Megha Engineering to Build India’s First Private Strategic Oil Reserve: All About the Project

Hyderabad-based Megha Engineering & Infrastructures Ltd (MEIL) has reportedly won the bid to construct and operate a strategic petroleum reserve (SPR) in India. This would be the country’s first private oil reserve, with a capacity of 2.5 million metric tonnes (MMT).

According to the Economic Times (ET), the Reddy brothers-led engineering, procurement and construction (EPC) giant won a tender floated by the government agency Indian Strategic Petroleum Reserves Ltd (ISPRL). The project aims to build a 2.5 MMT reserve in Padur, Udupi, Karnataka, where a government-operated SPR of similar capacity already exists.

In December 2024, ISPRL floated the tender for the new reserve, estimated to cost ₹5,514 crore. As per the tender documents, the selected bidder will be responsible for designing, financing, developing, managing, and operating the project in accordance with the provisions of the concession agreement.

The ISPRL awarded the Padur project through a competitive bid, based solely on the viability gap funding (VGF) sought by bidders, capped at 60% of the project cost (₹3,420 crore). Megha’s proposal, slightly below this ceiling, reportedly outbid two rivals.

ISPRL is expected to sign the agreement soon and hand over a 214-acre land parcel for the facility. The contract may also require the company to partially fill the reserve to align with the government’s emergency preparedness goals.

Once completed, the new facility will significantly add to India’s existing 5.33 MMT stockpile, which currently provides just 8–9 days of import cover. ISPRL, a wholly owned subsidiary of the Oil Industry Development Board under the Ministry of Petroleum and Natural Gas, was set up to build and operate India’s strategic petroleum reserves.

Under Phase I, it created underground rock cavern storage facilities with a total capacity of 5.33 MMT of crude oil across three locations—Visakhapatnam (1.33 MMT), Mangalore (1.5 MMT), and Padur (2.5 MMT).

Together, these reserves provide India with an overall SPR capacity of 39 million barrels, far below the United States’ 727 million barrels and China’s estimated 1,200 million barrels.

The Union Cabinet gave in-principle approval for SPRs with private participation in 2018, for two public-private partnership projects, Padur (2.5 MMT) and Chandikhol in Odisha (4 MMT).

According to the report, Megha Engineering has proposed to build the SPR at an estimated cost of ₹5,700 crore, with a crude oil filling cost of about $1.25 billion (₹11,020 crore) at current prices. The facility will reportedly take five years to complete and will be operated by the company for 60 years.

Under the terms of the contract, Megha can lease capacity to oil companies or the government and also trade crude stored in the facility. While leasing ensures stable revenues, trading carries greater risks and requires strong expertise.

However, the government will retain first rights over the stored oil during emergencies, ensuring the reserve serves both as a commercial asset and a national safeguard. The project also includes construction of dedicated loading, unloading, and pipeline infrastructure, both onshore and offshore.