Crisis management: India to set up four more strategic oil reserves, p

Srinivas_K

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Crisis management: India to set up four more strategic oil reserves, petroleum minister Dharmendra Pradhan says

BHUBANESWAR: The Centre has chalked out plans to set up at least four more strategic oil reserves in the country in a bid to store adequate stock for meeting 90-100 days requirement during any crisis.

"It is planned to reserve crude oil for 90-100 days to meet the requirement during emergency situations and crisis. The present storage capacity is 70-75 days and the four proposed projects will raise it further," petroleum minister Dharmendra Pradhan told reporters here.

At present, there are three strategic reserves — one in Andhra Pradesh and two in Karnataka — while four more such facilities were proposed to be set up at Bikaner in Rajasthan, Rajkot in Gujarat, Padur in Karnataka and Chandikhole in Jajpur district of Odisha, the minister said.

READ ALSO: India's oil reserve buffer set for major boost

The new reserves would have a combined capacity of around 12.5 million metric tonnes, Pradhan said, adding the largest petro reserve was proposed to be set up in Odisha's Chandikhole with an investment of Rs 3,800 crore.



The strategic oil reserves would enable the country to meet the requirement during any crisis as India depends heavily on crude imports, he said.

Pradhan, who met chief minister Naveen Patnaik during the day, said he has asked Odisha government to provide 400 acres of land to set up the country's largest strategic reserve for storing 3.7 million metric tonne (MMT) crude oil at Chandikhol.

The project envisages storing eight days' requirement of crude oil in the country.

Union petroleum ministry has already set up a special purpose vehicle (SPV) named Indian Strategic Petroleum Reserves Ltd for setting up such reserves across the country.

Crisis management: India to set up four more strategic oil reserves, petroleum minister Dharmendra Pradhan says - The Times of India
 

archie

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Re: Crisis management: India to set up four more strategic oil reserve

One of the Comments on the article

"this project saw green light in 2012. so this isn't this govt's initiative but the previous govt's actually. we started being on the 3 rock caverns under phase-1. its almost complete now. phase-2 will see the 4 salt caverns. i was part of the team of engineering consultants who made the detailed feasibility report of both the phases of this sub surface project for isprl. was also part of the team that designed the rock caverns. its one of the very few good things the congress govt did actually."

Seems like Big caravans.. is it not better to fill it with refined petrolum products?
 

sgarg

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Re: Crisis management: India to set up four more strategic oil reserve

I think only unrefined petroleum is put into salt/rock caverns. The refined products are stored in steel tanks.
 

Tanmay

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It is best to fill them up when the price of crude is low. With Iran sanctions the price is going back up.
But the reserves are still insufficient for a large country like India. As of now the reserves are less than /around 10 days .
And these will be usually treated as war time reserves rather than price fluctuation reserves. With current geopolitics we will need atleast 90 days reserves to breathe easily
 

Kshithij

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India can use coal liquefaction if needed. The strategic reserves don't appear to be really strategic except for short supply cut. For anything long, the only solution is to use coal liquefaction
 

Armand2REP

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But the reserves are still insufficient for a large country like India. As of now the reserves are less than /around 10 days .
And these will be usually treated as war time reserves rather than price fluctuation reserves. With current geopolitics we will need atleast 90 days reserves to breathe easily
French strategic reserves keep 90 days minimum. 10 days is not even enough to get the next shipment unloaded before it runs out.
 

Armand2REP

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India can use coal liquefaction if needed. The strategic reserves don't appear to be really strategic except for short supply cut. For anything long, the only solution is to use coal liquefaction
Coal liquification is expensive, it is easier and cheaper just to stash cheap crude in an underground basin in quantities large enough to ride out any supply shocks.
 

tharun

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Coal liquification is expensive, it is easier and cheaper just to stash cheap crude in an underground basin in quantities large enough to ride out any supply shocks.
Otherwise electric vehicles or 100% ethanol or hydrogen gas powered.
 

Kshithij

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Coal liquification is expensive, it is easier and cheaper just to stash cheap crude in an underground basin in quantities large enough to ride out any supply shocks.
The expensiveness depends upon various factors. Also, since the money goes within India, the income also increases. So, the expensiveness is easily nullified. The coal in India is also sold for cheap - about 1rupee/kg. So, the cost of diesel and Kerosene will come out to be much cheaper than that of petroleum. This will be in addition to creation of lakhs of jobs to produce 2 million barrels of liquids a day.

Otherwise electric vehicles or 100% ethanol or hydrogen gas powered.
Electric vehicles won't cut it. The battery technology is not good, recharge is difficult and time consuming. The lithium is also not very abundant in nature. Most importantly, India consumes 70% of the liquid fuels in diesel and kerosene, mainly in commercial vehicles and planes. None of them can use battery.
 

Armand2REP

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The expensiveness depends upon various factors. Also, since the money goes within India, the income also increases. So, the expensiveness is easily nullified. The coal in India is also sold for cheap - about 1rupee/kg. So, the cost of diesel and Kerosene will come out to be much cheaper than that of petroleum. This will be in addition to creation of lakhs of jobs to produce 2 million barrels of liquids a day.
A Coal Liquification plant costs $10 billion as the initial investment, then add the cost per tonne of coal, then add the cost of liquification and it is $80 per barrel not including recouping the $10 billion. It is a huge investment that requires oil prices over $100p/b in order to get the money's worth. Or you could have stockpiled crude when it was $40p/b and invest nothing.
 

Kshithij

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A Coal Liquification plant costs $10 billion as the initial investment, then add the cost per tonne of coal, then add the cost of liquification and it is $80 per barrel not including recouping the $10 billion. It is a huge investment that requires oil prices over $100p/b in order to get the money's worth. Or you could have stockpiled crude when it was $40p/b and invest nothing.
The foreign exchange rates are not constant. The cost of coal liquefaction is in Indian rupees and hence unacceptable to convert into foreign exchange. The investment will also be within India and hence it will be part of the regular government expenditure for job creation and infrastructure creation. Instead of making roads, make these plants once all roads are completed. Also, the operational cost of liquids come at less than $30 a barrel. The recovery for investment over 10 years time will make the price slightly higher (since the investment is govt expenditure, the returns are not needed). Indian coal pricing is quite low - about $15 a tonne, which can provide 1.2 barrels of liquids in addition to some power (as byproduct of liquefaction) and petcoke as residue which again can be used for generating power in thermal plants.

The disadvantage is that the petrochemicals used in paints, medicines etc are hard to obtain from coal liquefaction. Also, gasolene is difficult to obtain. India, however, uses 70% of its energy in diesel and kerosene. So, energy wise, India can sustain. Petochemicals will take a hit.

The foreign exchange is not free. Even when oil costed $40, the foreign exchange could be fluctuating and unavailable. Even at $40 per barrel of oil, if investment recovery is not considered, coal liquefaction is cheaper.
 
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Armand2REP

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The foreign exchange rates are not constant. The cost of coal liquefaction is in Indian rupees and hence unacceptable to convert into foreign exchange. The investment will also be within India and hence it will be part of the regular government expenditure for job creation and infrastructure creation. Instead of making roads, make these plants once all roads are completed. Also, the operational cost of liquids come at less than $30 a barrel. The recovery for investment over 10 years time will make the price slightly higher (since the investment is govt expenditure, the returns are not needed). Indian coal pricing is quite low - about $15 a tonne, which can provide 1.2 barrels of liquids in addition to some power (as byproduct of liquefaction) and petcoke as residue which again can be used for generating power in thermal plants.

The disadvantage is that the petrochemicals used in paints, medicines etc are hard to obtain from coal liquefaction. Also, gasolene is difficult to obtain. India, however, uses 70% of its energy in diesel and kerosene. So, energy wise, India can sustain. Petochemicals will take a hit.

The foreign exchange is not free. Even when oil costed $40, the foreign exchange could be fluctuating and unavailable. Even at $40 per barrel of oil, if investment recovery is not considered, coal liquefaction is cheaper.
You are talking about the lowest grade of coal full of moisture not fit for refineries. The grade of coal needed for 1 barrel per tonne is G2 which costs $50 a tonne based on Coal India pricing. The cost of liquifiying 1 tonne of coal was $14 in 2008 would be $17 today. $67p/b and the cost to pay for the plant bumps it to $87p/b. Interest on the loans bumps it to 90p/b. The math doesn't work unless crude is averaging $100p/b. If it only cost $40p/b everyone would be doing it.
 

Kshithij

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You are talking about the lowest grade of coal full of moisture not fit for refineries. The grade of coal needed for 1 barrel per tonne is G2 which costs $50 a tonne based on Coal India pricing. The cost of liquifiying 1 tonne of coal was $14 in 2008 would be $17 today. $67p/b and the cost to pay for the plant bumps it to $87p/b. Interest on the loans bumps it to 90p/b. The math doesn't work unless crude is averaging $100p/b. If it only cost $40p/b everyone would be doing it.
Indian Gondwana coal (bituminous, not lignite) is priced by India at $15 per tonne for power production. This is to reduce the cost of power. This is a subsidised price.

G2 coal is anthracite coking coal and is not used for liquefaction. I am taking SASOL coal liqueaction where bituminous coal with 24% ash content and 8% moisture is used to give 1.4 barrels liquids per tonne of coal.

A few years back, Reliance company has proposed to make 80000bpd plant with Narmada Lignite coal (high moisture, lowest grade) using 28-29 million tonne per year. This comes to roughly 1 barrel per tonne.

Majority of Indian coal is Gondwana bituminous with 36% ash and 3% moisture. Ash content is presence of sand, heavy metal or other items that are impurities. The grade of coal appears to be low due to higher ash content but is not the same as low grade coal which have higher moisture content. Using the SASOL coal reference and the reference of Narmada lignite coal proposal, I have deduced that the liquid production will be 1.2barrel per tonne from Gondwana coal.

So, the cost of $15 per tonne of gondwana coal and liquefaction cost of $15 per tonne will produce 1 barrel of oil in $25. Even if the subsidy is removed and the cost of coal is $45, which is international price for such coal, the cost will come to $50 per barrel. The liquids also don't require refining and hence the additional refining cost of 10% is saved. So, the net cost of liquids come to $45 a barrel.

India does not use coal liquefaction for these reasons:
1) Save coal reserves
2) Inability to extract such large amounts of coal without environmental damage. Indian coal is scattered in many reserves and hence lot of places will be needed to be dug out.
3) Coal is difficult to be extracted in large quantity due to it being a solid and needing transportation infrastructure.
4) Coal can't get two important fuels - LPG and petrol/Gasolene
5) Inability to use coal for petrochemicals, paints, medicines, sulphur etc.
6) Huge water demand for liquefaction plants
7) The FDI and remittance that flows into India has to be spent somewhere. Why wastefully hoard forex as surplus reserves when it can be exchanged for foreign raw material and goods?
 
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