Vizag Features
January 2004

Strategic Oil Reserves in Vizag

 

The central government has cleared a proposal whereby 5 million tonnes of crude oil (enough to meet the entire country's requirement for 15 days) will be stored in 3 underground locations, below the water table, including one at Vizag that will hold 1 million tonnes.

The price for this? Rs. 1640 crore. This might sound like a lot of money but is a small price to pay when the following are considered: 

  • 69% of the country's oil requirements are through imports - from the highly volatile West Asian region

  • India's demand for crude which is 100 mpta at present is likely to rise to 364 mpta by 2005.

  • Most of the worlds oil reserves are controlled by a few multinational (mostly US & British) companies

 Underground Oil Reserves

Both the initial capital investment and the annual operating and inventory costs may be met by levying a "special purpose cess" (estimated to be 20 paisa on every litre) on petroleum products. This will be on the lines of the road cess being levied to finance national highway projects

Storing strategic oil reserves in this manner is not uncommon in other countries. Japan stores 6 months' reserves on the southern tip of the island of Shikoku. India's oil minister Mr. Ram Naik visited the Bryan Mound Strategic Reserves in Texas in June 2003 and later sent a technical team to study the storage system there. India has also consulted the Paris-based International Energy Agency (IEA) on the building of strategic oil stocks.

The choice of Vizag is probably an indication of Vizag's strategic location.


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