New Delhi: India has begun to sell oil from the strategic Petroleum Reserve (SPR) to distillers managed by the state for implementing new policies to commercialize storage by renting out space, three sources are familiar with the problem.
Reuters reported last month that India has changed its policy to allow the strategic Indian Petroleum Reserves Ltd (ISPRL), which manages its oil inventory, to rent 30% of the total capacity of 37 million barrels to Indian and foreign companies.
Last year, ISPRL meets the SPR with cheap oil and needs to sell some of it to make a way for leasing.
So far Abu Dhabi National Oil Co (ADNOC) has rented one of the two same size rooms at 11 million barrels of Mangalore SPR.
The ISPRL gradually released 8 million barrels from the SPR to make space to also rent a Mangalore Refinery managed by the Government and Petrochemical Ltd and Hindustan Petroleum Corp., said the source, asked not to be named.
After the crash of oil prices last year, caused by the collapse of demand triggered by Pandemic Covid-19, the price has gathered strongly.
Refiner faces a higher cost for futures inventories from the Middle East after Saudi Aramco climbs the official selling price of September to the highest since February 2020, reflects tighter acid crude oil equipment after cutting production by the organization of petroleum exporting countries and allies (OPEC + ).
However, both state distillers, will buy oil from ISPRL with discounts for the official selling price set by producer countries.
India, the third largest oil importer in the world and consumers who import more than 80% of their oil needs, are reflecting the models adopted by countries such as Japan and South Korea in the commercialization of the SPR.
The aim is to increase personal participation in two new facilities planned.
Although the Indian oil release scale of the SPR is relatively small, it can reduce the import of UAE oil, one source said.
So far, ISPRL has begun selling around 5.5 million barrels of the upper zakum oil from the UAE, which is stored in the mangalore cave, to the MRPL.
Already tried to empty the room in February, because MRPL wants to save different crude oil classes in it, said two sources.
MrPL will rent 300,000 tons of space in Mangalore, while HPCL will take a similar sized room at around 7.5 million barrels of Vizag SP, which contains Iraq’s Basra oil, they said.
These sources say HPCL wants Iraqi oil, so the full volume does not need to be sold.
At the next stage, ISPRL will rent some space in storage to 2.5 million tons (more than 18 million barrels), which holds a mixture of Arab oil, they said.
Under policy change, the federal government will also allow ISPRL to exchanging oil equivalent to 20% of the total capacity of SPR in the Indian market.
ISPRL has not decided when to sell oil share in the market, said the source.
ISPRL, HPCL and MRPL have no comments directly when contacted by Reuters.