India will lease a quarter of its strategic petroleum reserve in Padur to Saudi Aramco to store about 4.6 million barrels of oil, a government official said on Wednesday, as New Delhi seeks global investment in its expanding energy infrastructure.
Global oil producers are eager to gain a foothold in India, where fuel demand is expected to keep rising as the country's economy grows.
Indian Strategic Petroleum Reserves Ltd, a government company charged with building oil storage, signed a memorandum of understanding with the Saudi state firm for its participation in the 2.5-million-tonne facility in Karnataka state.
"Aramco has signed an MoU for only one compartment," said HPS Ahuja, chief executive of the Indian company.
The Padur storage facility has four equal-sized compartments.
So far, Abu Dhabi National Oil Co is the only foreign company storing oil in India's strategic reserves, at Mangalore, also in Karnataka. Last year it signed a preliminary agreement to use half of the Padur reserve.
Ahuja said Aramco would have to keep some of the 4.6 million barrels for India's strategic needs but could sell the rest to Indian refiners.
India, which relies on imports for about 80% of its oil needs, has underground emergency storage in three locations to protect against any supply disruption. The reserves can hold 36.87 million barrels.