India is set to import eight million barrels of Iraqi oil to fill its first strategic petroleum reserve (SPR), taking advantage of cheap prices and lending some support to a market suffering from oversupply.
India's oil ministry instructed state refiners Indian Oil Corp and Hindustan Petroleum Corp Ltd to each seek two very large crude carriers (VLCC) of Basra oil for arrival in May-June, totaling eight million barrels. A committee of directors suggested Basra oil, as it suits refineries on India's east coast. This would be a one-off purchase for the SPR as the stocks will be used only in case of supply disruptions. India's finance ministry has provided 24 billion rupees from revised budget estimates for the current fiscal year to fill the first SPR.
The world's fourth biggest oil consumer, India last month built its first underground SPR in Andhra Pradesh with a capacity to hold 9.75 million barrels of oil. A total of three SPRs in the south will hold more than 36 million barrels of oil, enough to cover about 13 days' supply for India in case of a supply disruption or extreme price volatility.
The two other SPRs, at Padur and Mangalore in southern Karnataka state, will have a capacity of 29.3 million barrels and are expected to be ready by October.