US seeks to rent SPR space to India after similar deal with Australia

Washington — The United States and India signed a memorandum of understanding July 17 that could result in India renting space in the US Strategic Petroleum Reserve for an overseas oil stockpile, after Australia did the same earlier this year.

India has relatively small SPR capacity at home -- 39 million barrels -- considering its ranking as the third-largest oil consumer after China and the US.

The US SPR, held in four caverns on the Gulf Coast, currently has capacity for 714 million barrels.

If the US and India work out a deal for SPR rental, India would be able to buy US crude at low prices and store it until demand rebounds.

US Secretary of Energy Dan Brouillette told reporters July 10 that volumes or other details had not been reached on the potential SPR deal.

"It could ultimately look similar to what we've done with Australia, but there's no predetermined outcome," he said. "But we're excited to begin the conversation with India. We do think it's important for both of our nations."

In April, Australia reached a final deal with the US to create its first emergency oil stockpile and store it in the US SPR caverns.

Australia said it would spend A$94 million (then $59 million) to buy crude at current low prices and store the supply in the SPR for an initial period of 10 years. The plan had been in the works since 2018.

When oil prices crashed in March, the US Department of Energy, or DOE had hoped to buy up to $3 billion in US crudes to fill the government stockpile. Democrats in Congress blocked the plan, so the agency rented out space to private oil companies as their storage options were tightening.

SPR stocks have grown by 21.2 million barrels from April to 656.1 million barrels as of July 10, according to the latest Energy Information Administration data. At current capacity, the stockpile has room for another 57.9 million barrels.

Brouillette made the SPR comments after a virtual ministerial meeting with Indian petroleum and natural gas minister Dharmendra Pradhan.

Export slowdown

Asked about the outlook for US crude exports to India, Brouillette attributed a recent slowdown in the flows to lower global demand as a result of the coronavirus pandemic and government lockdowns.

"What we're seeing today is an increase as the economies begin to open up again," Brouillette said. "We see that not only in the sale of product across the oceans, but we see it in the data that shows traffic increasing here in the United states as well as around the world. We're on an upward trajectory in both countries."

US crude exports to India fell to 144,000 b/d in May,down from 247,000 b/d in April, according to the latest US Census Bureau data.

The flows peaked in April 2019 at 393,000 b/d, but have remained below 300,000 b/d since then.

Beyond the SPR plans, the US and Indian energy ministers discussed a public-private hydrogen task force to scale up technologies to produce hydrogen from renewable energy and fossil fuel sources, and cooperation on sustainable biofuel production and use.

They discussed India's plans to reach renewable energy targets and modernize its power distribution sector.

The US Federal Energy Regulatory Commission and India's Central Electricity Regulatory Commission are working to share best practices for regulating electricity and developing electricity markets.