptions in the Red Sea and escalating tensions in the Middle East. Any unforeseen incident along these crucial supply routes could significantly threaten the nation's energy security.

This scenario highlights the urgent need for strategic initiatives and investments to bolster India's energy resilience and reduce risks linked to external dependencies, according to analysts at Commodity Insights.

In its first phase, India set up SPRs at three locations with a combined capacity of 5.33 million mt: 1.33 million mt at Visakhapatnam, 1.5 million mt at Mangalore and 2.5 million mt at Padur in Karnataka.

In the second phase, India is looking to augment storage capacity further by creating an additional 6.5 million mt of SPRs at two locations: 4 million mt at Chandikhol in the eastern state of Odisha and another 2.5 million mt at Padur. They will be set up on a public-private partnership model -- called design, build, finance, operate and transfer, or DBFOT.

ISPRL has invited bids from foreign and domestic companies for the second phase of the project at Padur. For the construction part of the project, the Indian government would consider providing subsidies of up to 60% of the construction cost, Jain said, adding that the land acquisition at Padur for the second phase is nearing completion.

"We have already floated the tender for Padur, and we have extended the date for inviting expressions of interest until Feb. 28," Jain said.

"As far as the project at Chandikhol is concerned, the state government in Odisha has given us the green signal to go ahead with the project at the place we had selected initially, which is good progress," Jain said.

Flexible policy

The Indian government recently undertook a series of policy reforms under which 50% of the oil in SPRs would be kept for strategic use, while 30% of the capacity has been permitted to be rented out. The remaining 20% would be used for trading.

The decision to allocate cavern space for renting and using part of the volume for trading would give ISPRL flexibility to sell crude to domestic refiners while importing and refilling reserves when international prices are low.

The government would still retain the first right to use the entire volume of the caverns in case of an emergency, Jain said.

Abu Dhabi National Oil Co. is currently the only overseas company that stores oil at India's caverns. It holds about 5.86 million barrels at the Mangalore facility.

During the COVID-19 pandemic, ADNOC urged the Indian government to allow it to export some volumes from the caverns. As a result, India's petroleum ministry gave permission to ADNOC, which now is the only overseas producer with oil stored in the caverns in India, to re-export the crude to other countries.

In the budget for 2025-26 (April-March), India proposed to spend around $646 million to fill its strategic oil reserves. "This is a great development," Jain said, without giving details.

"We are also looking at exploring the feasibility of strategic gas reserves in Rajasthan as part of our vision for future expansion plans," he added.