IOC to build oil storage tanks

Jun 21, 2004 02:00 AM

Indian Oil Corp. (IOC) has formed an SPV (special purpose vehicle) to set up strategic oil storage facilities that would attempt to improve India’s oil security. The new SPV is a 100 % IOC subsidiary, with the IOC’s director of business development N.K. Nayyar as its chairman. The company will maintain crude oil stocks on behalf of the oil industry.
Engineers India Ltd. (EIL) is conducting a detailed feasibility report on reserves, which are expected to be built up over three years. The financial structure for the storages, to be built in Rajasthan, Mangalore and Vizag, has not yet been finalised. According to revised estimates, the capital cost of building the storage facilities will be about Rs 1,650 crore, while the crude inventory will be worth roughly Rs 5,000 crore.

The storage, equivalent to 15 days of oil consumption, will boost India’s existing 7.3 mm tons of crude tankage and 6.8 tons product tankage capacity. Currently, the total crude oil storage capacity can meet the country’s oil requirement for 19 days. India has an import dependency of about 69 % for crude oil of which roughly 67 % comes from the volatile Arabian Gulf.
According to a study by the ministry of petroleum, there have been 19 supply shock events globally since 1951. These resulted in supply shortfalls and tight market conditions. Among the countries that have strategic storages are the US, Japan, Italy, Germany, France, Spain, Belgium, Turkey, Poland, The Netherlands and Korea.

The International Energy Agency (IEA) has a 90-day storage norm for its members. Among others building crude reserves are China, which has announced plans to build storage equivalent to 20 days of demand. Singapore has a fuel oil stockpile for electricity generation and Thailand has crude stock for 22 days. Underground storages are usually either rock caverns, salt caverns or concrete tanks, while the above ground storage is in steel tanks.
During the administered price regime, the government controlled stocks and oil companies werecompensated for building tankages. Post-deregulation, companies are expected to hold stock on economic and commercial considerations.

Source: Neftegaz.RU
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