UAE's Adnoc to store oil in India, give it two-thirds free

Two-thirds of the crude oil India plans to store in its strategic oil storage will come free as the UAE national oil company Abu Dhabi National Oil Company (Adnoc) has agreed to store crude oil in India's maiden strategic storage facility and give two-third of the oil to it for free.

India is building underground storage facilities at Visakhapatnam in Andhra Pradesh, and Mangalore and Padur in Karnataka, which together could hold about 5.33 million tonnes of crude oil to ward off an oil shock due either to supply disruptions and price spikes.

But, with India 79 per cent dependent on oil imports, most of the oil to be stored will have to come from oil producing countries.
 
Adnoc, on the other hand is looking for a safer and closer storage facility and is keen on taking half of the 1.5 million tonne Mangalore storage facility, minister of petroleum and natural gas Dharmendra Pradhan said.

Besides Adnoc, Kuwait Petroleum Corp (KPC) is also reported to have evinced interest in hiring a part of the maiden strategic storage.

India is now looking at building four more strategic crude oil facilities at Bikaner in Rajasthan, Rajkot in Gujarat, Padur in Karnataka and Chandikhole in Jajpur district of Odisha.

The UAE oil company wants to stock oil when prices are low and sell it when rates rise.

Pradhan made the announcement after a meeting with the visiting UAE minister for energy Suhail Mohammed Al Mazrouei in the capital today.

Adnoc will store 0.75 million tonnes or 6 million barrels of oil in one compartment of the 1.5 million tone Mangalore facility. This will be a warehousing deal, which allows the company to trade oil from the warehouse. But India will be free to use two thirds of the 0.5 million tones, ie, 0.33 million tones or 4 million barrels, in emergencies.

The 1.5 million tonne Mangalore storage  and the 1.33 million tonne Visakhapatnam storage together with the 2.5 million tonne Padur stockpile could together hold 5.33 million tonnes or around 42 million barrels  of crude oil, which will be enough to meet nation's oil requirement of about 10 days.
 
Padhan, however, said some issues like tax on the oil stored are yet to be sorted out as Congress-ruled Karnataka won't let go the VAT on the imported crude.

"This will be beginning of our strategic ties," Pradhan said, adding that Prime Minister Narendra Modi's visit to UAE in August last year, the first by an Indian Prime Minister in 38 years, laid the foundation for closer cooperation.

UAE had then committed to invest $75 billion in India, and Pradhan today showcased to Mazrouei opportunities for that investment.

"We have offered them refinery projects, petrochemical plans, pipelines and LNG terminals for investment," he said.

On offer was 26-per cent stake for $700 million in ONGC's about-to-be-commissioned petrochemical project at Dahej in Gujarat and 24-per cent equity for $200 million in expansion being planned by BPCL of its subsidiary Bina refinery in Madhya Pradesh from 6 million tonnes to 7.5 million tonnes.

UAE has also been offered up to 40 per cent stake in HPCL's proposed petrochemicals plane in Andhra coast worth around $850 million, he said, adding that the Gulf nation can also invest in the Jagdishpur-Haldia and Paradip-Surat gas pipelines.