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NEW DELHI: India signed an initial pact to lease out a part of its underground strategic oil storage at Padur in Karnataka to Abu Dhabi National Oil Co (ADNOC) for storing crude oil. Padur storage has four compartments of 0.625 MMT (million metric tonnes) each and ADNOC may use half of the storage capacity for stocking its oil.

Allowing foreign companies to use the storage for storing crude oil helps the government save on the cost of filling the reserves.

"ADNOC is the only foreign oil and gas company, so far, to invest by way of crude oil in India's strategic petroleum reserves programme," an oil ministry statement said.

Caves of oil: They are called strategic petroleum reserves (SPRs). India has three underground storage facilities (built at the cost of Rs 4,100 crore) that can store 5.33 million tonnes of crude oil. The one in Visakhapatnam is already filled with 1.33 MMT of oil, deals to fill another 1.50 MMT capacity in Mangalore have been signed, and the third (with 2.5 MMT capacity) in Padur, Karnataka, is built but awaiting oil for storage. India also plans to build an additional 6.5 MMT facilities at Chandikhol in Odisha and Padur.

Caves on rent: India on Monday signed an initial pact to lease out a part of its storage at Padur to ADNOC, the second such deal with the UAE firm this year. It had signed a pact in February to fill half of the storage at Mangalore.

Why? The agreement allows ADNOC to sell or trade crude oil stored in these facilities to local refiners but it gives Indian government the first right to the oil in case of an emergency. Allowing foreign companies to store oil will help Centre save Rs 10,000 crore. The storage facilities are for India’s energy security, and to insulate us from external price and supply shocks. The oil in the three facilities already built can help meet 10 days of crude requirement, and the two planned ones can hold supply of about 12 more days.

What crisis? There was one during the Gulf War in 1990, when our oil reserves were adequate only for three days. Plus, others like US, Japan, China, UK and EU have it too.

