Seeking Energy Security Through IBSA

Garima Singh

Prime Minister Manmohan Singh’s recent visit to Brazil has set the stage for a new era in South-South cooperation across three continents: Asia, South America and Africa.  The visit is significant due to the fact that the Indian Prime Minsiter chose to participate in the India-Brazil-South Africa (IBSA) summit and the Non-Aligned Movement (NAM) summit in Havana over the United Nations General Assembly, which is being held from September 19-27, 2006. This was the first summit of IBSA initiative, launched three years ago, as a forum for South-South cooperation. This reflects India’s strategic thinking that diversification of energy sources is vital keeping in mind the shocks and disruptions that can be reasonably expected in energy supply. 

Among the several issues discussed in the IBSA summit, energy security appears to have found a prominent place. Over the past few years Indian economy has grown at over six per cent per annum. Given the fact that gross domestic product (GDP) per capita and energy consumption have a close correlation, energy needs are likely to rise dramatically as the economy grows at 7-8 per cent a year.  Indian crude oil use is expected to rise from 105 million tonnes in 2001 to 264-324 million tonnes in 2024-25. Similarly, the demand for natural gas is estimated to increase from the current 62 million metric standard cubic metres per day to 195-225 million metric standard cubic metres per day in 2025, and the demand for coal from 473 million tonnes in 2006-07 to more than 1,100 million tonnes in 2024-25.  It is estimated that India’s oil import dependence is expected to increase. Most of the oil import is likely to be from the politically unstable Middle East. Hence, prudence demands that India look for alternative sources of energy supplies. India is exploring the possibility of importing natural gas from various countries like Russia, Myanmar, Bangladesh, Vietnam and Iran.

India has been trying to diversify its energy sources by investing in oil assets outside the country. It currently imports nearly three-fourths of its crude oil needs, mostly from the much turbulent Middle East. The focus on energy security is driven in part by limited oil stock and by high oil prices, which have doubled over the past three years. The current attention on India’s energy security is fuelled by the threat of terrorism and instability in the oil exporting nations, fears of a scramble for supplies, geopolitical rivalries, and countries’ need for energy to power their economic growth. The change in Indian thinking on energy can be understood by the maiden draft energy policy. The draft report examines the relevant issues from the point of view of energy requirements and supplies options, and also attempts to address energy security. The report is an attempt by India to take a macro view of the emerging energy scenarios in the context of a 7-8 per cent GDP growth.

The Prime Minister’s visit to the IBSA summit reflects on this line of thinking. Brazil has an advantage of being a producer of alternative fuel ethanol, which would go a long way in securing India’s energy needs and in the areas of agricultural technology, offshore drilling techniques and aerospace. ONGC Videsh Ltd (OVL) will be taking advantage of opportunities in Brazil and has put out $ 400 million for acquiring stake in southeastern Brazil. Reliance Industries Limited (RIL) is gearing to set up a global scale ethanol facility in Brazil. India currently has to import up to 30 per cent of its requirement of industrial alcohol or ethanol. Therefore, blending ethanol with petrol will be cost-effective and help reduce dependence on expensive petro-products. The cost of production of ethanol in Brazil will come to one-third of India, primarily because of the abundant land available. Bharat Earth Movers (BEML) has acquired a 60 per cent stake in Compressor Controls Corporations (CCC), a Brazilian maker of mining equipment. India can offer Brazil opportunities in information technology, biotechnology and pharmaceuticals.

South Africa, by virtue of its large uranium reserves, can be one of the leading sources of uranium for India’s growing uranium needs as India works to develop nuclear energy as one of sources of energy. South Africa has an estimated recoverable uranium resources of 354,000 tonnes, 11 per cent of the world total. Though, South Africa is a net importer of oil and gas, it has a well-developed synthetic fuel industry supported by abundant coal resources. Sasol is one of the world’s largest coal liquefaction plant. Coal, on the other hand, is the most important and abundant fossil fuel in India and accounts for 55 per cent of India's energy need. Coal liquefaction technology from South Africa can be used to reduce the mining and operation costs in India. India must also master 'clean coal' technologies such as integrated gasification combined cycle (IGCC) plants, which turn coal into a gas and then remove impurities from the gas before it is combusted. The result is far fewer emissions of greenhouse gases and other pollutants. The United States has also offered to collaborate with India in the more advanced field of coal-fired power stations with zero emissions, though at present the potential to develop those looks uncertain and is very much a long-term project. The current business relationship with South Africa may help in reaching out to the latest technologies in coal mining and processing.

Prime Minister Manmohan Singh met the Iranian President, Mahmoud Ahmedinejad, on the sidelines the 14th Non-Aligned Movement Summit at Havana on September 15. This meeting came after some bitterness had crept into India-Iran relations since India voted against Iran in the International Atomic Energy Agency (IAEA) in September 2005. India is making efforts to rebuild the relationship with Iran concerning the proposed project to run a gas pipeline from southern Iran to India via Pakistan. India and Iran also held talks to work jointly in different parts of the world including Central Asia, Africa, Latin America, in various economic spheres, transportation, trade and industry and energy in particular. The Prime Minister also met the Venezuelan President, Hugo Chavez, and discussed the potential for investment in the Indian energy and infrastructure sectors. The possibility of investment by Venezuela, a major oil producer, in India’s infrastructure was also discussed.

India has to continuously look for new energy sources and exploit new technologies. It is time India looks beyond the present set of energy suppliers. The Indo-US nuclear agreement is also based on the fact that India wants to maintain the right mix of energy sources, which ranges from clean coal, oil and gas to renewables such as wind and solar power and nuclear energy. The IBSA group has supported the Indo-US civil nuclear energy co-operation, which has drawn much criticism both in India and abroad especially on count of proliferation concerns. The IBSA group has lent its support for forward-looking approaches to enhance international civilian nuclear cooperation.

India is at the threshold of a new phase in its drive for energy security. The new strategy of diversifying energy sources will help India in ensuring adequate energy supplies. India is taking steps to reduce vulnerabilities by new investments in exploration, development and pipeline projects, new supply arrangements and new technologies. The shift in India’s energy policy priorities now seems evident and augurs well to attain the estimated GDP growth of 10 per cent.  

The writer is a Associate Fellow at Observer Research Foundation,New Delhi