India changes SPR rules for foreign firms

India has changed to the rules for foreign companies storing oil in its strategic petroleum reserves (SPR), a move that could attract investment for necessary SPR expansion.

The amendments approved by the cabinet today will initially benefit UAE's state-owned Adnoc, which has crude in one cavern at the Mangalore SPR. The modifications include allowing an increase in commercial quantity for Adnoc, to 50pc from 35pc, allowing the re-export of crude to third countries with the first right of refusal to Indian companies, and allowing movement of crude to or from SPR facilities. India has not previously allowed crude exports.

India's 39mn bl of SPR capacity comprises 9.7mn bl at Vishakhapatnam (Vizag) on the east coast, and 11mn bl at Mangalore and 18.3mn bl at Padur on the west coast. All are underground rock caverns. India plans to add 48mn bl at Padur and at Chandikhole on the east coast, at a cost of $1.5bn that will require external investment. Saudi state-controlled Aramco has expressed interest in participating in India's second phase of SPR construction.

The government has released 38.7bn rupees ($527mn) to the oil ministry as compensation to state-owned refiners for filing caverns in all three SPRs in April and May. Then, India purchased 16.7mn bl of crude at low rates, the ministry said. India allocated Rs6.9bn in the budget for the April 2020 to March 2021 fiscal year to fill its SPRs.

With domestic storage capacity reached, New Delhi is in talks with the US about storing crude in the US SPR.

By S Dinakar and Sarah Raffoul