The South Asian country plans to import about 1.25 million tons (9.2 million barrels) of oil to fill empty reserves, said people familiar with the matter, who asked to remain anonymous because the information is not public.
The grades and the time are still being discussed, said one of the respondents. It is unclear whether India, which has become a major buyer of Russian crude since invading Ukraine, will choose to buy cargoes from the OPEC+ producer or its traditional Middle East suppliers.
The US and India plan to increase reserves — as a back-up for contingencies such as acute global outages or price spikes — as reference prices are near their lowest levels in more than a year. Brent is around 45% off its 2022 peak as demand worries plague the market.
A spokesman for the Oil Department did not immediately respond to phone calls and text messages asking for comment.
The South Asian country plans to fill about a quarter of its reserves, which are spread across two sites at the Visakhapatnam facility on the east coast and Mangalore on the west coast. India has strategic storage facilities at three locations with a capacity of approximately 5.33 million tons. The capacity is not large considering that India imported 232.4 million tons of crude oil in the year ended March 31.
India allocated 50 billion rupees ($606 million) in its budget for strategic stockpile replenishment earlier this year. The International Energy Agency said in February the funds could cover the purchase of about 10 million barrels of Russian crude or about 7 million barrels of unsanctioned oil.
Most recently, the company stockpiled its strategic stockpiles in 2020 after the oil price plummeted due to the Covid lockdowns, buying crude oil at an average price of $19 per barrel.
The Asian country launched a plan early last year that would allow local and foreign companies to lease space for around 8 million barrels at two underground locations. However, India’s refiners are unwilling to pay the rent for the premises demanded by the government, said one of the respondents.
Discussions on renting storage space were also held with Saudi Aramco and Abu Dhabi National Oil Co. but made no progress, according to parliamentary documents. Adnoc signed an agreement in 2017 to lease some space sufficient for nearly 6 million barrels.
India is aiming to increase its reserve capacity by 6.5 million tonnes, but progress has been slow due to land acquisition issues. The feasibility of storage caverns near Bharat Petroleum Corp’s Bina Refinery and the use of salt caverns in Bikaner near Hindustan Petroleum Corp.’s Barmer plant. is also checked.
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