India’s First Private Strategic Petroleum Reserve

India is building its first private-sector strategic petroleum reserve (SPR) in Padur, Karnataka, led by Megha Engineering & Infrastructures Ltd. The Rs 5,700 crore project will add 2.5 million metric tonnes to India’s SPR capacity, enhancing energy security. Megha will construct and operate the facility for 60 years, generating revenue through storage leasing and trading. This public-private partnership marks a major step toward reducing reliance on imports and improving emergency preparedness.

In a landmark move to bolster its energy security, India has embarked on the construction of its first private-sector strategic petroleum reserve (SPR). The ambitious Rs 5,700 crore project has been awarded to Megha Engineering & Infrastructures Ltd, marking a significant milestone in the nation’s energy infrastructure development.

Megha Engineering Secures the Historic Contract

According to reports, Megha Engineering emerged as the successful bidder for this groundbreaking initiative, edging out two unnamed competitors. The Hyderabad-based engineering giant secured the contract with a proposal that narrowly came in under the maximum bid limit. The project represents a paradigm shift in India’s approach to energy storage, inviting private participation in what has traditionally been a state-dominated strategic sector.

Key Features of the Project

The new facility, to be located in Padur, Karnataka, will add a 2.5 million metric tonnes (MMT) capacity to India’s existing SPR network. Padur currently houses a portion of the country’s government-managed strategic reserves, but this new addition will be developed and operated by Megha Engineering under a public-private partnership (PPP) model.

Here are the essential details about the project:

• Construction and Operation Timeline: Megha has been granted five years to complete the construction of the facility and will hold operational rights for 60 years thereafter.

• Investment and Funding: The project includes a crude oil filling cost of $1.25 billion (approximately Rs 11,020 crore), making it the largest private investment in India’s energy security infrastructure. The bidding process, overseen by Indian Strategic Petroleum Reserves Ltd (ISPRL), focused on viability gap funding (VGF), which was capped at 60% of the project cost, equating to Rs 3,420 crore.

• Capacity Expansion: India’s current SPR capacity of 5.33 MMT provides only 8–9 days of crude oil supply at full capacity. The Padur reserve will significantly enhance this capacity, though it still lags behind global benchmarks like the United States (727 million barrels) and China (1,200 million barrels).

  
  

Strategic Importance of the Padur Reserve

The Padur facility’s development underscores a critical need to strengthen emergency preparedness in a volatile global energy market. To support this goal, ISPRL will offer Megha a 214-acre plot at no cost, with conditions stipulating partial filling of the storage caverns to ensure readiness during emergencies. While the government will retain priority access to the reserves, Megha will pursue revenue generation through leasing storage space to oil companies and trading crude oil independently.

This dual revenue model highlights the risks and rewards of operating an SPR. Leasing provides stable, long-term income, whereas trading activities introduce higher risks but potential for greater returns. The facility will also include state-of-the-art infrastructure for oil handling, featuring an integrated network of onshore and offshore pipelines.

A Decade in the Making

The concept of private participation in India’s SPRs has been in the works for over a decade. In 2018, the Union Cabinet approved two PPP-model SPR projects: the Padur facility (2.5 MMT) and another in Chandikhol, Odisha (4 MMT). However, developing a framework to attract private investment proved challenging and required years of planning.

Megha Engineering’s expertise in engineering, procurement, and construction (EPC) for the oil and gas sector positions it well for this new venture. The company has previously worked on refinery projects, pipeline installations, and underground storage facilities, including an LPG storage facility for Hindustan Petroleum.

Pioneering a New Era in Energy Security

The Padur project represents a bold step in India’s energy landscape, leveraging private-sector efficiency to address strategic challenges. It also sets a precedent for future collaborations in this critical domain. As India works to reduce its dependency on imported oil and shield itself from global supply disruptions, the addition of private SPRs could play a transformative role in securing the country’s energy future.

By combining commercial viability with national interest, this pioneering initiative is poised to serve as a robust model for public-private partnerships in strategic sectors.