Can India build a strategic fuel system?, Pg10

Key Highlights:

• India's energy security is vulnerable due to limited strategic storage for crude oil, LNG, and LPG.
• A proposed decade-long strategic-fuel programme aims to add 28 MT of crude oil, 9 MT of LNG, and 4 MT of LPG storage.
• This expansion targets nearly two months of crude and LNG demand cover and about six weeks of LPG demand.
• India currently operates underground Strategic Petroleum Reserve for crude and two LPG caverns, but lacks natural gas storage.
• The proposed program, estimated at $42 billion, combines infrastructure CAPEX with the cost of purchasing and maintaining fuel inventories.

Fuel Storage.jpg

Detailed Insights:

• Phase I of the Strategic Petroleum Reserve provides 5.33 MT of underground crude capacity, with 63-64% utilization across Visakhapatnam, Mangaluru, and Padur.
• Phase II crude storage projects (6.5 MT) at Chandikhol and Padur face delays due to land acquisition and finalization of Public-Private Partnership (PPP) frameworks.
• India's current underground LPG capacity is 0.14 MT in Visakhapatnam and Mangaluru, making the 4 MT proposal a significant increase.
• Natural gas security relies on domestic production, LNG imports, terminals, commercial inventories, and pipelines, as there is no operational underground storage.
• The proposed 9 MT LNG storage aims to buffer India against prolonged import disruptions, representing about 56 days of imports.
• LNG is stored cryogenically at -162°C, while underground natural gas storage involves regasifying LNG and injecting it into depleted reservoirs or caverns.
• The Ministry of Petroleum and Natural Gas proposes LNG import terminals maintain 10% extra storage capacity for government use during crises.
• India is diversifying import sources and shipping capabilities, with State-run oil refiners and Shipping Corporation of India planning a $1.5-$2 billion joint venture for 59 ships.
• Indian Oil is expanding sourcing and exploring direct stakes in Very Large Gas Carriers to secure supply chains.
• The Petroleum and Natural Gas Regulatory Board (PNGRB) has authorized 1,800 km of new LPG pipelines to improve deliverability and reduce road dependence.
• An effective strategic reserve requires an integrated framework encompassing reserves, shipping, pipelines, and robust governance for emergency execution.

Key Concepts Involved:

• Strategic Petroleum Reserve (SPR): Government-maintained emergency stockpiles of crude oil to mitigate supply disruptions.
• Liquefied Natural Gas (LNG): Natural gas converted to liquid form for easier storage and transport at cryogenic temperatures.
• Public-Private Partnership (PPP): A funding model for public infrastructure projects involving collaboration between government and private sector.
• Energy Security: Uninterrupted availability of energy sources at an affordable price.