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March 24, 2024

India Grants Permission to Adnoc for Exporting Oil from Strategic Storage in Mangalore

The Indian government has taken a significant step by granting permission to the Abu Dhabi National Oil Company (Adnoc) to export crude oil stored in underground strategic storages located in Mangalore. This move aims to provide operational flexibility to the foreign firm and marks a notable development in India’s oil industry. The decision, outlined in an order by the Ministry of Commerce and Industry, signifies a strategic shift in the country’s approach towards managing its oil reserves.

Currently, crude oil, the essential raw material for fuel production, is primarily exported through the state-owned Indian Oil Corporation (IOC). However, the recent order exempts Adnoc Marketing International (India) RSC Limited (AMI) from certain conditions, allowing it to re-export crude oil from its commercial stockpile in the Mangalore strategic petroleum reserve at its own expense. This decision not only diversifies export channels but also enhances Adnoc’s operational capabilities in the region.

India, being the world’s third-largest oil importer and consumer, relies on imports for over 85% of its oil needs. To mitigate supply risks, the country has established strategic storages across three locations, including Visakhapatnam in Andhra Pradesh, Mangalore, and Padur in Karnataka, with a combined capacity of up to 5.33 million tonnes. These reserves serve as a crucial insurance against potential supply disruptions and can sustain approximately nine days of national demand.

The Mangalore storage, with a capacity of 1.5 million tonnes, holds particular significance in this strategic framework. Half of its capacity has been leased to Adnoc by the Indian Strategic Petroleum Reserve Ltd (ISPRL), while the remaining portion is retained for domestic purposes. The leasing arrangement was designed to allow foreign companies to store oil for sale to Indian refiners, with India retaining priority access in case of emergencies.

Adnoc’s request for exporting oil from the Mangalore cavern, especially in scenarios where domestic buyers are unavailable, underscores the need for operational flexibility in managing strategic reserves. With the government’s approval, Adnoc now possesses the authority to export oil stored in the Mangalore facility, thereby opening avenues for optimized utilization of resources.

This decision aligns with India’s broader energy security strategy, which emphasizes diversification of supply sources and enhanced operational efficiency in managing strategic reserves. By facilitating Adnoc’s export activities, India not only strengthens its ties with the United Arab Emirates but also fosters a more dynamic and resilient oil market ecosystem in the region.

In conclusion, the government’s decision to permit Adnoc to export oil from the Mangalore strategic storage reflects a strategic realignment in India’s approach to managing its oil reserves. This move not only enhances operational flexibility for foreign firms but also contributes to India’s broader energy security objectives in the region. As India continues to navigate the complexities of the global oil market, such measures will play a crucial role in ensuring stability and resilience in its energy landscape.

Jhumpa Lahiri

Jhumpa Lahiri

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