-NEW DELHI (XFN-ASIA) – India will start building its first strategic crude oil storage facility in January at Vizag in the southern state of Andhra Pradesh, a senior government official was quoted by the Wall Street Journal Asian edition as saying.

The official was quoted as saying in an interview that the Vizag facility ‘will have a capacity to store 1 mln tons of crude oil, and it will be ready in January 2010.’

This volume is equivalent to 7.33 mln barrels, the report said.

Two other crude storage facilities will also be built, the official said. One, with a capacity of 2.5 mln tons, will be built at Padru in Karnataka state, while a facility with a capacity of 1.5 mln tons will be built at Mangalore, also in Karnataka.

The cost of building the strategic crude-oil reserves, including the cost of buying 5.0 mln metric tons of crude, will be 112.7 bln rupees, the report said, quoting government estimates.

India’s refineries currently have a crude storage capacity of 5.7 mln tons, enough to meet domestic demand for oil products for about 19 days.

The plan to establish crude reserves stems from India’s heavy reliance on the global market for crude oil supplies. The country imports close to 76 pct of its crude oil, with annual consumption of petroleum products estimated at about 112 mln tons, the paper said.

India’s decision to build an oil reserve is the latest indication from Asia’s top importers that low oil prices may be gone for good, industry analysts were quoted as saying.

In fact, the decision will likely usher in a sustained period of price support, given plans by other leading consumer nations in Asia to stock up on oil or add to reserves, they said.

Regional powerhouse China plans to set aside as much as 14 mln tons — nearly 30 days of its national consumption, the report added.