Product Verticals > The Indian Crude Oil Strategic Reserve Project
The Indian Crude Oil Strategic Reserve Project
This project which is currently under the consideration of the Ministry of Petroleum & Natural Gas , Government of India , involves the creation of a large crude oil strategic storage facility on the Indian west coast. The unique feature of this project is that while it provides market access insurance to Persian Gulf oil exporting countries, it simultaneously gives the government of India access to a large strategic crude oil reserve at very low capital and inventory carrying cost. The design / structuring of this project therefore solves the critical problem of financing the construction of the storage facilities and the massive crude oil inventory that will be held in the reserve.
Conceptually , the plan is to provide a means for countries such as Saudi Arabia , Kuwait, Iran and the UAE to store their oil outside the Persian Gulf ( In India ) , thereby allowing them to supply the global market even when the Straits of Hormuz are blocked due to war / conflict in the region.
The project will thereby remove the risk premium in the oil price ( currently at $ 12 - $ 15 / bbl ) as the storage at 600 million barrels is large enough to cap global oil price at $ 60 / bbl. Since most energy alternatives become viable at an oil price > $ 60 / Bbl , the project will help OPEC and GCC states to retain their long term global market share in the energy business . It is therefore in the strategic interests of GCC states to take part in this project.
While the reserve itself will come at almost no cost, the pipeline infrastructure will have to be financed wholly by Indian companies through a tax regime specifically designed for this project.
The paper was published in Febí 08 by the Indian Defence Review for the international launch of the magazine . It is now on its way to becoming a government of India sponsored Public Private Partnership ( PPP ) project as the IDR is the unofficial policy journal of the Indian Ministry of defence.
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