Pragmatic | Delays of the strategic kind

India’s strategic crude oil reserves

The project was started in 2004. Three underground strategic crude oil reserves, to hold reserves equivalent to 14 days of India’s oil consumption, were to come up at Visakhapatnam (1.33 mmt – originally 1 mmt), Mangalore (1.5 mmt) and Padur (2.5 mmt). The scheduled date of completion of this project was four years. Double the time has already elapsed and not even one of the reserves has been completed. As per this report in the Hindustan Times, the latest projected dates of completion are:

The facility at Visakhapatnam is likely to be completed by March 2013, followed by Mangalore in end 2013 and Padur in the middle of 2014.[HT]

The total cost of this project in 2004 was around Rs 1,650 crore. Now, it has already escalated to Rs 23,000 crore. This excludes the cost of purchasing 5.33 mmt of crude oil at current prices, which are three times higher than those in 2004. You can read all the details about these strategic oil reserves project at this blogpost of last year.

Missed deadlines, cost overruns on a ‘strategic’ project. And no one seems to care. Perhaps that is why the government is already formulating another plan for constructing additional strategic crude oil storage facilities to store 12.5 mmt of crude oil. It is estimated to cost Rs 55,000 crore.

Each of these new locations will have a crude oil storage capacity of 2.5 mt and will come up at Bikaner in Rajasthan, Chandikhol in Odisha, Rajkot in Gujarat and at Padur in Karnataka.

While all the earlier three strategic crude oil storages would be in underground rock caverns, the four new such facilities have been proposed as a mix of rock caverns, salt caverns and underground concrete tanks.[HT]

Even if these additional reserves are miraculously constructed in a short time, India would then have a total of about 55 days of crude oil reserves. Even then, India would be well short of the world standards – oil importing member-countries of International Energy Agency (IEA) are committed to hold oil stocks equivalent to 90 days of net oil imports.

These plans may sound worthless but planning is still worth it. Didn’t Dwight D. Eisenhower say it best: “In preparing for battle I have always found that plans are useless, but planning is indispensable.”

DISCLAIMER: This is an archived post from the Indian National Interest blogroll. Views expressed are those of the blogger's and do not represent The Takshashila Institution’s view.