The terminal at Visakhapatnam on the east coast will have a capacity of 1.33 million metric tons, Oil Secretary S. Sundareshan said in an interview at his office in New Delhi. The nation’s storage capacity will rise to 5 million tons when two more terminals are built at Mangalore on the west coast by 2012, he said yesterday. That’s equal to two weeks of current imports.
India, which imports 77 percent of its oil needs, is emulating programs in the U.S., Japan and China to build an emergency stockpile. Crude declined from a record $147.27 a barrel in July 2008 as demand fell following the worst global recession since the World War II. Prices have gained 86 percent in the past year as economies recover.
“Given the volatility in crude prices, the storage terminals are intended as a buffer for the economy,” said Dharmakirti Joshi, an economist at Mumbai-based Crisil Ltd., the local unit of Standard & Poor’s. “This should ideally have been done when oil prices were at their lows.”
Crude futures in New York may reach $85 a barrel in 2011, according to the median estimate of 26 analysts compiled by Bloomberg. Prices may hit $95 a barrel in 2012, according to 17 analysts. Crude oil for March delivery on the New York Mercantile Exchange fell to $73.48 at 9:53 a.m. Singapore time. Futures have averaged around $77 this year.
India imported 109.32 million tons of oil in the nine months ended Dec. 31, a 12 percent increase from a year earlier, according to the oil ministry’s Petroleum Planning and Analysis Cell.
Spending to build three storage terminals was estimated at 24 billion rupees ($514 million) in 2005, excluding the cost of filling the underground caverns with crude, according to the Web site of Indian Strategic Petroleum Reserves Ltd., the government company overseeing the construction.
“The storages will be filled at government cost and that may not be the most economical way of doing it,” Sundareshan said. “We are looking at various options. Somebody may want to use it as a storage hub.”
Overseas companies may be allowed to lease capacity at the oil terminals in exchange for supplies, he said. All three facilities are located near refineries.
Indian refineries are expanding capacity to meet demand in the world’s second-fastest growing major economy. Mangalore Refinery and Petrochemicals Ltd. plans to process 15 million tons of crude a year by 2012 from the current 9.69 million tons.
Indian Oil Corp., the nation’s second-biggest refiner, is building a 15 million ton-a-year project in the eastern state of Orissa and Bharat Petroleum Corp. and Oman Oil Co. are jointly setting up a 6 million ton-a-year plant in Madhya Pradesh state.
India has approved an emergency oil storage capacity of 15 million tons to be built in phases, Oil Minister Murli Deora told parliament in April 2008.
