Govt leases Padur oil reserve site to Abu Dhabi company

Padur (Karnataka): Half of Padur strategic oil reserve site in Karnataka will be leased out to Abu Dhabi National Oil Company (ADNOC) for storing crude, according to sources Indian Strategic Petroleum Reserves Ltd (ISPRL) will sign an initial agreement with ADNOC today in the presence of oil minister Dharmendra Pradhan, sources with direct knowledge of the matter said.

The agreement will allow ADNOC to sell oil to local refiners but give the government of India the first right to the oil in the case of an emergency. This deal will be the second one with ADNOC, which is already storing oil at the Mangalore strategic storage in Karnataka.

“We will sign a memorandum of understanding with ADNOC to fill two compartments in Padur along the same lines as the Mangalore cavern,” said one source.

In return for allowing ADNOC to store its crude at a strategic reserve site, India does not have to pay for the imports, only accessing the oil in emergencies.

According to sources in ADNOC, the company is already working with India`s ISPRL in Mangalore and hoping to build on this working relationship for future projects. India`s cabinet last week approved a plan allowing foreign oil companies to store oil in Padur.

The Padur site is located about 5 km (3 miles) from the southwest coast and 40 km from Mangalore Refinery and Petrochemicals Ltd`s refinery. India relies heavily on oil imports, which account for about 80 per cent of its total demand.

To protect itself from potential supply disruptions, it has built emergency storage in underground caverns at three locations, with a capacity to hold 36.87 million barrels of crude, or about 9.5 days of its average daily demand.