The Great New Game

In an environment of global competition for energy resources, described variously as the 'New Scramble for Africa' and a 'New Cold War', India sees energy security as inherently cooperative in character

Talmiz Ahmad Delhi

India is the fifth largest consumer of energy in the world, accounting for 3.7 per cent of the world's consumption. Its total primary energy demand is expected to almost double by 2030.  Its primary commercial energy consumption in 2004 stood at 375.8 mtoe. This was made up of coal -- 54 per cent, oil -- 32 per cent, natural gas -- eight per cent, hydroelectricity -- five per cent, and nuclear energy -- one per cent. India's commercial energy consumption is expected to double to 812 mtoe in 2030.

The Hydrocarbon Vision 2025, published in February 2000, set out in stark terms India's energy security predicament. It showed a decline in the country's crude oil self-sufficiency from 65 per cent in 1989-90 to 30 per cent in 2000-01, with the situation likely to get worse. India's demand for oil is expected to increase from 122 million tonnes in 2001-02 to 196 million tonnes in 2011-12, and 364 million tonnes in 2024-25.  Domestic production during this period would increase from 26 million tonnes to 52 million tonnes in 2011-12, and to 80 million tonnes in 2024-25. In 2024-25, crude oil self-sufficiency would be a mere 15 per cent. The situation relating to gas is equally grim.

In September 2006, the Planning Commission published the Integrated Energy Policy (IEP), which took a holistic view of India's energy interests.  According to the IEP, India needs to sustain an eight per cent to 10 per cent economic growth rate over the next 25 years to eradicate poverty and meet its human development goals. To meet these targets, the country has to increase its primary energy supply three to four times, and its electricity generation capacity/supply five to six times of 2003-04 levels. Thus, by 2031-32, power generation capacity must increase to nearly 800,000 MW from the current capacity of around 160,000 MW, inclusive of all captive plants.

To achieve these targets the country will have to make a major effort to boost domestic resources, maximise the use of the national hydropower potential, obtain the materials and technologies to pursue civilian nuclear power projects, pursue energy efficiency and demand side management policies. It will also have to diversify energy sources through increased use of renewables. In spite of these efforts, for the next 25 years at least, fossil fuels will dominate our energy requirements, being between 74 per cent and 85 per cent of the energy mix as against 94 per cent at present.

To meet the challenge of energy security, the Vision 2025 document had proposed a robust effort to expand domestic production of oil and  gas by liberalising the oil sector, encouraging    the entry of private Indian and foreign companies, and investments in technology and research and development. An important component is India's 'energy diplomacy'; this consists of robust and multifaceted engagements across the world. These overseas engagements are aimed at securing the following:

• Significant enhancement of domestic resources and capabilities by bringing in state-of-the-art foreign technology and expanding the national knowledge-base.
• Acquisition of assets abroad. These are of two types: Equity participation in producing fields. And exploration and production contracts in different parts of the world, on-shore and off-shore.
• Participation in downstream projects (refineries and petrochemicals) in producer and consumer countries on the basis of criss-cross investments.
• Finalisation of long-term LNG (liquefied natural gas) contracts.
• Setting up of trans-national gas pipelines.
• Promotion of dialogue between producers and consumers, at regional and global levels, to encourage investments, and develop capabilities, resources and infrastructure.

The development of Sino-Indian cooperation in the hydrocarbon sector culminated in the then Petroleum Minister Mani Shankar Aiyar's  visit to China in January 2006, when the two sides identified certain specific areas for bilateral cooperation: upstream exploration and production, refining and petrochemicals, the marketing of products,  national and transnational oil and gas pipelines, energy efficiency and conservation programmes and promotion of eco-friendly fuels. Since the visit, bilateral exchanges between Indian and Chinese companies have intensified and joint bids for assets acquisition in third countries have been successful in Syria and Columbia.

Saudi Arabia is India's largest supplier of crude oil, meeting 25 per cent of its annual requirements. During the visit to India of King Abdullah bin Abdul Aziz in January 2006, the two countries agreed to transform their commercial ties into a “strategic energy partnership”. This will be concretised through investments in each others' downstream and petrochemicals projects, as also by India's participation in Saudi Arabia's upstream proposals in the gas sector.

Russia, Japan, Republic of Korea and Norway have emerged as important partners for Indian companies for the development of domestic resources and capabilities. This covers issues such as increased oil recovery (IOR) and enhanced oil recovery (EOR), commercial and strategic storage, promotion of conservation and of environmental friendly fuels, training, health and safety, development of unconventional energy resources such as coal bed methane, underground coal gasification and gas hydrates, and, above all, pursuing equity participation and exploration and production proposals in third countries. India has set up mutually beneficial ties with Nigeria, Angola and Egypt in Africa, and Columbia, Ecuador, Venezuela and Cuba in Latin America.

India's oil diplomacy has begun to yield results. We have a 25 per cent equity participation in an oil-producing field in Sudan, which provides India with three million tonnes per annum. Other producing fields in which India has equity stakes are in Russia (Sakhalin I), Vietnam and Myanmar. Two agreements for supply of five million tonnes of LNG have been finalised with Qatar and Iran.

India is vigorously pursuing transnational gas pipeline projects. The Iran-Pakistan-India pipeline is expected to bring Iranian gas to India in 2010-11, which will be utilised to fuel power and fertilizer projects and industry in the north, north-western and central India. India will be participating in the Turkmenistan-Afghanistan-Pakistan-India [TAPI] pipeline. This will give us access to Central Asian gas resources and augment the supplies received from Iran.

While the technological, financial and political challenges involved in the successful implementation of transnational pipeline projects are obvious, the availability of abundant hydrocarbons within Asia, as also the overwhelming demand for this resource, ensures that concerns of national security and energy security can and should coalesce. This complementary interest in energy security of producers and consumers constitutes the strongest factor which is encouraging policy-makers to replace contemporary political discord with energy-based cooperation.

India took the first significant step in promoting such cooperation at a regional level by convening a Round Table Conference in January 2005, involving the four principal Asian oil-consuming countries — China, Japan, Republic of Korea and India — getting into a dialogue with the principal oil-producing countries of West Asia and Southeast Asia. The 11 participating ministers agreed on a consensual programme of cooperation that included studies to reform the Asian oil markets, promotion of investments, joint ventures for exploration contracts, and enhancement of Asian capabilities in regard to conservation, environment-friendly fuels and non-conventional energy sources. A second round table was convened in November 2005, on the promotion of oil and gas linkages in Asia.

In an environment of strong global competition for energy resources, described variously as the 'New Great Game', the 'New Scramble for Africa', and even a 'New Cold War', India sees energy security as inherently cooperative in character. This logically emerges from the realities of the contemporary global hydrocarbon scenario. A major mobilisation of the world's capabilities and resources has to be mounted to explore and develop the world's hydrocarbon potential which is available in diminishing quantities, with individual discoveries smaller than before and difficult to access. Again, energy security is not just a question of protecting supply sources: it encompasses the protection of the entire energy supply chain and infrastructure, that is, production facilities, transport, refining, pipelines, storage facilities, power plants and transmission lines.

The global rise in hydrocarbon demand has encouraged multi-national cooperative ventures. This involves oil and gas explorations in new areas, besides encouraging the development of unconventional energy sources such as heavy and ultra-heavy oils, shale and tar sands, coal bed methane, clean coal technologies and non-conventional sources such as solar, wind and tidal power. The recent surge in oil prices, even as it has adversely affected economies in different parts of the world, has called for greater scrutiny of the organisation and functioning of the world's oil markets — their non-transparent and non-rational foundations and procedures -— which calls for reform, particularly from developing countries that are seeing their hard-earned resources wither away with their development programmes in crisis.

The writer is Director General, Indian Council of World Affairs. The views expressed here are his own