INTERVIEW: India open to more SPR crude release if oil remains overheated, says SPR chief

India is open to the release of crude oil either on its own or in coordination with other oil global consumers from strategic reserves if the Russia-Ukraine conflict pushes prices higher, although supply disruption is expected to be minimal, the CEO of Indian Strategic Petroleum Reserves Ltd told S&P Global Platts in an interview.

H.P.S. Ahuja, who is also the managing director of ISPRL, said India's dependence on Russian crude for minimal volumes would mean that supply will not be a concern, although any escalation could have an impact on prices.

Russian crude accounted for about less than 3% of the around 4.3 million b/d crude that India imported from all global suppliers in 2021, according to Platts Analytics.

"I don't really expect a major disruption to supplies for us. But if the government decides we should release more crude from SPRs, we are open to it. We are already doing it as part of a coordinated release with the United States," Ahuja said.

India, China, South Korea and Japan last November said they planned to release oil from their state reserves after the White House announced on Nov. 23 that the US would release 50 million barrels from its SPR in early 2022. India at the time agreed to release 5 million barrels of crude oil from its SPR.

"We have already released some crude as part of the coordinated release. We will keep an eye on the market trend and replenish the reserves when we get an opportunity," Ahuja said.

Well-supplied markets

An Indian government statement over the weekend said that New Delhi is closely monitoring global energy markets as well as potential energy supply disruptions as a fall-out of the evolving geopolitical situation, and stands ready to take appropriate action for ensuring ongoing supplies and to stabilize prices.

"We get the majority of our oil supplies from the Middle East anyway. There is always some crude oil which is arriving from that region. We can always raise the import volumes from the Middle East if needed, because the voyage time is much shorter. But I am hoping this geopolitical development in Europe is a temporary phenomenon, and prices will cool off from current levels," Ahuja said.

"And as far as India is concerned, it's not just the crude oil reserves that are in the caverns. Refiners at any given point of time also hold substantial inventories," he added.

Crude oil futures extended gains in afternoon Asian trade Feb. 28 as as fighting intensified in Ukraine and as the G7 nations and their allies planned to impose stricter sanctions against Russia, including banning Russian banks from using the SWIFT international payment system, which could indirectly impact crude trading.

At 2:55 pm Singapore time (0655 GMT), the ICE April Brent futures contract was up $5.08/b (5.19%) from the previous close at $103.01/b, while the NYMEX April light sweet crude contract was $5.46/b (5.96%) higher at $97.05/b.

Ahuja said that not just coordinated SPR releases with other countries, but India's decision last year to liberalize its oil policy by allowing ISPRL to commercialize up to 50% of its reserves, would help in a situation like this and keep refiners well-supplied with oil.

Out of the 50% of its reserves that ISPRL can commercialize, it can use 20% of the volume for trading and lease out the remaining 30% capacity.

The decision would help to achieve the twin objectives of softening the blow from surging global crude prices, while creating space at the reserves that can be leased out to private and international companies, Ahuja said.

UAE's ADNOC is currently the only overseas company with any capacity in the caverns, holding about 750,000 mt under a government-to-government deal. The recent decision to lease up to 30% of capacity with international investors and oil marketing companies excludes the capacity already given to ADNOC.

Need to expand caverns

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. All three facilities have been commissioned.

In the second phase, India is augmenting storage capacity further by creating an additional 6.5 million mt of SPRs at two locations: 4 million mt at Chandikhol in Odisha and another 2.5 million mt at Padur. It will be set up on a public-private partnership model.

The first phase, which is fully filled now, can cater to almost 9.5 days of India's crude oil requirements. The second phase will add another 12 days of requirements.

"This would help India to move ahead with its expansion plans. It is very important to expand our strategic reserves capacity given what we are now witnessing on the geopolitical front," Ahuja said.