Strategic Storage of Imported Crude Oil at three locations in India

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Demand for petroleum products is steadily increasing in the country to support the economic and social development. The consumption of petroleum products which was around 3 million tonnes in 1948-49 and is expected to reach about 105 million tonnes during the terminal year of IX Plan i.e. 2001-02 excluding liquid hydrocarbons for power generation. With the indigenous production of crude oil not keeping pace with the increasing requirements, the import dependence for petroleum has been increasing and is expected to go up to about 70% in 2001-02 as compared to a little over 30% in 1984-85. This is likely to go up further in future. Security of supply of petroleum products assumes great importance in this context. To achieve this end, one of the actions taken is augmentation of domestic refining capacity in a big way. With this, the total refining capacity is expected to increase from 61.55 MMTPA, at the beginning of IX Plan to over 120 MMTPA by 2001-02. Major sourcing of crude oil is from Middle East, which is politically volatile and in the event of any hostilities in the Middle East, crude oil imports would be highly vulnerable. To safeguard against such disruptions, strategic reserves of crude oil need to be held in the country. This is in line with the international practice followed by various import dependent countries.

As per Government decision, storage is required to be put up for imported crude oil for 45 days cover. Refineries have been adding crude oil storage from time to time. However, there was no distinction between a strategic storage and operational storage in the past. With the addition of refining capacity over the years, the available storage is barely adequate to cover the operational requirements. In line with the Government decision, in October 1995, refineries were advised to formulate suitable proposals for additional storage capacity for imported crude oil for 45 days cover. However, progress has not been very satisfactory due to various reasons, the major being no assured reimbursement of cost for strategic tankage and working capital particularly after deregulations of the petroleum sector. In fact, with the dismantling of Retention Pricing Mechanism for refineries w.e.f. 1.4.1998, there is no incentive for refineries to build crude oil tankage and maintain a stock beyond their minimum operational requirements. Besides, refineries are also being set up in private sector. In the changed situation the need for maintenance of strategic reserves of imported crude oil gets even more pronounced to ensure uninterrupted supply of petroleum products in the country to achieve the desired economic growth.

Various alternatives, to provide a strategic storage for 45 days cover, have been examined and it is recommended that strategic tankages are provided gradually in phases over a period to achieve a total of 45 days cover. Initially 15 days of strategic reserve for imported crude oil may be planned in the first phase due to large investment required for putting up 45 days strategic cover and purchase of crude oil. Further, some quantities of crude oil would always be in transit, which based on actual experience provides 15 to 20 days cover. Assuming that only part of the transit stock would be available during hostilities in the Gulf, it is assumed that in such an eventuality transit stock should provide up to 10 days cover. Therefore, with strategic storage for 15 days cover it should be possible to sustain refinery operations for 35 to 40 days, taking into account stocks in transit and operational stocks with the refineries.

The proposed 15 days of strategic reserve would necessitate putting up gross tankage of 5.00 MMT so as to hold crude oil stock of 4.35 MMT.

Ownership of Central Tank Farms and Crude Stock would vest with the Central Government who nominates M/s Indian Strategic Petroleum Reserves Ltd. (a wholly owned subsidiary of IOCL) to implement the project and to maintain the crude stock.

In December '98, the Ministry of Petroleum & Natural Gas had set up a Committee for 'Preparation of DFR for Strategic Storages' with members from EIL, OCC, BPCL, HPCL and IOCL, to oversee and monitor the preparation of DFR. The Committee engaged Ell as Project Management Consultants for preparation of DFR.

The Ministry of Petroleum & Natural Gas vide its letter no. P-20012114/98­PP dated 26th July, 1999 conveyed the first stage approval of the Government of India to the proposal for the preparation of DFR as the likely expenses were within the prescribed limit of Rs 10 crore allowed to the Ministry.

The detailed feasibility report had since been prepared and approved by the Committee set up by the Ministry in March 2001. To deal with contingencies arising out of any disruption in the supply chain due to reasons beyond control, the Government had approved construction of strategic crude oil reserve of 5.33 MMT at a total cost of Rs 11,267 crore (at September 2005 prices) at three locations, namely:

  1. 1.5 MMT in underground rock caverns at Mangalore near MRPL Refinery.

  2. 1.33 MMT (originally 1.0 MMT) in underground rock caverns at Vishakhapatnam near Dolphin's nose.

  3. 2.5 MMT in underground rock caverns at new site near Padur in Udipi Distt. for which a new detailed feasibility report should be prepared based on detailed field investigations.

In emergent situations, these reserves would ensure supplies of petroleum products across the country for about 15 days. The crude oil from the Strategic Storage will be released by a Government appointed High Powered Committee. The target date for completion of the project is December, 2012. Indian Strategic Petroleum Reserves Limited (ISPRL), a Special Purpose Vehicle and a wholly owned subsidiary of the Oil Industry Development Board (OIDB) is implementing the projects.



The locations, the capacities and the types of storages along with the refineries being catered, are given in Table 1.


Location Capacity of Terminal Type of Storage Catering to Refineries
Mangalore 1.5 MMT U/G Rock Caverns MRPL, CRL, BPCL- Mumbai and  HPCL, Mumbai
Vishakhapatnam 1.0MMT U/G Rock Caverns MRL,HPCL- IZAG,  IOCL Refineries  at Haldia & Barauni and BRPL
Padur (Udipi) 2.5 MMT U/G Rock Caverns IOCL Refineries at Mathura, Panipat & Koyali, RPL, EOL & BORL

In the event, crude oil from a particular strategic storage terminal is required to be dispatched to refineries other than those catered above, the same would be possible by ship transport from the respective jetties.

The description of the locations is given below:

Visakhapatnam Project:

The Visakhapatnam project is being constructed on 68 acres of land (38 acres from Visakhapatnam Port Trust (VPT) on 30 years lease basis and 30 acres from Eastern Naval Command). As of the end of November 2009, 42.7% of the project work has been completed. The project is expected to achieve mechanical completion by the target date of November 2011.

EIL has been appointed as Project Management Consultant. EIL has, in turn, appointed M/s. SWECO of Sweden as their back up consultant. Supplementary investigations carried out at site through M/s RITES provided the inputs required for determining the optimal cavern capacity. Based thereon, the storage at Visakhapatnam originally planned for storing 1.0 MMT of crude, has been enhanced to 1.33 MMT. All requisite environmental clearances from Ministry of Environment & Forest (MOE&F) and State Pollution Control Board have been received including the revised clearances for enhanced storage capacity. Hindustan Construction Company Ltd. (HCC), one of India's premier infrastructure construction companies has been awarded the underground civil works contract. The effective date for commencement of construction of the cavern is January 16, 2008. The contractor has mobilized personnel at the site and work on the Access tunnel and the shafts have commenced. HCC bagged the order for Rs 375.38 crore through a Net based Reverse Auction process, a novel method for a rate contract of such a large magnitude. The Project involves excavation of huge underground caverns, 30 m high (almost 100 feet) and 20 meter wide. The total length of the caverns will be more than 3 kilometers and the amount of rock expected to be excavated will be approximately 5 million tonnes. HCC has obtained necessary clearances from Labour Department.

National Insurance Company Ltd. has been awarded the Contractors' All Risk Insurance cover of the underground civil works. For the above ground works, the NIT for pre-qualification of bidders has been issued on May 1, 2008. Based on the discussions with the Backup consultant regarding the process design basis, the scope of above ground works has been finalised.

Mangalore Project:

The Mangalore project is located over an area of 100 acres within the Mangalore Special Economic Zone. The project is scheduled to achieve mechanical completion by November 2012. As of the end of November 2009, 16.4% of the project work has been completed.

EIL has been appointed as Project Management Consultant. EIL has, in turn, appointed M/s. Geo-stock of France as their back up consultant. Government has approved storage of 1.5 MMT of crude oil. However, supplementary investigations are being carried out at site through M/s RITES for determining the optimal cavern capacity. The environmental clearance dated 11th March, 2008 has been received from MOE&F. Land for the project has been acquired by Mangalore Special Economic Zone Ltd. (MSEZL). Account payment of Rs 41 crore (approx.) has been made to MSEZL. Approval has been obtained from Development Commissioner, Ministry of Commerce for establishing the unit in SEZ area. Central Line Survey for pipeline route has been completed. Cadastral survey report for the pipeline route is under review by EIL. The tenders for pre-qualification of underground bidders are likely to be issued shortly.

Padur Project:

The Padur project is being constructed on 161.75 acres of land and the land acquisition process is expected to be completed shortly. This project is also scheduled to be completed by December 2012. The total project progress is 11.7% (as on 30.11.2009).

Cadastral Survey for plot is completed. Application has been filed with Karnataka Udyog Mitra on 29th April, 2008 for acquisition of land for the site through Karnataka Industrial Area Development Board (KIADB). Central Line Survey for the proposed 35 km pipeline route has been completed. Cadastral survey for the same is nearing completion. Application has also been filed with Department of Environment and Ecology, Government of Karnataka for approval of the terms of reference for the environmental impact and risk assessment reports.

Underground Rock Cavern Storage System

The principle of storage of oil in underground rock caverns essentially employs ground water pressure for containing the product within an unlined rock cavern. It is an established system successfully followed in many countries.

As oil has a lower density than water and is not soluble in it, all transmission of water which takes place through joints and fissures in the rock, proceeds towards the underground caverns and it is drained to a pump pit at the bottom of the storage cavern. The cavern bottom is designed with a drainage system, minimizing the contact between the product and the water. Since it is the water and not the rock that keeps the oil in, the rock cavern can in principle be of any shape provided that it is situated well below the ground water level.

Based on site investigations, horizontal caverns of sizes up to 20m in span and 25 to 32 m high are envisaged at Mangalore. The crown level of the caverns is proposed at (-) 30 m level below MSL. For the proposed storage, two 'U' shaped caverns are planned, parallel to each other, with leg lengths of 890 m each. The types of crude oils, viz High Sulphur and Low Sulphur are being stored in the ratio of 1:1 at Mangalore and 2:1 at Vishakhapatnam. The caverns are oriented in N 1000 E direction so as to come across minimum geological problems such as weak zones and shear zones while excavating the caverns. They have a D shaped cross section. For ensuring stability of the caverns, a support system of shotcreting and rock bolting is envisaged.

Two vertical shafts provide access to inlet oil pipe for the two types of crude oil and to the submersible pumps for pumping out the oil. Water seeping into the caverns is pumped out by submersible pumps to water treatment facilities located on the surface. A control system constantly monitors the oil and water levels in the caverns. For fire protection and for avoiding explosive atmosphere in the vapour space in the caverns, an inerting system is considered. From the ambient storage temperature, the crude oil will be heated to 40 degree centigrade through a heating and circulation system before dispatch. Provision is also kept to heat and circulate the crude at 70 degree centigrade for de-waxing and de-sludging, when small quantities of crude oil are left in the storage. A flare stack is provided for controlled release of vapour pressure inside the cavern, during full capacity intake of crude oil.

Water infiltration gallery and water curtains, 20 m above the crown level of the cavern, ensure a constant water pressure towards the caverns.

The submersible pumps in the caverns are designed to deliver the crude oil either to the nearest refineries or back loading in the tankers for dispatch to other refineries.


The site wise details of interconnecting pipelines and booster pump stations are given below:


The strategic storage at the terminal will cater to the following:

The existing unloading facilities for MRPL refinery for crude oil shall be used to transfer crude to/from strategic storage. Booster pumps shall be provided near tap-off point at MRPL refinery to transfer the crude oil to strategic storage. For transfer of crude oil out of strategic storage, transfer pumps shall be provided to transfer crude oil to MRPL refinery. To load ship tankers at MRPL jetty for use in BPCL and HPCL refineries at Mumbai or KRL refinery, Cochin which are being catered by this cluster, new booster pumps at lower plateau of MRPL shall be used for reverse pumping. Existing unloading facilities at MRPL jetty shall be used for loading purpose also. The length of the new 38" NB pipeline will be about 10 km.


The strategic storage at the terminal will cater to the following refineries:

The existing unloading facilities for HPCL refinery for crude oil shall be used. The tap-off from existing pipeline shall be taken around 2 km from Jetty and location of strategic storage is around 2-3 km from the pipeline. The residual pressure at tap-off point is sufficient to transfer the crude oil to strategic storage. For transfer of crude oil out of strategic storage, transfer pumps shall be provided and the same pipeline shall be utilised to transfer crude oil to HPCL refinery and also to load ship tankers at HPCL Jetty for use in MRL, Haldia and other refineries. For IOCL's refineries at Haldia and Barauni and BRPL refinery at Bongaigaon, the crude transfer shall be from Haldia Jetty by existing onshore pipeline. Existing unloading facilities at HPCL Jetty shall be used for loading purpose also. The length of new 36" NB pipeline will be about 3 km.


The cost estimates have been worked out at DFR stage by M/s Engineers India Limited who were the prime consultants for the detailed feasibility and supported by data from the back-up consultants. The total estimated cost for the project based on June, 2004 rates is Rs 1,358.83 crore inclusive of foreign exchange component of Rs 466.24 crore (Considering exchange rate of 1 US$ = Rs 45.41). The cost of crude oil has not been included.

The terminal wise break up of the cost estimates are as under:

S. NO.


Total Cost

FE Component










Padur (Udipi)

To be given after new DFR

The accuracy of the cost estimates is +/- 10% at constant prices.

The cost estimation is based on the conceptual schemes, engineering inputs for equipment sizing, material take off for piping, electrical and instrumentation items, site development and civil works. The estimates have been worked out considering the conventional method of execution except for underground rock cavern storage terminal at Mangalore, which is expected to be executed on Lumpsum Turnkey (LSTK) concept.


The completion schedule for the three terminals along with associated interconnecting facilities from the date of approval of the project are as follows:

  1. Mangalore Terminal - 53 months.

  2. Vishakhapatnam Terminal - 51 months.

  3. Padur, Udipi Terminal - To be given after

This includes 9 months for preparation of bid documents and award of work on LSTK concept.


Phasing of expenditure of all the strategic storage terminals is as follows:


1st  Year

2nd Year

3rd Year

4th Year

5th Year
















Padur (Udipi)


To be given after new DFR 

These costs are exclusive of crude oil costs.


It is proposed to enact a law to levy surcharge on domestic consumption of petroleum products. The 'ACT' is planned to be introduced by the time project for strategic crude oil storage is approved for implementation. Funds so collected under the 'ACT' would be utilized for the capital investment for putting up storage and allied facilities. These funds are also proposed to be utilized for purchase of crude oil for strategic cover. Gap between the capital investment requirement and availability of funds through collection of surcharges is proposed to be met by borrowings from Oil Industry Development Board (OIDB) at a concessional rate of interest to minimize the cost of the project. After completion of project the funds collected through surcharge on products would be utilized for recovering expenditure towards operating costs, interest liability, repayment of debts etc.

Detailed Feasibility Report (DFR) envisages that the ownership of the facility will rest with the Central Government through a nominated Company namely Indian Strategic Petroleum Reserves Ltd. (a wholly owned subsidiary of IOCL) companies/agencies to implement the project and to maintain the crude stock. The DFR also presumes that the funding through debt may have to be resorted to about 50% of the estimate.


vital for during any available for other environmental pollution or benefits arising from underground storages The strategic storage provides a cover for sustained operation of the refineries, the country's economic and defence operations, for additional periods emergency conditions. The underground storage makes the land industrial/economic activities besides reducing the disturbing the ecological balance. Specific are enumerated here below:


Growing foreign exchange outgo on account of import of crude oil (due to high volatility in international prices) is one of the primary concern for the country today. These facilities may be converted into operational storages thereby reducing impact of foreign exchange outgo.


Applications to MOE&F for environmental clearance are being submitted for all three terminals.


Approval of the Public Investment Board is solicited for setting up strategic storage terminals and interconnecting the terminals to existing facilities at the estimated cost mentioned against each terminal as follows:

S. No Terminal Total Project Cost FE Component
1. Mangalore 700.08 237.35


658.75 228.89
3. Padur (Udipi) To be given after DFR



(Updated in January 2010)