UAE looks to expand crude storage at Indian Strategic Petroleum Reserves

The UAE will explore opportunities to expand its crude storage volumes at caverns of Indian Strategic Petroleum Reserves Ltd., in addition to the 5.86 million barrels the Middle Eastern producer current holds at the Mangalore facility, according to an Indian government statement.

The two countries signed an agreement to boost petroleum reserve cooperation during the visit of Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, to India from Sept. 9-10, during which he held discussions with Indian Prime Minister Narendra Modi.

"The memorandum of understanding between ADNOC and ISPRL provides for exploring ADNOC's participation in additional opportunities for crude storage in India and the renewal of their storage and management agreement on mutually acceptable terms and conditions. This MOU builds on ADNOC's existing involvement in crude storage at the Mangalore Cavern of ISPRL since 2018," the statement said.

The UAE's ADNOC is currently the only overseas company that stores oil at India's caverns. During the pandemic, ADNOC urged the Indian government to be allowed exporting some volumes from the caverns. As a result, India's petroleum ministry had given permission to ADNOC, which now is the only overseas producer that has oil stored in the caverns in India, to re-export the crude to other countries.

The policy change to allow re-exports by ADNOC brought India's SPRs in line with major Asian oil storage countries like Japan and South Korea, where international oil producers store oil as well as re-export from the facilities.

ADNOC has the permission but so far it has not used any oil from the caverns for re-export, L R Jain, CEO of ISPRL told S&P Global Commodity Insights recently.

India aims to triple its strategic petroleum reserves capacity over the next decade to enhance energy security, as global geopolitical risks and price fluctuations weigh, according to Jain.

In its first phase, India set up SPRs at three locations with a combined capacity of 5.33 million mt: 1.33 MMt at Visakhapatnam, 1.5 MMt at Mangalore, and 2.5 MMt at Padur in Karnataka.

In the second phase, India is looking to augment storage capacity further by creating an additional 6.5 MMt of SPRs at two locations: 4 MMt at Chandikhol in the eastern state of Odisha and another 2.5 MMt at Padur. They will be set up on a public-private partnership model -- called design, build, finance, operate and transfer, or DBFOT.

Upstream cooperation

In addition to the SPR agreement, India and the UAE has also signed a production concession agreement for Abu Dhabi Onshore Block 1 between Urja Bharat -- a joint venture between Indian Oil Corp. and Bharat Petro resources Ltd -- and ADNOC. It is the first such agreement for any Indian company operating in the UAE.

"The concession entitles Urja Bharat to bring crude oil to India, thus contributing towards the country's energy security," the statement said.

The two leaders expressed satisfaction over the substantial progress achieved in recent years in the India-UAE Comprehensive Strategic Partnership and discussed opportunities to further widen and deepen the partnership in all areas of bilateral cooperation, as per the statement.

"They also underscored the need to explore new areas of untapped potential, particularly in nuclear energy, critical minerals and cutting-edge technologies," it added.