India ‘s oil security |
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On July 27, 2005 , as a major fire engulfed the Bombay
High North oil platform, 130 km off the Mumbai coast, the impending casualty
figures were not the only cause of concern. The platform, India’s largest,
with an output of nearly 110,000 barrels per day (38 % of India’s domestic
crude oil output), is a significant contributor to India ‘s total crude oil
production. Moreover, the facility produces 15 % of India’s gas output and in
the aftermath of the accident, this figure was down to a fifth. In fact, the
concern was so acute that Prime Minister Manmohan Singh himself had to issue
a statement allaying fears of a shortage of petroleum products in the
country. But the tragedy did enough to raise a question mark over India’s energy
security. For some inexplicable reason, energy security has
traditionally not been a prominent issue on our radar screens. In fact even
in the aftermath of the first major global oil crises of 1973 when the price
of oil topped the US$60 to a barrel mark, India did not wake up from her
slumber. Today, energy dependent India imports upto 73 per cent of her energy
requirements. India is expected to grow by at least 6 per cent every year for
the next ten years. This means that India’s energy needs will grow annually
at an average of 4 per cent as against a global average of 2 per cent; by
2015 therefore, India will import 85 per cent of her energy needs. India ,
already the sixth largest in terms of global energy consumption, along with
China , Japan, and the US , will become one of the largest importers of oil
and natural gas. Not until the middle of the last decade did the phrase
‘energy security’ find notable mention in our public discourse. But then
reality began to stare us in the face. Be it Central Asia, the Middle East,
Africa or South America, China was frantically buying up oil fields or stakes
in them in these parts of the world and was entering into strategic alliances
with global oil majors in a bid to secure its energy needs so that its
explosive growth may not in any way be stalled. This sent the establishment in New Delhi into an
overdrive. September last year saw India intensify her moves on the oil
diplomacy front. Petroleum and Natural Gas Minister Mani Shankar Aiyar went
on record calling for a “new Asian order” for petroleum, by bringing together
or co-opting oil producing and importing countries in the continent on a
single platform. Aiyar wants to set up an ‘Organisation of Oil Importing
Countries’ on the same lines as the Organisation of Oil Exporting Countries
(OPEC). India ‘s newfound vigor in the area of oil diplomacy
manifests itself on two counts: 1. As a first
step, India wants to ensure relative price stability in the oil market by
creating a more unified Asian market, establishing petroleum exchanges and
synergising research and development activities in this field. 2. The second
deals with building up strategic relationships and consolidating the existing
ones with countries and companies. The oil sector is India’s cash cow. With an annual
turnover of US$ 90 billion, it contributes nearly US$ 13.6 billion a year to
the national exchequer and accounts for more than 25 per cent of the total
tax revenues. But then there is a flip side too. The energy sector accounts
for one of the highest rates of foreign expenditure by any Indian industry
sector; the figure stands at a whopping US$ 14 billion annually. Since the Indian government deregulated the petroleum
industry, the first major discovery of gas by the private industry was by the
Reliance Group in the Krishna-Godavri region of Southern India. This was
followed by Carin Energy’s find in the Western Indian state of Rajasthan.
These finds are in addition to various off-shore and on-shore oil and natural
gas fields already being operated by state owned companies like Oil and
Natural Gas Corporation (ONGC), Oil India Limited (OIL), Indian Oil
Corporation (IOC), GAIL etc. These companies operate chiefly out of Assam and
Arunachal Pradesh (North Eastern India), Krishna-Godavri basin ( Southern
India) and off the cost of India’s financial capital Mumbai (Bombay-High). India ‘s crude oil refining capacity is roughly 124
million tons or 2.1 million barrels per day. If one factors the projected
growth in annual oil and natural gas consumption, the total requirement of
petroleum products would jump from the present figure of 96 million metric
tons per annum (mmpta) to 396 mmpta by 2025, an increase of nearly four
times. This explains the urge to look beyond India’s boundaries in search of
‘liquid gold.’ “If China could do it, so can we,” say the powers- that-be
in New Delhi . ONGC Videsh Ltd. (OVL), the subsidiary of the state controlled
ONGC already has equity stakes in oil, LNG and natural gas fields located in
Sudan Siberia, Vietnam and Mayanmar. In addition to this a consortium of
public sector companies (including OVL) has struck a 7.5 million tonne a year
LNG-for-oil deal with Iran. The chief suppliers of oil and natural gas to India have
been the countries of the Persian Gulf and the Middle East , a region that
India has traditionally had close liaisons with. This region, home to nearly
3.5 million Non Resident Indians (NRIs), has a two way trade of over US$ 20
billion with India and this trade is likely to grow with various long term
joint venture projects already in place. The second principal supplier is Russia, India’s
traditional ally. Indian oil companies are partnering Russian oil majors in
developing oil fields and more joint ventures are already in the offing.
Central Asia has suddenly become the focal point of India ‘s hunt for scarce
global reserves of energy. The Delhi visit of Uzbek President Islam Karimov
in April this year only highlights Delhi’s growing engagement with not just
Uzbekistan (the sixth largest producer of oil in the world) but with the
region as a whole. Efforts are already on to make Kazakhstan and Turkmenistan
natural gas suppliers to India via a proposed pipeline through politically
unstable Afghanistan . Africa , the third major supplier of energy to the world,
has historically not evoked much interest in New Delhi . Africa however, is a
happening story and the mandarins in New Delhi have realised this fact.
Sub-Saharan Africa holds 7 per cent of global oil reserves and accounts for
11 per cent of the world’s produce of oil. In fact in 2001, out of the 8
billion barrels of oil reserves discovered, nearly 7 billion were in West and
Central Africa. With oil production from this region set to increase from the
current output of 3.8 million barrels per day (mb/d) to about 6.8 mb/d by
2008, its time New Delhi cultivated long lasting relations with the countries
of this region. Latin America is another region that is suddenly making
its presence count in the world energy market. India already has significant
stakes in Venezuela ‘s energy sector and is gunning for more business in
Columbia , Cuba, Ecuador , Argentina and Trinidad and Tobago . Then there is the much-hyped Iran-Pakistan-India gas
pipeline the origins of which may be traced to the Balusa group. This group ,
supported by the United Nations Development Program (UNDP) and the
Rockefeller Foundation, is the brainchild of India-born Pakistan bred and US
based brother-sister duo of Taufiq Siddiqui and Shirin Tahir-Kheli and
comprises Indian and Pakistani generals, analysts, economists and scientists,
The 2700-km pipeline will connect South Paras, an
off-shore area in the Persian Gulf (off the coast of Iran) to Rajasthan and
Delhi in India , via Balochistan, Sindh and the Punjab in Pakistan and will
carry 3.2 billion cubic feet of methane every day. Strategic implications of
the pipeline go far beyond just securing India’s energy requirements. If this
deal worth US$ 5 billion does indeed come though (and the omens are good, the
opposition from the US notwithstanding), it would change the geo-political
landscape of the South Asian region and will usher in an era of peace in the
sub-continent. India is also looking east and there is already talk of
connecting India to Mayamnar via Bangladesh, a country, that in Aiyar’s
words, “is literally floating on gas.” But there are those who discount India’s quest for foreign
oil. Skeptics argue that merely mopping up oil from foreign shores and
shipping it to India does not really mean that we have secured our energy
needs. India sits on top of one of the largest coal reserves in the world. It
is estimated that we have 92 billion tons (and growing) of proven coal
reserves, one-third of which can easily be mined. The trick, say analysts,
lies not in importing oil and gas but in harnessing this resource which is so
readily available to us. Our current yearly production at around 400 million tons
is grossly inadequate. Till not too long ago, India exported coal (mainly to
Nepal and Bangladesh); last year our power plants had to import 10 million
tons to make full utilisation of their capacity. Even one per cent increase
in thermal energy output requites 5 million additional tons of coal. If one
considers India’s projected energy requirement in the next five years, this
shortfall is expected to rise to 50 million tons by 2008-09 and to 80 million
tons by 2011-12. The long-term answer to our energy woes lies in the
privatisation of only the coal industry per se but also the process of coal
prospecting. We must open the gates for domestic private investment and
foreign money to flow into the coal industry. Private mining of coal, except
for captive purposes is forbidden in India and the nationalized coal industry
suffers from huge inefficiencies and excess labour (and yes, lopsided labour
laws). The use of nuclear energy in order to quench India’s
thirst for energy is has often come under intense scrutiny. The biggest
challenge that the country faces here is the fact that India has an immense
shortage of high-grade uranium. Indian uranium being low grade is about seven
times as costly as that available internationally. The known sources of uranium (at Jaduguda) are fast
depleting and there is no willingness on the part of the government to start
mining at two locations (Domiasiat and Nalagonda) in the southern Indian
state of Andhra Pradesh, which have proven uranium reserves. On the other side,
India has massive reserves of thorium and the need of the hour therefore is
to bridge the gap between the shortage of natural uranium and the available
thorium. This is what the formed the crux of a plan for India’s future energy
needs, devised by Homi Bhabha, the father of the Indian nuclear program. Even after Prime Minister Singh’s recently concluded
“successful” visit to the US, wherein the hosts promised “full civil nuclear
co-operation,” there is no clarity on exactly which Indian nuclear installation
will be opened up for international inspection. And then there is the
question of used nuclear fuel. Nearly 60 tons of spent fuel was produced for
30 years by the Tarapur nuclear facility alone. India is not allowed the
reprocessing of this spent fuel and there is every danger that this will get
degraded over time. The Indo-US agreement however was silent on this issue
and skeptics are not amused. It was in the 1970s that the real potential of renewable
energy sources was identified in India for sustainable energy growth. The
contribution of renewable energy-except hydel energy and conventional
biomass-as a proportion of global energy output is pegged at a paltry 2%.
This scenario in all likelihood will not change drastically, which means that
this figure will be 5% by 2020. Since 1980 a significant thrust has been given to the
development, trial and induction of a variety of renewable energy
technologies for use in different sectors, such as biogas, biomass, solar
energy, wind energy, small hydro power and other emerging technologies. In the sphere of solar energy use, solar photovoltaic (PV)
and solar thermal technologies are being used for a host of industrial and
commercial applications, as well as in Non Electrified and Rural Zones
(NERZ). The country has the world’s largest assemblage of solar
photovoltaics, consisting of about 500,000 PV systems totaling to 39 MW, and
encompassing over 30 variegated operations. The scramble for energy security has begun in earnest, is
it a case of too little too late? Only time will tell. |
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