Leasing out storage compartments & opting for tanks to ensure effective oil storage
Oil storage is essential to cater to the demand of the country and storing imported oil products is also one of the major strategies adopted by countries. Countries across the world have formed the partnership and collaborations with major oil companies from the countries in the Middle East region. They lease out space in their countries for storage. They form agreements for space and renew whenever needed to ensure there is a proper supply to meet the demand of the country. Asian countries such as India and Japan have collaborated with major oil companies from Saudi Arabia and signed lease contracts. Moreover, the Department of Energy from the U.S. have been opting for storage tanks as a temporary measure for imported oil storage. The industry for oil storage is booming with such activities. According to the report published by Allied Market Research, the global oil storage market would reach $4.30 billion by 2023. The following are some of the strategies adopted and measures taken by companies and countries.
Taking storage reserves on rent is one of the crucial strategies adopted by oil producers to store the produced oil. Saudi Aramco will avail one-quarter of the petroleum reserve at Padur from India on lease. The site in Padur, Karnataka will be made available for storage of 4.6 million barrels of oil. A government official of India outlined that this deal is made with its vision to expand energy infrastructure with the global investment. As the Indian economy grows, the fuel demand throughout the country is expected to grow significantly. This has led global oil producers to gain a foothold in the country.
Indian Strategic Petroleum Reserves Ltd. is the government company that took the charge of constructing oil storage. It entered a deal with a memorandum of understanding signed with Saudi Aramco for its lease in the 2.5-million-tonne facility at Padur. HPS Ahuja, the Chief Executive of the Indian company, outlined that the Saudi firm signed an agreement for only one compartment. There are four compartments of equal size at the storage facility. He added that Aramco would hold some of the barrels of the total reserve for its strategic requirements, however, the rest can be sold to Indian refiners.
As the trend of leasing out the space for storage continues, there is another Asian country opting for agreements with a Middle East country. Japan and Saudi Arabia arrived at an agreement for the renewal of a joint crude oil storage scheme in Okinawa. This renewal offers rapid and easy access to key customers in East Asia along with offering energy security to Tokyo as geopolitical woes rise. This also marks another milestone in Saudi-Japan Vision 2030 2.0 agreement. The existing agreement is with Saudi Aramco and Tokyo provides payment for oil storage at storage tanks in Okinawa. The agreement was expected to expire by the end of October 2019. According to the sources at the Ministry of Economy, Trade, and Industry, Japan and Saudi Arabia will speed up the talks for renewing the scheme, which is expected to offer benefits for both countries. As per the terms of the current agreement, Saudi Aramco provides a lease of 8.18 million barrels of crude oil storage capacity at Okinawa. It is offered for commercial purposes in the exchange for prioritization of supply to Japan during an emerging. On the other hand, the storage of oil in its soil from its strategic suppliers including Saudi Arabia is one of the important things for Japan after the occurrence of different events in the Middle East. Japan has a reliance on nearly 90% of its crude import requirements in the Middle East.
If strategic reserves are not available, the governments have been planning to utilize tanker storage for imported oil storage. The Department of Energy (DoE) outlined its strategy to store refined products, sign government-to-government supply contracts, and utilize vessel storage for the short term if there are petroleum supply disruptions. The DoE revealed the plans after being questioned by the Senate regarding the contingency measures related to disruptions in supply from vital sources of the country in the Persian Gulf. Alfonso G. Cusi, the Energy Secretary told reporters that it has a plan for some time. He added that the department held discussions with Qatar, Russia, and Brunei along with long-time suppliers in Saudi Arabia. The talks have been held for the fuel supply agreement. He did not give any details about whether the prices of fuel will be lower than those offered by the current oil companies. Undersecretary Donato D. Marcos added that the agency will discuss the onshore and offshore storage options for the imported finished product. However, DoE has not decided whether the commercial arm of the agency Philippine National Oil Co. (PNOC) will be in charge of the imports. Mr. Marcos added that the variations in oil prices can be handled with the oil for the strategic reserves. The department took a decision that if the development of the onshore facility is not over in two years, it would use to tanker vessels for oil storage.
