The Union cabinet has allowed Abu Dhabi National Oil Co (ADNOC)to export oil from its Mangalore strategic petroleum reserve (SPR), a minister said, marking a policy shift that could enhance foreign participation as India seeks to expand its storage capacity.

Allowing ADNOC to export its oil mirrors a model adopted by countries such as Japan and South Korea which allow oil producers to re-export crude storage. India does not allow oil exports.

"The move will facilitate trade for ADNOC," Prakash Javadekar, minister of environment, told a news briefing.

ADNOC had been seeking permission from the Indian government for the export of its oil from the cavern as it was finding difficult to sell to Indian refiners, some of which have cut crude processing due to falling demand.

ADNOC can now export oil stored in the Mangalore SPR in foreign flagged ships. So far Indian flagged ships were used for coastal movement of the oil from the cavern.

Indian companies will have a first right of refusal in case of any re-exports by ADNOC, a government source said.

India, the world’s third-biggest oil importer and consumer, imports about 80% of its oil needs and has built strategic storage at three locations in southern India to store up to 5 million tonnes oil to protect against supply disruption.

India also plans to build strategic storage at Chandikhol in Odisha and Padur in Karnataka for around 6.5 million tonnes of crude.

The Indian Strategic Petroleum Reserve Ltd has leased half of the 1.5 million tonnes capacity in Mangalore storage to ADNOC, while ISPRL has retained the remainder.

The previous lease allowed ADNOC to sell only 35% of its oil stored in Mangalore to Indian refiners and another 15% with permission from the government. The remainder was kept for India’s needs.