Saving grace

New Delhi, Aug. 27: The government has shortlisted 10 companies, including Japan’s Taisei Corporation, Larsen and Toubro, Samsung-Alpine Bau Deutschland, to build a strategic oil storage near Vizag.

This 9.75mt reserve will be the first of several strategic oil storages that the government wants to set up. Vizag, Padur and Mangalore have been chosen for these storages.

Officials said three companies had been eliminated in the first round on technical grounds.

An Iranian and a Chinese company have cleared the first round but are not expected to be serious contenders.

The strategic reserve is being set up partly as a pool to be used in times of war when oil supplies from West Asia could be cut off and partly as a buffer to reduce the country’s vulnerability to violent oil price swings on international markets. India has been importing about a two-third of its oil needs, mostly from West Asia.

Initially a strategic reserve of about 38 million barrels will be built and later this may be increased to 110 million barrels.

Besides this, the government plans to ask oil companies — both state-run and private — to build up petroleum product stocks in various parts of the country, which will be used during war or other disruptions.

Some reserves are already maintained by various state-run oil companies. They have a capacity to store 15 days supply of crude for India’s refineries, which can refine up to 2.3mt a day and store 45 days supply of finished product.

However, more reserves at strategic locations could help in case of internal or external disruptions in supply.

“These reserves will be needed for several reasons: if oil supplies from abroad dry up due to a war or if train or road links snap as a result of war or natural calamities,” officials said.

New reserves would have to be built according to specifications drawn up by the defence department, which implies making them bomb-proof.

Officials said a list of fragile areas, which may be cut off due to natural calamities such as floods, earthquakes and cyclones, have been identified.

These will be given priority while deciding on the location of the reserves.