Explained | What is Strategic Petroleum Reserve ?

 

In the run-up to the 2022 US midterm elections, the Biden administration is considering using the US Strategic Petroleum Reserve (SPR) to stem rising oil prices.

Such a move would not have a long-term effect on the fall in US oil prices, which hit a seven-year high of $ 85 a barrel.

China and India are expected to do the same after OPEC (Organization of the Petroleum Exporting Countries) production group members Saudi Arabia and Russia refused to supply more oil to global markets.

(What is Strategic Petroleum Reserve ?)

 

 

 

 

Strategic Petroleum Reserves

 

Strategic petroleum reserves are huge reserves of crude oil to meet any crude oil related crisis such as the risk of supply disruption due to natural disasters, war or other disasters.

The concept of dedicated strategic reserves was first introduced in the US in 1973 after the OPEC (Organization of Petroleum Exporting Countries) oil crisis.

According to the International Energy Program (I.E.P.) Agreement, each country of the International Energy Agency (IEA) is responsible for maintaining an emergency oil stock equivalent to at least 90 days of net oil imports.

In case of severe disruption in oil supply, IEA members may decide to market the stock as part of a collective action.

Japan, USA, China have 3 largest strategic petroleum reserves.

 

Role of IEA in National SPR

 

According to the IEA, there are generally three ways to maintain SPR levels to meet the 90-day requirement.

Commercial stock with refiners,

Government and agency shares,

Selection of countries according to balance.

Ensuring stable supply of energy to IEA member countries and promoting free markets to promote economic growth and alleviate energy shortages.

The IEA also suggests measures to help control demand or supply.

This could include voluntary fuel savings, fuel-switching such as adding oil, gas or underground reserves to generate electricity for a rapid increase in output.

 

Strategic Petroleum Reserves in India

 

Construction of Strategic Crude Oil Storage Facility in India is managed by Indian Strategic Petroleum Reserve Limited (ISPRL).

Indian Strategic Petroleum Reserve Limited is a wholly owned subsidiary of the Development Board (OIDB) under the Ministry of Oil Industry, Petroleum and Natural Gas.

Under Phase-I, strategic crude oil reserves are located at Mangalore (Karnataka), Visakhapatnam (Andhra Pradesh) and Padur (Karnataka). It contains a total of 5.33 MMT (million metric tons) of fuel.

The Government of India is planning to set up two more such stores at Chandikhol (Odisha) and Udupi (Karnataka) in the second phase through public-private partnership. This would facilitate an additional 6.5 million tonnes of oil reserves.

A total of 22 days (10 + 12) oil consumption will be provided after the new facilities are started.

Strategic Indian refineries also maintain a 65-day stockpile of crude oil (industrial stock).

Thus, India will be able to meet oil demand for a total of 87 days (22+ through strategic reserves, 65 by Indian refiners) after completion of the second phase of the ‘Strategic Petroleum Reserves’ program.

This would be very close to the International Energy Agency's (IEA) 90-day mandate.

India became an associate member of the International Energy Agency in 2017, and recently the International Energy Agency invited India to become a full-time member.

 

The Need for ‘Strategic Petroleum Reserves’ in India

 

Adequate Capacity Building:

Its current capacity is not enough to cope with any unforeseen event in the international crude oil market.

With a daily oil consumption of about 5 million barrels, 86% of the country is dependent on oil.

 

Energy Security:

India is in dire need of building petroleum reserves to ensure the country's energy security and to avoid financial losses due to volatility in the price of crude oil in the international market.

 

 

IMP Points: 

  

Venezuela has highest oil reserves - 299,953,000,000 (Oil Reserves (barrels) in 2016).

 

India has three strategic petroleum reserves with combined storage capacity of 5.33 million tonnes (about 38 million barrels), sufficient to meet country's crude oil requirements for about 9.5 days.

While the dynamics are being worked out, it also raises a more pertinent question — what reserve is India talking about? The current strategic reserves capacity which India has can manage only nine days of the country's demand.

 

United States is the largest producer of petroleum in the world - 18.60 - Million barrels per day & 20% Share of world total.

 

Saudi Arabia is the 2nd largest producer of petroleum in the world - 10.82 - Million barrels per day & 11% Share of world total.

India imported 8 million tonnes of crude oil from Mexico and one million tonnes from Canada. Kuwait supplied 9.9 million tonnes. Iraq has been India's top supplier for the past few years, staying ahead of Saudi Arabia, which has been producing less than its capacity to meet OPEC supply curb commitments.

Crude oil consumption is expected to grow at a CAGR of 3.60% to 500 million tonnes by 2040 from 221.56 million tonnes in 2017. India's oil demand is projected to rise at the fastest pace in the world to reach 10 million barrels per day by 2030, from 5.05 million barrel per day in 2020.

According to the most recent data, the top five oil-producing nations are the United States, Saudi Arabia, Russia, Canada, and China.

Saudi Aramco Largest Oil and Gas Companies in the World. ($1,979 (US $, billions) - (market cap.)

 

 

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FAQs - You will find the answers to all the questions below in this article.

 

 

How much oil does U.S. have in strategic reserves?

Where is U.S. strategic oil reserve?

Are the U.S. oil reserves full?

Which countries have strategic petroleum reserves?

Does China have oil?

Who are the 5 biggest oil producing nations?

How much oil is stored in the Strategic Petroleum Reserve?

Who is OPEC?

How many barrels of oil does the India use a day?

Which country has largest petroleum storage?

How much Strategic Petroleum Reserve India has?

How many days of strategic oil reserves does India have?

In which city does India's strategic petroleum reserve located?

Which is the largest reserve of petroleum in India?

How much India can store crude oil?

Which state is the largest producer of petroleum in India?

        

 

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