To fill SPR, India to import Basra crude from Iraq

To fill its first strategic petroleum reserve (SPR), India is planning to import 8 million barrels of Iraqi oil. Since, crude price is cheap at this point, planning for such financial decision can prove to be highly effective.
SPR purchases could temporarily help offset the impact of an expected pause in China's strategic stocks build and the start of spring maintenance at Asian refiners.
Indian oil ministry instructed Indian Oil and Hindustan Petroleum to seek two very large crude carriers (VLCC) of Basra oil for arrival in May-June. The total volume of oil will be 8 million barrels.
It is expected that the tenders will be issued by this month. According to sources, a committee of directors said that Basra oil as it suits refineries on India's east coast. To fill the first SPR, the finance ministry has rendered Rs. 2400 crore for the current fiscal year.
Ehsan Ul Haq, senior consultant at UK-based consultant KBC Energy Economics, stated, "In Asia we are trading May cargoes and demand from India for Basra will tighten the prompt market and will make contango in the Asia and Dubai markets narrower."
Global oil prices of crude have fallen drastically since this year’s January. Brent crude price has fallen by 50% from last June, registering at $53 per barrel.
"It could weaken the price of Brent-linked crudes as traders were expecting India to buy sweet oil for its SPR.
"On the other hand it would be good news for Iraq, which has been struggling to find buyers because of the deteriorating quality of Basra," Haq said.
Last month, India completed building its first underground SPR in southern Andhra Pradesh state. It is reported that the SPR will occupy 9.75 million barrels of oil.
The Vizag facility has two compartments of 7.55 million barrels and 2.20 million barrels. The smaller compartment will be used by HPCL for its 166,000 barrel-per-day Vizag refinery.
It is also informed that a total of three SPRs in the south will hold more than 36 million barrels of oil, enough to cover about 13 days' supply for India in case of a supply disruption or extreme price volatility.
The two other SPRs will be located at Mangalore and Padur, in the state of Karnataka. Jointly these two SPRs will have a capacity to occupy 29.3 million barrels.
In addition to HPCL's Vizag refinery, the IOC's 150,000 bpd Haldia refinery and a 210,000 bpd refinery owned by Chennai Petroleum Corp., a subsidiary of IOC, can process Basra oil.