India currently has Strategic Petroleum Reserve (SPR) facility located at Visakhapatnam, Padur and Mangalore. These hold oil reserves of 5 MMT. This roughly equates to 10 days of average daily import.
Budget 2017 has given a green signal to a mega-merger of Government-owned oil and gas companies to match the performance of international and domestic private sector oil & gas companies, Finance Minister Arun Jaitley announced this move in his budget speech on Wednesday.
India currently has Strategic Petroleum Reserve (SPR) facility located at Visakhapatnam, Padur and Mangalore. These hold oil reserves of 5 MMT. This roughly equates to 10 days of average daily import.
The Government will now add to this facility by setting up caverns at Chandikhole in Orissa and Bikaner in Rajasthan which will triple the SPR to 15.33 MMT. It will effectively increase the reserves to serve 30 days of the average daily imports. The reserves nevertheless shall remain dwarfed by China which has SPRs equivalent to 60 days’ imports.
Rahul Jain, Partner, Nangia & Co said, “There was talk last year of the Government merging the 13 state-run oil & gas companies under one umbrella. This notion was dispelled by the Government at that time but this budget announcement of the merger of major E&P companies such as ONGC, OIL India Limited with marketing companies creating an Indian oil behemoth, could be on the cards.”
However, such a move may turn out to be anti-competitive in a developing economy, such as India starved of energy. It will be interesting to see how the Government moves forward on this.
Out of total 23 Indian refineries 20 belongs to public sector. These government refineries accounted 65 percent of overall domestic refining capacity. Domestic production of natural gas is expected to increase over the next five years at a CAGR of 8 percent and expected to reach of 141 MMSCMD in FY 2019.
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