Megha Engineering is well recognized for its EPC contracts in the oil and gas industry, which include rig supply, pipeline installation, and refinery development.
Megha Engineering Secures SPR
An Economic Times story on Tuesday said that Megha Engineering & Infrastructures Ltd (MEIL) has secured a historic contract to construct and oversee the first privately run strategic petroleum reserve (SPR) in India.
With an estimated worth of Rs 5,700 crore and an extra crude-filling cost of $1.25 billion (Rs 11,020 crore), the project is the largest private sector investment in the nation’s energy security to date.
Megha Engineering has been given five years to build and sixty years to maintain a 2.5 million metric tonne (MMT) reserve at Padur, Karnataka, according to the ET article. When it is operational, it will greatly increase India’s strategic store of 5.33 million metric tons of crude oil, which at full capacity only provides eight to nine days of domestic crude oil use.
Padur SPR Capacity Details
According to the publication, Padur already houses a share of India’s existing reserves. In charge of managing the nation’s SPR network, the state-owned Indian Strategic Petroleum Reserves Ltd (ISPRL) carried out the bidding procedure. The viability gap financing (VGF) requested, which was limited to 60% of the project cost (Rs 3,420 crore), was the only factor used to choose the winner. According to the Economic Times, Megha’s bid defeated two other rivals by coming in barely below this cap.
According to the same research, ISPRL operates underground caverns near Visakhapatnam, Mangaluru, and Padur, which together account for over 39 million barrels of India’s current SPR capacity. This is significantly less than the 727 million barrels that the United States and China maintain, respectively, and the over 1.2 billion barrels that China has. It is anticipated that ISPRL would shortly complete a deal with Megha Engineering and provide a 214-acre block of land near Padur for the new plant at no cost. According to The Economic Times, the agreement may also require the business to partly fill the reserve in order to satisfy the government’s disaster readiness objectives.
Investment and Pipeline Plan
Megha will be able to recoup its investment by leasing space to the government or oil corporations and selling the stored petroleum with full commercial freedom, the business daily said. Leasing provides a steady income, while trading is riskier and needs specialized expertise. However, in the event of a national emergency, the government will have first rights to the crude, guaranteeing that the storage facility remains a strategic and economic asset.
The Padur proposal also include the construction of onshore and offshore pipelines, as well as systems for loading and unloading oil, according to The Economic Times.
Megha’s New SPR Venture
According to the research, Megha Engineering is best recognized for its EPC contracts in the oil and gas industry, which include rig supply, pipeline laying, and refinery development. For Hindustan Petroleum, it is also building an underground LPG storage facility. However, the Hyderabad-based company will embark on a new chapter by operating an SPR.
The concept of corporate involvement in India’s strategic oil reserves has been around for over ten years, as The Economic Times recalls. Two public-private partnership projects, one at Padur (2.5 MMT) and another at Chandikhol in Odisha (4 MMT), received in-principle clearance from the Union Cabinet in 2018. According to the report, it took a number of years to create a structure that would be attractive enough to attract private companies, which led to this historic agreement with Megha Engineering.