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The Indian Crude Oil Strategic Storage Megaproject ...

ashishkp
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The Indian Crude Oil Strategic Storage Megaproject ...

Postby ashishkp » 15 Oct 2008 01:01

Sirs,

On the link below please find the complete details of the " Indian
Crude Oil Strategic Storage Megaproject ". The project seeks to
create a 600 Million barrel Oil Reserve in India using an innovative
financing mechanism.

http://www.busybric.com/site_includes/d ... cument.pdf

The entire 14 page document was published in the Indian
Defence Review in Feb 2008 and was sent to the Government of
India as a National project proposal in the first week of Mar' 2008.

The Cover letter explains the central concepts behind the project
which itself is the largest Energy project ever attempted in india.

Sincerely,



Ashish Puntambekar
Project Visualizer
Last edited by Rahul M on 15 Oct 2008 09:53, edited 1 time in total.
Reason: edited link format. no need to to use the "url" code, it screws up the "automatically parse URLs" option AND messes up the page format.

ramana
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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby ramana » 15 Oct 2008 02:41

Moved to Tech and Econ forum.

ramana

ashishkp
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The Indian Crude Oil Strategic Storage Megaproject ...

Postby ashishkp » 15 Oct 2008 09:49

repeat post.

Suraj
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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby Suraj » 15 Oct 2008 10:04

Ashish, you're presumably involved with this project. Here on BRF, we try to keep thread clutter to a minimum, and if someone starts a new thread, the person has an obligation to build up the thread topic, provide direction and insights. Would you like to take a while to post on the subject, summarizing its background, capabilities, and stakeholders, as well as any quantitative information on the costs and benefits ? Without meaningful discussion potential this thread will just end up being merged with the oil&gas discussion thread. Thanks.

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby p_saggu » 15 Oct 2008 14:31

Very interesting Ashish.
Please do a write up we can all discuss. It'll be nice to know in detail about the project.

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby Rahul M » 15 Oct 2008 14:39

very interesting ashish. I remember a strategic reserve project at the fag end of NDA era that was shelved by this govt.
what have been the govt responses, if any ?

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby p_saggu » 15 Oct 2008 18:37

Does the project to lease the Trincomalee Oil Farms also figure in this?
On google earth the oil farms are spread over a huge area. you can count 95 + tanks there. Unfortunately it lies in LTTE afflicted areas, where the threat to its security will always be there. This was the reason the sri lankan media had speculated that India may send in its troops to secure this location should it ever be threatened.

Image

ashishkp
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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby ashishkp » 15 Oct 2008 20:01

Sirs,

Thanks for responding. From now on I shall try to clear any
questions to the best of my ability.

First ... there has been no response to this project from
the Government of India. It however remains a Very Important
project as far as India's Energy Security is concerned.

The purpose of the cover letter was to explain the main concepts
behind the project structure. So If anyone has any questions about
concept its best to refer to the letter.

The main issue is that, in India, the government does not have enough
surplus money ( some 36 Billion $ ) @ $ 60 / Bbl crude to build up a 600 Million
Barrel inventory + $ 24 Billion for the Tanks and Pipelines to connect all
the refineries to the storage reserve. So an alternative project structure
that fills all the gaps in the requirements of the various players ( OPEC,
Consuming countries, National Governments and their Military concerns etc )
had to be thought up. I have been an Energy derivatives trader for 5 years,
so, after fully understanding all the issues , I felt this was one possible
attempt at a solution. The idea itself of storing Gulf crude in India is
not new
, but no-one had come up with a project structure that meets
the requirements of all stakeholders and distributes project risk in a fair
manner between all participants. This in essence has been my role.

The main reason for my putting this project on the Bharat Rakshak
Forum is that I heard this forum has some senior people who
are in a position to influence Govt policy in New Delhi and with their
help , I am hoping that this project could become a reality... Someday.

There was a question about whether the tanks in Trincomalee are a
part of this storage . The answer is no. In my view , above
ground storage tanks are not the right technological choice for
strategic reserves. The right choice from a Technological and cost
perspective is the " South African " design of concrete tanks filled
up with oil and later covered up with soil over which a 40,000 Acre
forest can come up. In my view , this project should come up south
of Karwar
and North of Mangalore on the Indian West Coast. There
is sufficient land ( 40,000 acres ) free of forest cover in this area
and roughly 70 Km from the coast. The pictures on Google Earth
suggest that this is possible
. It is also possible to split the project
into two parts with 300 Million barrels at each location. The other
possible location is in Northern Kutch, and North west of the Mundra
Port. Though this second location is closer to the Pakistani Border , it
is safe as it will be totally underground and secondly , it will be able
to directly feed 5 - 6 refineries along the Salaya Mathura Pipeline
that runs from Jamnagar to mathura.

In Terms of cost ... all that the Government of India has to do is to
say " YES ". They also have to do some diplomatic work by
sending a high powered delegation to the Middle East to meet all
the Oil Ministers. As far an Persian Gulf and OPEC is concerned ,
while the recent oil prices have created close to $ 2 Trillion of new
wealth , it has also created huge issues to long term OPEC interests
as most alternatives ( Jatropha, Ethanol, Solar Energy , Wind etc )
become viable above $ 60 / Bbl crude and Saudi Arabia and other
gulf countries such as Kuwait are really worried about their long term
market share. So If the Indian Government were to suggest this
project ... they might grab it . With $ 2 Trillion in reserves ... the
$ 60 Billion price tag is small money for GCC countries.

Unfortunately , No one within the Government wants to do anything
new. We need a visionary Petroleum Minister and Petroleum Secretary
to implement this project. Till such people come to office ... India
will just have to wait.

I hope that answers some of the queries. Will be happy to take any
more questions.

Ashish Puntambekar

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby Rahul M » 15 Oct 2008 20:47

ashish ji, just one point, you don't have to address anyone as sir here.
we are quite informal in that aspect. being a non-technical person I can only wish you luck.
you and we, as in India will need it.
regards.

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby fanne » 15 Oct 2008 20:53

Yes Sir,
Good luck and hopefully God speed!!

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby BijuShet » 15 Oct 2008 21:33

Ashishji thank you for initiating this thread. I like the proposal of building a strategic reserve for crude oil but I wonder about who will pay for building this reserve and who will benefit directly from this. Crude oil is not directly consumed by the tax payer but by refinaries so why should the refinaries not think of building these reserves themselves. If each crude oil processing facility builds its own reserve facility then we would have spread the storage of the crude reserves and thus reduce over all risk as well as make the oil producing facitlity responsible for its upkeep. The question is who will they pay for it and how? Here the Govt can step in by providing access to easy credit for building the storage facilty and acquiring the reserves as well. They can build these reserves over a 3-5 year period. Look forward to your thoughts on this.

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby sugriva » 15 Oct 2008 22:12

Some questions
1) How is the figure of 600 million barrels being arrived at? How many days of crude reserve is it? One month, Two months or six months or six years
2) If crude prices fall further, as is widely expected, then why should Government of India commit to buying it at 60$ per barrel now?

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby Rahul M » 15 Oct 2008 22:24

bijushet and sugriva, please read the first few pages of the document given in ashish' link above.

I believe it would answer both your questions. It is a very innovative idea. please go through it.

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby ashishkp » 15 Oct 2008 22:29

Hello Everyone,

To keep this discussion focussed , I think its best to address only the
important issues.

I repeat, that to get the concept , Its best to just scan the cover letter
which goes into who will finance the reserve and why they will be
very keen to do it.

Regarding the issue of the individual refinery stocks. These usually last for
around 21 days. No refinery, around the world keeps stocks higher
than this level of 21 days inventory. Its just too expensive in working
capital terms.

Strategic stocks are kept by the Federal / Central Government. You could
find a discussion on the US strategic storage reserve on the following link :

fossil.energy.gov/programs/reserves/spr/spr-sites.html

If this discussion on this forum is taken to its proper conclusion and if we
could get the Government to notice this ... This would probably be the first
Forum to actually generate a large national project via a discussion thread.


Ashish Puntambekar

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby BijuShet » 15 Oct 2008 22:36

Rahul M wrote:bijushet and sugriva, please read the first few pages of the document given in ashish' link above.

I believe it would answer both your questions. It is a very innovative idea. please go through it.

Rahulji my bad. Thread headline got me all excited and I rushed in without doing my homework. I will read through the presentation and come back again with my queries.

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby sugriva » 16 Oct 2008 08:23

1) 5 million barrels : 19 days
600 million barrels : 6.3 years (if my madrassa math is right)
Q : why does india need 6 years of petroleum reserves?

2) I dont see how the idea is novel given that GOI has already started work on having underground oil reserves of 36 million barrels (about 140 days) which I believe is a consumer's reserve

3) how is setting up a strategic reserve that mainly benefits oil exporters and oil producers (OPEC etc) an Indian strategic good. I dont see how it is beneficial for India if the OPEC countries of the middle east are able to sell their oil at guaranteed prices even in case of war. I think this surplus oil money is one of the root causes of Islamism in the world, of which India is a victim. Why should India sign up to promote Islamism? It may be in the strategic interests of ME OPEC countries but certainly not of India. As I see it we should in the long term seek to turn ourselves away from oil.

4) The way I see it, it only benefits a certain private refiner/oil producer who needs to hedge his prices at 60$/barrel when oil prices are falling globally. To be fair to you, you mention in the paper that it is a producers reserve and not a consumers reserve.

5) Also why should govt provide tax incentives for the strategic aims of another group of countries and what is primarily a producers reserve

6) wow, now the going gets incredible. Not only must the govt provide tax incentives but it must also provide missile units for its protection for something that the nation largely does not benefit from :shock:

7) On a more cynical note 6 years worth of petroleum reserves sounds a lot like the 100 year nuclear fuel reserve per reactor that was proposed in this forum sometime back :mrgreen:

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby ashishkp » 16 Oct 2008 08:58

Hello Everyone,

One of my firm beliefs is that to make a project take off , one must
listen to and try to convince ones most ardent critics. I have
therefore liked Sugriv's response as he has raised some valid issues.

Ok ...

1. In my view , Govt of India's oil storage plan at Vizag and Mangalore
at 36.5 Million barrels is too little as its just 19 days Imports. China
has around 90 days reserves and the US in excess of 150 days. A
600 Million barrel reserve is big at almost 300 days of Imports ...
but its necessary as India is growing very rapidly. In any case the
reserve will take some 8 - 10 years to fill fully as the filling will take
place mostly in the second quarter of each year as global demand
for oil drops in the 2nd quarter. Also ... this is a producers reserve
and not a consumers reserve ... For Persian Gulf producers , who
export some 17 million barrels a day through the Straits of Hormuz
this is just a 35 day storage ... but its size is big enough to cap
global oil price at $ 60 / Bbl. This is why the reserve has beeb
conceptualized at 600 Million barrels.

2. This reserve is coming free to India. Since it is going to be built on
our soil , we can get an agreement to store the crude without the
kind of Political and other issues that some people may be
concerned about. There are ways of mitigating that risk. I agree
that the political part needs to be handled keeping our cultural
and other interests safeguarded.

3. I am a clean energy buff myself ... thats why I am suggesting covering
the whole reserve with 40,000 acres of new forest cover. Besides this
I am also a project designer of one of the largest clean energy projects
( Another project ... not this one ) that might come up ... Its still in my
mind ... but I agree that we need to move in the direction of Low
carbon.

4. Tax incentives are necessary and this project area will have to be
declared as an SEZ ... Otherwise no one is going to give you oil . In
fact , if we dont give these tax incentives South Africa will give
them . They are looking to build reserves too. We need to understand
that this project has been designed to Minimize our inventory cost.
The Indian Economy is going to do 9 % after this recession gets over
We need to think ahead and we need to Understand that " There
is no free Lunch "
. You get something ... You give something.
Only thing is that you have to ensure that this is net - net positive
for India ... without any other influences.

5. This is going to be a 600 Million Barrel reserve ... that kind of stock
needs to be protected with Missile Units, The Navy etc ... that is
precisely why I chose Karwar as a potential site as one of India's
largest naval bases is located at Karwar
. The Navy could look after
this facility by devoting a small Reconnisence unit to its security ...
... Its no sweat.

I hope I have answered all the questions satisfactorily and without
anyone feeling hurt. Some of the issues are sensitive and the
concernes are genuine so its important that all issues have to be
addressed to the satisfaction of all citizens and interest groups.

Finally ... Sugriva is talking in Tonnes and I am talking in terms of barrels
... there are around 7.8 Barrels in a Tonne of crude oil. Hope this clarifies.


Sincerely,



Ashish Puntambekar
Last edited by ashishkp on 16 Oct 2008 09:29, edited 2 times in total.

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby sugriva » 16 Oct 2008 09:07

Ashish, Maybe I misread your paper, but this is what you say.....

There has been a small move in the direction of strategic reserves , by the Government
of India, which ,acting through the Oil Industry Development Board ( OIDB ) has set up “
The Indian Strategic Petroleum Reserves Limited ( ISPRL ) ” . ISPRL’s initial mandate is
to set up a strategic crude oil reserve of 5 Million metric Tonnes , equivalent to 19 days
of imports ( basis demand in 2006–07) .
The company has since proposed 3 different
locations for the setting up of the reserves.

Please tell us what is correct. Do we require 36 million for 19 days or only 5 million.

Also this is what I found in an article from FICCI

According to FICCI estimates, in order to acquire a 15 days stock of 5.4 million tones of crude oils at the current rate of US$60 per barrel, the country would need about Rs. 10,800 crores. To build storage capacity of this order of strategic oil reserves, upwards of Rs. 1,000 crores would be required.

So I guess your original figures as stated in the paper are right.

http://www.ficci.com/press/179/RESERVES.doc

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby ashishkp » 16 Oct 2008 09:31

Sugriva is talking in Tonnes and I am talking in terms of barrels
... there are around 7.6 - 7.8 Barrels in a every 1 Tonne of crude
oil. Hope this clarifies.

Ashish

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby Arya Sumantra » 19 Oct 2008 15:49

Although the following article is more about pricing but does talk about building up reserves with surplus cash in case the international oil price goes below the indian oil price.

Case against cutting oil price
19 Oct, 2008, 1119 hrs IST,Swaminathan S Anklesaria Aiyar, TNN
http://economictimes.indiatimes.com/Opi ... 614848.cms

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Re: The Indian Crude Oil Strategic Storage Megaproject ...

Postby Rishirishi » 20 Oct 2008 19:07

Here is another Madrsa idea.

What about putting a 10 dollar per barrel tax on oil consumption (this is enforced by all oil consuming countires). Use this money to finance huge reserves. If the oil consuming countires have stock for up to 48 months of oil imports, they will be able to control the demand and break the OPEC oil monopoly. Opec control less then 30% of global production, so their ability to blackmail consumers is very limited.

Anyone care to do the math? How long will it take to build the reserves.?


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