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India's Third Giant Leap
This Could be One of the Biggest Opportunities for Investors
- Home
- Todays Market
- Indian Stock Market News April 16, 2010
India to stash away crude oil Fri, 16 Apr Pre-Open
The US has it. So do Japan and China. India will join their ranks with the completion of a strategic crude oil storage by October, 2011. The under-ground storages are being built at Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka. A 1.3 m tonne facility will be ready in Visakhapatnam by October 2011. The huge underground cavity will be almost 10 storey tall and 3.3 km long. The 1.6 m tonne facility in Mangalore will be ready by late 2012. A 2.5 m tonne facility at close by Padur will also come up by that time. Together they will store about 5.3 m tonnes of crude oil. That is equal to about 14 days of India's oil requirement. It may be noted a 14 day reserve is still quite small compared to US stockpile of about 90 days. The project is likely to cost about Rs 30 bn.
A strategic crude oil storage is protection from supply disruptions. Given our reliance on foreign sources of supply, that makes sense. It can also be used to store oil when prices are low and sell when they rise. Although there was a proposal to build a 45 day storage, given the cost escalation it is likely that we will have to be content with current capacity for now.
Gas producers want more
The debate over pricing the gas produced from the KG basin rages on. About two years ago, an empowered group of ministers set the price for Reliance Industries KG basin gas at US$ 4.2 per British thermal units (mBtu). That was met with a lot of opposition from users who felt the price should have been much lower. Now ONGC, which has 10 gas finds in the region, has joined the fray. It wants prices in the region of US$ 7 per mBtu. It believes current prices are much too low to make investments viable. It maybe noted that imported liquefied natural gas costs about US$ 9 per mBtu.
It doesn't come as a surprise that producers of a commodity want higher prices. Which producer doesn't? But the question remains whether it will go down well with the users. They found US$ 4.2 per mBtu expensive. But Gujarat State Petroleum Corp will begin gas production from its KG basin block before ONGC. So, the next round in the pricing debate will begin soon enough.
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2 Responses to "India to stash away crude oil"
ramakrishnan s
Apr 15, 2010This is a long overdue requirement.Atleast this govt has taken the steps.When BJP was in power they had a golden opportunity to store oil when it was available at rock bottom prices.But as usual we squander our time in quarreling over petty issues.Anyway better late than never
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ganesh
May 3, 2010Ramakrishnan,
"When BJP was in power they had a golden opportunity to store oil when it was available at rock bottom prices"...
When you say above lines, I wonder if you have studied mathematics a little bit..
You cannot store commodities for consumption of years together.. If that is the case, why don't you buy rice, wheat and oil when it is available at CHEAPEST price as of now compared to what it will be in next 10, 20 or 50 years.. May be your grandchildren will enjoy cheaper raise, wheat and oil..
Please study little bit of economics before you write a comment.. Above article is about energy security for short duration in case of terrorist attack or war... not for decades' consumption....