India signed a deal with the United
Arab Emirates on Wednesday that allows the Gulf OPEC country to fill half of an
underground crude oil storage facility at Mangalore that is part of New Delhi’s
strategic reserve system.
New Delhi announced a series of pacts with the UAE
ranging from defence, trade, maritime cooperation to energy after a meeting
between Prime Minister Narendra Modi and Abu Dhabi’s Crown Prince Sheikh
Mohamed bin Zayed al-Nahyan.
UAE’s Abu Dhabi National Oil Co will store about 6
million barrels of oil at Mangalore, taking up about half of the site’s
capacity, said Sunjay Sudhir, joint secretary for international cooperation at
the Indian oil ministry.
India, hedging against energy security risks as it imports
most of its oil needs, is building emergency storage in underground caverns to
hold 36.87 million barrels of crude, or about 10 days of its average daily oil
demand in 2016.
“This will … help to ensure India’s energy
security and enable us to meet the nation’s growing demand for energy,”
said Indian oil minister Dharmendra Pradhan.
As one of the fastest growing economies in the world,
India needs massive investments in some key sectors, particularly
infrastructure.
ADNOC said the Mangalore oil storage facility is the
third that it has access to in Asia after Japan and South Korea, enabling the
company to become more competitive in meeting market demand across south east
Asia.
“India is an important energy market and this
storage agreement reinforces ADNOC’s role as one of the world’s most trusted
and reliable suppliers of oil,” Sultan Ahmed Al Jaber, UAE Minister of
State and ADNOC Group CEO said in a statement.
“We will utilise the Mangalore facility to not only
build on our existing business relationships across India but also to explore
new downstream opportunities for ADNOC’s expanding range of refined and petrochemical
products.”
During Modi’s visit to the UAE in 2015, the two countries
announced a $75 billion joint infrastructure fund that would invest in India’s
infrastructure development. UAE is India’s fifth biggest oil supplier.
The crude supplies will begin in the last quarter of this
year, Sudhir told Reuters. “We are talking to them (ADNOC) for two-three
grades and most likely it will Murban.”
The two sides had discussed ways to advance their energy
ties through specific projects, including long-term supply contracts and joint
ventures in energy, Modi said in a speech after his meeting with the crown
prince.
India in 2014 began talks to lease part of its strategic
storage to ADNOC. Under those discussions, India was to have first rights to
the stored crude in case of an emergency, while ADNOC would be able to move
cargoes to meet any shift in demand.
India has already filled the other half of the Mangalore
storage in Karnataka state with 6 million barrels of Iranian oil.
India, the world’s third-biggest oil consumer, has also
filled a Vizag storage site in southern Andhra Pradesh with 7.55 million
barrels of Iraqi oil and has invited bids from suppliers to fill an 18.3
million-barrel facility at Padur in Karnataka.
The crown prince of Abu Dhabi will be the guest of honour
at India’s Republic Day parade on Thursday.
