New Delhi: Concerned over volatility in crude oil supplies and prices, Prime Minister Atal Behari Vajpayee said on January 10 "oil security" was crucial to India and favoured creation of a buffer to meet any eventuality in the case of tensions in West Asia that could lead to prolonged supply shortages.

"Oil security has come to occupy a key position in the present policy matrix of our government. We are examining the feasibility of establishing strategic storage of crude oil and petroleum products in our country to create a buffer for meeting unforeseen disturbances and strengthening India's oil security," Vajpayee said at the 5th international petroleum conference, Petrotech 2003.

Warning that crude oil prices may shoot up if tensions in West Asia rise, leading to a prolonged shortage of supplies in the world oil market, Vajpayee, in his keynote address, said, "This may adversely affect our national economy. Recent developments have already affected oil markets and sent prices upwards."

"We have also embarked upon a detailed study to identify ways to minimise supply risk from external sources," he said emphasising that security of supplies had become one of the most important challenges, particularly for nations that were increasingly dependent on oil imports for their sustained economic growth.

Cautioning that without substantial domestic production, the nation would be subject to the volatility in crude oil supplies and prices and 'oil security' would be difficult to achieve, Vajpayee said, "We are aware of the need to find viable strategies to explore, produce and refine more from our own hydrocarbon resources."

It is for achieving this objective India had opened up the petroleum sector, where public sector undertakings (PSUs) had been pre-dominant in the last four decades, for private and foreign investment, Vajpayee said.

Not only government had encouraged both domestic and international enterprises to supplement the efforts of PSUs, the petroleum companies were also looking to new areas both within the country and outside to match the rapidly growing demand for petroleum products.

"In the petroleum industry, globalisation has provided an opportunity for India to be a significant centre for equipment and services both in upstream and downstream sectors," he said.

Vajpyee promised to put in place a transparent and independent regulatory system to ensure a healthy and sustained development of the hydrocarbon sector in the country and said, "The Petroleum Regulatory Bill is before Parliament and we will strive to ensure its early passage."

PTI