India plans to increase its stockpile of oil in the aftermath of the Arab Spring as conflict has shaken the government¿s faith in the security of supply.
India aims to boost oil stockpile
India plans to increase its stockpile of oil in the aftermath of the Arab Spring as conflict in source countries such as Libya has shaken the government's faith in the security of supply.
India plans to stock 132 million barrels of oil by 2020, up from the previous target of 110 million barrels, GC Chaturvedi, the oil secretary, said this week.
"These [reserves] are mainly for contingency plans. It can be used in case of price fluctuations also," Mr Chaturvedi said.
The stockpiling programme was announced in 2004, and three reservoirs to hold 40 million barrels are under construction. But even if the new target is met, the strategic storage capacity would fall short of equalling 90 days of imports, the benchmark set by the programme, as demand keeps on rising.
"By 2020, India's consumption will be a lot higher. So it still doesn't give that much security compared to western countries," said Tom Grieder, an analyst for IHS World Markets Energy.
Apart from chasing ever-growing consumption, the government is responding to the added supply uncertainty arising from this year's turmoil in the Middle East, India's biggest source of crude. The country relies on imports for 75 per cent of its crude, and last year 64.5 per cent of its oil came from the Middle East.
"During the Arab Spring, Indian officials voiced great concern," said Mr Grieder. "The expansion of the strategic stockpiles is a consequence of that."
The government's plan to use the reserves to smooth out price fluctuations rather than to compensate for interruptions of supply is tied to India's fuel subsidies, which increase the burden on the state as crude prices rise, said Mr Grieder.
Asian countries, led by China, are working on creating strategic stockpiles in line with their growing consumption. This development is supported by the International Energy Agency, whose members - some of the major oil-importing nations - already boast considerable reserves.