Estimated cost of Phase-II strategic oil reserves to be built, Pg10

Key Highlights:

• India plans to develop Phase-II of its Strategic Petroleum Reserve programme at an estimated cost of ₹14,527 crore.
• The project will be implemented under a Public-Private Partnership (PPP) model.
• Government viability gap funding (VGF) will be capped at 60% of the total project cost.
• This expansion aims to add 6.5 million metric tonnes (MMT) of crude oil storage capacity.
• The new facilities will be located in Odisha (4 MMT) and Karnataka (2.5 MMT).

Detailed Insights:

• The Phase-II expansion of the Strategic Petroleum Reserve program was approved in July 2021.
• The Indian Strategic Petroleum Reserves Limited (ISPRL), a public sector company under the Ministry of Petroleum and Natural Gas, is responsible for maintaining the country's strategic petroleum reserves.
• Phase-I of the SPR program established 5.33 MMT of crude oil storage capacity in Visakhapatnam, Mangaluru, and Padur, completed between 2016 and 2018, without government budgetary support.
• Strategic Petroleum Reserves are crucial for India's energy security, providing a buffer against global supply disruptions and price volatility.
• The Public-Private Partnership (PPP) model is being utilized to attract private capital and leverage private sector efficiencies for infrastructure development.
• Viability Gap Funding (VGF) is a government assistance mechanism designed to make economically justified but financially unviable infrastructure projects commercially feasible.

Key Concepts Involved:

• Strategic Petroleum Reserves (SPR): Emergency crude oil stocks maintained by governments to ensure energy security during supply disruptions or crises.
• Public-Private Partnership (PPP): A contractual arrangement between a government entity and a private sector company for the provision of public assets and/or services.
• Viability Gap Funding (VGF): A financial grant provided by the government to support infrastructure projects that are economically justified but lack financial viability for private investors.