Mangaluru oil storage likely to be leased to Shell

 

New Delhi, 04 Sep 2015: Sources have confirmed that talks are on for leasing India’s oil caverns at Mangaluru to Royal Dutch which would in turn provide increased storage to a market where oil demand has been increasing.

 

The decision on the Mangaluru site which has a total capacity of about 11 million barrels of oil will depend on Shell gaining relief from local sales tax, sources said. However, the commissioning has been pushed back by two months to December.

 

 

India stands in fourth position as a crude consumer and is one of those economies which are still witnessing growth. India is thus building up Strategic Petroleum Reserves (SPR) facilities at 3 locations in the southern part of the country and will hold about 36.87 million barrels of oil which would be sufficient to cover about two weeks of its needs.

 

As per the proposal, Shell will make use of Mangaluru for commercial storage, but in cases of emergencies supply would have to be made to state-run refiners, thus keeping the site filled at specified levels.

 

Officials said that Shell would mostly store oil grades used by a nearby 3,00,000 barrels per day (bpd) refinery owned by the state’s Mangalore Refineries and Petrochemical (MRPL).

 

The storage would be commercial for Shell, but emergency cases will require supplies to be made available to MRPL or any state-run refiner.

 

Though the origin of the oil has yet to be decided, sources say it might come from Africa since producers are on the lookout for new buyers in the wake of the US shale oil boom.

 

At present, MRPL buys an average of 2 million barrel of sweet African grades every month from spot markets.

 

If the deal was reached, the government is expected to resolve the local tax issue.

 

Officials said that the starting of the work was delayed and would be postponed to December due to a delay in pipeline connections between the port and the storage units. Mangaluru requires about three kilometre (1.9 miles) of pipelines. Padur, has 4 divisions of about 4.6 million barrels each and required 34 kilometre (21 miles) of pipeline.

 

India depends heavily upon fuel imports, but produces less than a third of its overall demand.