Why Is India Stockpiling Oil?

In a bid to capitalise on historically low oil prices, India as stockpiled 32 million tonnes of crude in its commercial storage facilities. Using tanks, pipelines and ships, Indian refiners are attempting to help the nation minimise imports and take advantage of discounted oil.

“India can meet around 20% of its domestic demand by storing low-priced priced crude oil,” says Dharmendra Pradhan, Minister of Petroleum & Natural Gas. He predicts that fuel demand will quickly recover when lockdown restrictions are lifted, and when it does the nation will be ready with more than 30 million tonnes of oil at its disposal. “Some activity picked up in rural India from April 17 and from today, activity will be stepped up in rest of the country, which will push up demand,” he said.

India acts quickly to fill up commercial storage facilities

As the third biggest oil importer in the world, India currently purchases 80% of its oil from international markets. While production is low, the country has an impressive refining capacity of around 250 million tonnes a year. In the face of the COVID-19 pandemic, which has seen both fuel consumption and oil refining activities drop in response to travel restrictions and industrial shutdowns, India has decided to leverage low oil prices and stock up on supplies.

“As of now the plan is to fill the caverns by (the third week of May), before the arrival monsoon rains,” says managing director of the Indian Strategic Petroleum Reserves Ltd (ISPRL), H.P.S. Ahuja. “We are buying oil from state refiners,” he confirmed. “We are taking advantage of low oil prices.”

A lifeline for Indian oil companies

As well as helping the nation reduce its reliance on imports, Pradhan says filling up commercial storage facilities is helping struggling India-based oil companies to sidestep penalties for offloading delays. Instead, they’re sending surplus oil to storage and continuing to accept planned cargo deliveries without financial penalties. Currently, Pradhan says companies such as Indian Oil Corp, Bharat Petroleum, Hindustan Petroleum and Mangalore Refinery and Petrochemicals Ltd are storing 25 million tonnes in pipelines and 7 million tonnes in ships.

Want to know more about how the oil industry is responding to the COVID-19 pandemic? With commentary from experts at Koehler Instrument Company, ‘The Only Certainty is Uncertainty for Corona-Stricken Oil Industry’ explores how countries around the world are reacting, and what could be ahead for the international market.