ADNOC has a similar storage deal already at the Mangalore strategic storage in Karnataka.
Abu Dhabi National Oil Co. (ADNOC) has signed a preliminary agreement to use half of the Padur strategic reserve facility in India, which can store about 2.5 million tonnes or 18 million barrels of crude, the UAE firm said on Monday.
Officials of Indian Strategic Petroleum Reserves Ltd (ISPRL) and ADNOC signed the memorandum of understanding in the presence of Oil Minister Dharmendra Pradhan and ADNOC Chief Executive Sultan al-Jaber.
India, the world's third biggest oil importer, is scouting for partners to fill the reserves and also to build new storage to hold oil reserves and to cut costs.
"It is our firm hope that we will be able to convert this framework agreement into a new mutually beneficial partnership that will create opportunities for ADNOC to increase deliveries of high-quality crude oil to India's expanding energy market and help India meet its growing energy demand and safeguard its energy security," the ADNOC CEO said in statement.
The announcement confirmed an earlier Reuters report.
India, which relies on oil imports for about 80 percent of its needs, has built underground emergency storage in three places to protect itself from any disruption. The reserves can hold 36.87 million barrels or about 9.5 days of average demand.
ADNOC, the only foreign company with a deal to store oil in India's strategic reserves, has a similar storage deal already at the Mangalore strategic storage in Karnataka.
"This agreement reflects the strong bonds of cooperation between India and the UAE and provides a foundation for strengthening and expanding our strategic energy relationship," Mr Pradhan said in the statement.
The agreement allows ADNOC to sell oil to local refiners but would give the government of India the first right to the oil held in the reserve in case of an emergency.
Mr Pradhan said earlier on Monday that India was also in talks with Saudi Arabia to store oil in Padur, after India's cabinet approved a plan last week allowing foreign firms to store oil in the facility.
"Participation by foreign oil companies will significantly reduce budgetary support of government of India by more than 100 billion rupees ($1.38 billion) based on current prices," Law Minister Ravi Shankar Prasad told a news conference last week.
The Padur site is about 5 km from the southwest coast and 40 km from Mangalore Refinery and Petrochemicals Ltd's refinery.