House panel suggests government to construct small caverns for crude storage


New Delhi: Amid strides to achieve energy security, the parliamentary standing committee on petroleum and natural gas has recommended that the government construct small caverns for crude oil storage in the country.

In its latest report submitted in the Parliament on Tuesday, the panel also reiterated its recommendation for expediting land acquisition process for planned storage projects in Chandikhol, Odisha and Padur, Karnataka with storage capacity of 4.0 MMT and 2.5 MMT respectively.

In its earlier report, the committee had stressed on the fact that the strategic petroleum reserves are projects of national importance to enhance energy security and the ministry should take up the issue of land acquisition at the highest level in coordination with the two concerned state governments keeping in view interests of all stakeholders.

In its response, the ministry said that the land acquisition is under process and discussions with the respective state governments for expeditious completion of land acquisition are going on, and that the Cabinet had approved development of commercial-cum-strategic reserves under Phase II at Chandikhol (4MMT) and Padur (2.5 MMT) on public-private partnership (PPP) along with dedicated single point mooring and associated pipelines.

The panel expressed displeasure over the response from the ministry. “The ministry has neither furnished details of steps taken towards solving vexatious issue of land acquisition nor it has furnished any road map or plan to construct strategic storage facilities for crude oil in association with oil marketing companies (OMCs)/refineries,“ it said.

“The committee is not satisfied with the reply of the ministry and reiterate their earlier recommendation for expediting the process for completion of land acquisition in respect of both the projects.”

It further suggested that the ministry should explore the feasibility of building mini or small caverns by engaging OMCs or refineries to operate and maintain strategic petroleum reserve caverns while the ministry should incur the capital cost for construction.

For FY24, the Centre has allocated 508 crore for construction of ISPRL Phase-II projects at Chandikhol (Odisha) and Padur (Karnataka) using underground unlined rock caverns storage technology in PPP mode. ISPRL, or Indian Strategic Petroleum Reserves Limited, is a special purpose vehicle owned by the Oil Industry Development Board (OIDB) under the ministry of petroleum & natural gas.

Besides, a provision of 202.81 crore has been made for payment to ISPRL regarding O&M expenditure for Mangalore (Padur) and Visakhapatnam projects. 

In addition, 1.5-2 MMT capacity is proposed to be constructed adjacent to existing caverns at Mangalore. Feasibility of constructing above ground storage at Mangalore and Padur on the existing land is also being looked into. ISPRL is also examining storages in other locations in the country.

Crude storage capacity has become crucial amidst a highly volatile market scenario, especially because of the Ukraine war.

India is a net importer of crude oil and imports around 85% of its total energy requirement. To ensure energy security, the government of India decided to set up 5 million metric tonne (MMT) of strategic crude oil storages at three locations –  Visakhapatnam, Mangalore and Padur (near Udupi). These strategic storages would be in addition to the existing storages of crude oil and petroleum products with the oil companies, and would serve as a cushion during any supply disruptions.

The construction of the strategic crude oil storage facilities is being managed by ISPRL. Engineers India Limited (EIL) worked as the project management consultant for the three locations.

The crude oil storages are constructed in underground rock caverns and are located on the east and west coast of India. Crude oil from these caverns can be supplied to the Indian refineries either through pipelines or through a combination of pipelines and coastal movement. Underground rock caverns are considered as the safest means of storing hydrocarbons.

Catch all the Industry News, Banking News and Updates on Live Mint.
Download The Mint News App to get Daily Market Updates.


Updated: 08 Aug 2023, 08:33 PM IST

Leave A Reply