India has started selling crude from its strategic oil reserve in a bid to monetize the assets by leasing out space in them to oil companies, Reuters reported, citing unnamed sources.
An earlier report by Reuters said that the entity managing the country’s strategic petroleum reserve was allowed to lease out 30 percent of its capacity to both local and foreign companies by a change of policy.
The strategic reserve’s capacity is some 37 million barrels.
Yet the strategic reserve is currently full because of the record low prices last year, which stimulated more buying. So India now needs to free up some space and then start leasing it.
The oil equivalent of some 20 percent of the capacity of the strategic reserve will be sold to help the state hedge against price inflation and be in a position to provide urgent supplies to refiners when needed, Argus reported last month, citing the chief executive of Indian Strategic Petroleum Reserves Ltd., HPS Ahuja.
This makes a total of 50 percent of capacity available for commercialization. Initially, the space to be freed by the sales was thought to be 8 million barrels—and there are already leasers waiting, according to the Reuters sources, including Mangalore Refinery and Petrochemicals, and Hindustan Petroleum Co.
The two will also buy oil from the strategic petroleum reserve at discount prices.
At the same time, India is expanding its strategic petroleum reserve. Two more storage facilities are in the process of construction: one with a capacity of 29 million barrels and the other one capable of holding about 18 million barrels, Argus also reported in July.
India is seeing a recovery in oil demand recently after lockdowns were lifted and people returned to less restricted movement. In July, Reuters reported earlier this week, fuel demand hit the highest since April, boosting imports.
By Charles Kennedy for Oilprice.com
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