New Delhi: India on Monday signed an initial pact to lease out a part of its underground strategic oil storage at Padur in Karnataka to Abu Dhabi National Oil Co (ADNOC) for storing crude oil, the second such deal with the UAE firm this year, Oil Minister Dharmendra Pradhan said.
India has built 5.33 million tonne (MT) of emergency storage -- enough to meet its oil needs for 9.5 days, in underground rock caverns in Mangalore and Padur in Karnataka and Visakhapatnam in Andhra Pradesh. It has allowed foreign oil companies to store oil in the storages on condition that the stockpile can be used by New Delhi in case of an emergency.
ADNOC had in February this year signed a pact to fill half of the 1.5 MT strategic oil storage at Mangalore. On Monday it signed a similar pact for Padur.
"ISPRL (Strategic Petroleum Reserve entity of India) and ADNOC of UAE signed MoU to explore possibilities of ADNOC investment in filling up of crude oil in Padur strategic reserve in Karnataka," Pradhan, who is in Abu Dhabi for the agreement signing, tweeted.
The agreement allows ADNOC to sell or trade crude oil storage in the storages to local refiners but give the Indian government the first right to the oil in case of an emergency.
"ADNOC signs MoU with the Indian Strategic Petroleum Reserves Ltd (ISPRL), to explore storage of crude oil at Padur underground facility in Karnataka, which has a 2.5 MT (about 17 million barrels) capacity," the UEA firm tweeted.
Official sources said the pact followed the Cabinet's last week decision of approving filling up of the underground strategic oil storage at Padur by foreign oil companies.
While a third of the Visakhapatnam facility has been hired by Hindustan Petroleum Corp Ltd (HPCL), ADNOC and the Government of India filled the storage at Mangalore. The 2.5 MT Padur facility remained empty.
Allowing foreign companies to use the storage for storing crude oil helps the government save on the cost of filling the reserves. Law and IT Minister Ravi Shankar Prasad had after the Cabinet meeting on November 8 said that allowing foreign companies to store oil in Padur would help the government save Rs 10,000 crore.
An Oil Ministry statement said Monday's MoU with ISPRL "follows the arrival, on November 4, of the final shipment of the initial delivery of ADNOC crude to be stored in another ISPRL underground facility at Mangalore."
With this ADNOC has filled its share of oil in the Mangalore carven.
"ADNOC is the only foreign oil and gas company, so far, to invest by way of crude oil in India's strategic petroleum reserves programme," the statement said.
The MoU was signed by Abdulla Salem Al Dhaheri, Director of Marketing, Sales and Trading at ADNOC; and HPS Ahuja, CEO & MD ISPRL, on the sidelines of the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC).
ADNOC CEO Sultan al-Jabel said: "India is an important oil market and this agreement underscores the strategic energy partnership between the UAE and India that leverages the UAE and ADNOC's expertise and oil resources."
"It is our firm hope that we will be able to convert this framework agreement into a new mutually beneficial partnership that will create opportunities for ADNOC to increase deliveries of high quality crude oil to India's expanding energy market and helping India meet its growing energy demand and safeguard its energy security," he said.
ADNOC in another tweet quoted Pradhan as saying that "the MoU with ADNOC will allow ISPRL to explore opportunities related to the possible storage of ADNOC crude at Padur, which would help to significantly strengthen the country's strategic petroleum reserves."
The ISPRL has constructed and commissioned underground rock caverns for storage of total 5.33 MT(around 39 million barrels) of crude oil at three locations -- Vishakhapatnam (1.33 MT), Mangalore (1.5 MT) and Padur (2.5 MT).
Padur storage has four compartments of 0.625 MT each and ADNOC may use half of the storage capacity for stocking its oil.