Nearly 70 per cent of India's crude oil requirements are met through imports. Moreover, 
67 per cent of our crude oil imports are from the Arabian Gulf region which has been politically volatile over the years. According to a study by the Ministry of Petroleum and Natural Gas, there have been 19 supply shock events globally since 1951, resulting in supply shortfalls and tight market conditions. This describes the need for strategic storage crude oil requirements. 
The oil embargo of 1973-74 prompted the US government to set up strategic petroleum reserve (SPR) in India. The crude oil is stored in underground salt caverns. Similarly Japan, Italy, Germany, France, Spain, Belgium, Turkey, Poland, Netherlands and Korea have created strategic crude oil storage facilities. China has announced plans to build storage equivalent to 20 days of demand. Singapore has a fuel oil stockpile for electricity generation, and Thailand has crude stock for 22 days. It may be mentioned that the oil importing member-countries of the International Energy Agency (IEA) have commitments to hold stocks equivalent to 90 days of net oil imports. 
India currently has 7.3 million tonnes of crude tankage and 6.8 million tonnes product tankage capacity. The total crude oil storage capacity can meet the country's oil requirement for 19 days. Under the APM, the storage of crude oil and petroleum products and the strategic requirements were being taken care by the oil PSUs. However, in the deregulated scenario, the oil companies will optimise their inventories to meet their operating requirements to take advantage of competitive pricing and enhance their margins. Therefore, it is the government which has to take the initiative to build strategic crude oil storage in the country. 
In fact, the government had proposed to build strategic storage of crude oil for storing five million metric tonnes. The proposed locations are Visakhapatnam, Mangalore and Udupi (near Mangalore). The estimated capital cost of the project is around Rs. 1,650 crore. In addition, the cost of crude would be around Rs 5,000 crore. The project is at an initial stage and the proposed storage is likely to come up by 2008.
ONGC is setting up a pilot strategic storage facility in Bikaner, which would be located in close proximity to the international border and firing range. The project is expected to be completed by mid of 2006. The pilot storage facility will come up in a salt cavern, which is considered the best medium for underground oil storage. 
At Udupi, 200 acres have been selected for seismic test. After satisfactory refractory and soil resistance test, nearly 30 acres would be allotted for constructing bunkers under the rocks. Initially, there was resistance for this project by environmentalists. However, they have now mellowed down their protests and may stop opposing the project. 
A team of experts from Engineers India Ltd was recently in Udupi to select a site. In all probability Udupi will have the country's first underground crude bunker in unlined rock cavern. The caverns for crude oil storage could be as deep as 150 ft.
However, the main hurdle in creating a crude oil storage facility is the high crude oil price. When the crude oil price is ruling above $50 per barrel, buying crude oil for trategic storage will not be financially viable. 

Natural gas storage
Many developed countries have created underground storage facilities to meet the eventuality of disruption in gas supplies, and to meet the requirements of seasonal demand variation. In Germany, Italy, Austria and France storage capacities account for 25 to 30 per cent annual consumption. In Spain suppliers must hold reserves for 35 days. 
In India, also, the government has decided to develop underground natural gas storage facilities. The proposal is at a conceptual stage. Abandoned gas wells and salt caverns are generally used for this purpose. 
Natural gas storage is favoured because: 

• It acts as a buffer between the pipeline and distribution system. It is prerequisite for building an efficient national gas grid system.
• Storage allows distribution companies to serve customers more reliably by withdrawing more gas from storage to meet customer demands during peak use periods. 
• It allows the sale of fixed quantities of natural gas on the spot market during off-peak periods. 
• Having local storage of gas reduces the time for a delivery system to respond to increased gas demand. 
• Storage allows continuous service, even when production or pipeline transportation services are interrupted. 
• Storage is used occasionally as a conservation measure to prevent flaring and other waste when production rates exceed marketability.
  Three principal types of underground storage sites used today are: 1) Depleted reservoirs in oil and/or gas fields. 2) Aquifers, and 3) Salt cavern formations.
  Depleted reservoirs in oil and/or gas fields will have high storage capacity. This is one of the cheap forms of storing gas. Depleted reservoirs are the most commonly used underground storage sites because of their availability and suitability for gas storage.
  An aquifer is suitable for gas storage if the water-bearing sedimentary rock formation is overlaid with an impermeable cap rock. While the geology of aquifers is similar to depleted production fields, their use in gas storage usually requires base (cushion) gas and greater monitoring of withdrawal and injection performance. 

The salt cavern construction is costlier than depleted field conversions when measured on the basis of dollars per thousand cubic feet of working gas. However, the ability to perform several withdrawal and injection cycles each year reduces the per-unit cost of each thousand cubic feet of gas injected and withdrawn. A 50:50 joint venture of HPCL and TotalFinaElf of France is developing 60,000 mt LPG underground cavern storage facility worth Rs 333 crore at Vizag. It is expected to be completed by March 2006. 
The government is in the process of developing gas storage facilities for 15 days of gas consumption equivalent to 1 
billion cubic meters (bcm). The 
project is to cost Rs 450-500 crore. Gail India is looking out for suitable technology for the purpose. 

Late awakening
With the energy consumption in India going up day by day, its dependence on import is also increasing. India has woken up quite late to the need for strategic storage of oil and gas, and unfortunately it has coincided with rising international price for the same. This may only delay the implementation of the important project, but nobody can stop it from happening.