From UPSC perspective, the following things are important :
Prelims level : Strategic Petroleum Reserves Programme
Mains level : Oil prices volatility and its impact on India
Under Phase II of the petroleum reserve program, the Government has approved two additional commercial-cum-strategic facilities at Chandikhol (Odisha) and Padur (TN) on Public-Private Partnership (PPP) model.
Strategic Petroleum Reserves Programme
- To ensure energy security, the govt had decided to set up 5 million metric tons (MMT) of strategic crude oil storage at three locations namely, Visakhapatnam, Mangalore, and Padur (near Udupi).
- These strategic storages would be in addition to the existing storage of crude oil and petroleum products with the oil companies and would serve as a cushion during any supply disruptions.
- The petroleum reserves established are strategic, and the crude oil stored in these reserves will be used during an oil shortage event, as and when declared so by the Government of India.
- The construction of the Strategic Crude Oil Storage facilities is being managed by Indian Strategic Petroleum Reserves Limited (ISPRL), a Special Purpose Vehicle.
Why need SPR?
- The Gulf War in 1990 caused a sharp rise in oil prices and a massive increase to India’s imports.
- During the subsequent 1991 Indian economic crisis, foreign exchange reserves could barely finance three weeks’ worth of imports while the government came close to defaulting on its financial obligations.
- India was able to resolve the crisis through policies that liberalized the economy. However, India continued to be impacted by the volatility of oil prices.
- In 1998, the AB Vajpayee administration proposed building petroleum reserves as a long-term solution to managing the oil market.
- Three storage facilities were built in underground locations in Mangalore, Visakhapatnam and Padur.
Construction of ISPR
- The crude oil storages are constructed in underground rock caverns and are located on the East and West coasts 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 the safest means of storing hydrocarbons.