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May 22, 2002 | 1220 IST
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Plan for strategic oil reserves revived

P Vaidyanathan Iyer

The Prime Minister's Office has revived an earlier plan to build strategic petroleum reserves to insulate India, albeit temporarily, from oil supply disruptions. The move assumes significance given the country's aggressive military posture.

The PMO has simultaneously decided to constitute a group to look afresh at the entire problem of hydrocarbon security. Top government officials told Business Standard that the need for maintaining strategic oil reserves was revisited at a recent meeting with the petroleum ministry.

There was a unanimous view that in the changed milieu where India had mobilised troops along the border, it was imperative for the country to build a contingency plan.

"The plan would address three specific areas of concern, viz., long-term disruption of oil supply, prolonged spike in crude oil prices and persisting conflict in West Asia," said a senior official.

The PMO, together with the petroleum ministry, has already roped in ONGC and Gail to study various aspects concerning hydrocarbon security, officials said.

"Security aspects related to the source from where crude oil is procured, routing of the crude oil to India, the technological options available and storage modes will be studied," they said.

While the PMO is awaiting a report from the Institute of Defence Studies and Analysis on certain security aspects concerning preservation of oil reserves, it has now decided to appoint a consortium of research agencies including Teri to study the hydrocarbon security issue in its entirety.

Finance ministry officials said it was envisaged earlier that India should maintain 40 days strategic oil reserves. "We have adequate refining capacity. But the costs of maintaining such reserves proved to be prohibitive," said an official.

The costs involved those relating to storage - overhead or underground - of oil, transportation to the refineries and also the security cover for these reserves, he added.

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