India inks deal with UAE for strategic oil reserves storgae
India has signed a deal with United Arab Emirates (UAE), fifth biggest oil supplier as part of its quest for energy security and strategic reserve system.
The deal allows UAE’s Abu Dhabi National Oil Co. (ADNOC) to fill half (about 6 million barrels of oil) of an underground crude oil storage facility at Mangaluru, Karnataka.
India has already filled the other half of the Mangaluru storage in Karnataka state with six million barrels of Iranian oil. It also has filled a Vizag storage site in southern Andhra Pradesh with 7.55 million barrels of Iraqi oil and has invited bids from suppliers to fill an 18.3 million-barrel facility at Padur in Karnataka.
Background
As one of the fastest growing economies and world’s third-biggest oil consumer, India is building emergency storage in underground caverns to hold 36.87 million barrels of crude, or about 10 days of its average daily oil demand. This move aims to hedge against energy security risks as it imports most of its oil needs. In 2014, India already had started talks to lease part of its strategic storage to ADNOC. Under those discussions, India was to have first rights to the stored crude in case of an emergency, while ADNOC will e able to move cargoes to meet any shift in demand.
Significance
- Strategic petroleum reserves have become indispensable to safeguard the economy and to help maintain national security in the event of an energy crisis.
- These crude oil reserves (or stockpiles) can be held by the government of a particular country, as well as by private industry.
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Month: Current Affairs - January, 2017