India plans to store oil in US
Stockpiling crude oil in American strategic reserves will allow India to shield itself from any supply disruptions arising out of geopolitical reasons, and buy and store large quantity of crude when international oil prices plunge.
India is planning to store oil in the US. Both the countries have signed an agreement to develop a strategic petroleum reserve and are in an advanced stage of discussion to store crude oil in America to increase India's stockpile.
"We have signed a memorandum of understanding (MoU) to begin co-operation on strategic petroleum reserve. We are also in advanced phase of discussing of storing crude oil in US strategic reserve to increase India's strategic oil stockpile," said petroleum and natural gas minister Dharmendra Pradhan, who co-chaired with his American counterpart Energy Secretary Dan Brouillette a virtual US-India Strategic Energy Partnership Ministerial on Friday.
Stockpiling crude oil in American strategic reserves will allow India to shield itself from any supply disruptions arising out of geopolitical reasons, and buy and store a large quantity of crude when international oil prices plunge.
Before the fall in demand due to the COVID-19 pandemic, India consumed 4.5 million barrels of oil per day. The country has strategic underground storage of over 5 million tonne or about 38 million barrels. This is good enough for 9-10 days at the current consumption rate. The stores 714 million barrels of oil, in comparison.
The minister said the memorandum on cooperation in the field of strategic petroleum reserve was based on a proposal from the US after the recent historic drop in oil prices during coronavirus pandemic.
According to reports, India has two options when it comes to storing oil in the US. "First one is to lease caverns with crude stockpile for a specific period of time when prices are low. The second one is to lease capacity and buy oil separately as and when prices drop to a level expected to yield handsome arbitrage later," said a report on Economic Times.
The Indian government actively considered increasing its oil stockpile both inside the country and also overseas in countries like the US, following the historic drop in global crude oil process. Very soon the government will be coming out with a concrete road map and proposal on how it can be unfolded, Pradhan said, adding that this would also include that New Delhi can invest in an American storage facility for India's requirement.
Co-operation in Strategic Petroleum Reserves Programme will further strengthen India's energy security and pave the way for greater US investments and collaborations in India's future SPR programmes, the minister said.
Brouillette said the MoU signed Friday will establish the process of moving forward.
"What we would like to do is to begin the process of sharing with India, the establishment of a strategic reserve. And then accordingly, how does our SPR or Strategic Petroleum Reserve work here?" he said.
"It could ultimately look similar to what we've done with Australia, but there's no predetermined outcome as to where this conversation is going to grow into. We're excited to begin the conversation with India. We do think it's important for both of our nations” said the US Energy Secretary in response to a question.
The State Department said that the MoU on Strategic Petroleum Reserve will ensure a consistent energy supply, protects national security, and promote regional and global stability.
"The US-India Strategic Energy Partnership works to support sustainable energy development, in the 21st century and beyond. We collaborate on renewable energy, smart grids, and unconventional & clean energy sources research for the benefit of our people, now and in the future," South and Central Asia Bureau of the State Department said in a tweet.
Substantive wide-ranging conversation on the different pillars of India-US energy partnership took place during the India US Strategic Energy Partnership Ministerial, said India's Ambassador to the US Taranjit Singh Sandhu.
Minister Pradhan said that during the meeting, he expressed his keenness to work closely with the US government to realise the "full potential of our Strategic Energy Partnership and also invited the US Government and companies to join our initiatives under the Atmanirbhar Mission to further strengthen the strategic energy partnership".
Asserting that India-US relationship has witnessed significant growth and expansion in the last few years, especially through the energy component, the minister said that the Strategic Energy Partnership, was now recognised as a key constituent of this bilateral engagement.
India and the United States have made rapid strides in increasing bilateral hydrocarbon trade during the last three years, he said.
India-US bilateral hydrocarbons trade has touched USD 9.2 billion during 2019-20, a 93 per cent increase when compared to 2017-18 figures.
The Indian government is committed to transform India into a gas-based economy and universalise power supply to all households, he said.
"Teams from both our countries are working to develop high-efficiency technologies with low to zero emissions through carbon capture, utilisation and storage," he said.
Established in April 2018, recognising the strategic importance of energy to the US-India bilateral relationship, the SEP builds upon the two countries longstanding energy partnership and sets the stage for meaningful engagements through robust government-to-government cooperation and industry engagement.