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Shell in talks to lease Mangalore’s new strategic oil caverns

Royal Dutch Shell is reportedly in talks to lease India’s new strategic oil caverns in Mangalore, along India’s southwest coast. A decision on the Mangalore site, which has a total capacity of around 11 million barrels of oil, depends on Shell getting local sales tax relief, according to local media reports.

India, the fourth largest consumer of crude oil, is one of the few major economies which is growing as the Chinese economy started to slow down. The government is building up strategic petroleum reserves (SPR) at three locations in the south to store a total of 36.87 million barrels of oil, which is sufficient to meet the country’s oil requirements for two weeks.

Under the proposal, Shell would use the Mangalore site for commercial storage, but in the event of an emergency would have to make supplies available to public sector undertakings.

Shell and Indian Strategic Petroleum Reserves Ltd. (ISPRL), which is building the cavern, declined to confirm or offer any comment on the report. ISPRL Chief Executive Officer Rajan K. Pillai said the start-up of Mangalore’s SPR, as well as sites at Padur further to the south, would be pushed back to December because of a delay in pipeline connections between the port and the storage sites.

India relies heavily on imported crude oil as it produces less than a third of overall domestic oil demand.