Industry and Energy

Home page

Industry and Energy

India to store crude oil in United States

20 July 2020 12:28 (UTC +04:00)

India plans to store its crude oil in US strategic petroleum reserves for use not just during emergencies but also for trading to capture any price advantage, officials said, APA reports citing Decceanhearld.

India and the US on July 17 signed a preliminary agreement for cooperating on emergency crude oil reserves, including the possibility of India storing oil in the US emergency stockpile. "It is a good concept but comes with a lot of riders," a senior government official said.

For one, India will have to pay a rental for hiring the storages in the US. This rental will be on top of the international price for oil.

"The alternative is to build our own strategic reserves which will involve huge capital cost and will take a few years to construct.

So the rental is a small fee to pay to get immediate access to a strategic reserve," the official said. Strategic petroleum reserves (SPR) in the US are built and maintained by private companies.

The oil stored in the US reserves can be used for the nation's own needs or can be traded to capture price advantage, he said adding these two scenarios work when oil prices rise after India has bought and stored oil in US reserves.

"But if the prices fall, you will book losses," he said.

Also, if the sea route is obstructed, having a stockpile in the US will make no difference to India's energy security as the country will not be able to access them, he said. "It takes a month to ship oil from the US."