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India is emerging on the global scene as a major consumer of energy. India produces 32 million tonne (mt) of oil but requires 113 mt. This is despite the fact that the average Indian’s energy consumption is less than a fifth of the global average. There is a deficit of 70 percent between demand and supply of energy in India that could go up to 85 percent over the next 20 years. Moreover, to fuel 7-8 percent economic growth, India’s energy consumption will have to increase by 5 percent per annum, up to 2010-11. Thus, it follows that if India wants its desired growth, it has to increase its reservoir of energy or import it.
Total energy consumption in India comprises of coal, oil, gas, hydro and nuclear. In the coming days, demand for gas will rise faster than other sources. India is working in earnest to convince its neighbours that the quest for energy security should override political reservations. The Government of India (GoI) is trying hard to bring Pakistan, Bangladesh, China, Japan and Saudi Arabia, together to create an energy security zone, which will prove beneficial for concerned parties.
India’s initiatives
India is taking diplomatic initiatives to secure oil and gas from the Gulf, Russia and Africa. After already initiating diplomatic parleys with Sudan, Russia, Vietnam, Iran and Myanmar with regard to importing energy sources, New Delhi is “pursuing new opportunities in Columbia, Cuba, Ecuador, Trinidad-Tobago, Brazil and Argentina,” said K Natwar Singh, Foreign Minister of India. The special challenge for India’s oil diplomacy lies in setting up energy-related engagements by consolidating existing relations with concerned countries and reaching out to new avenues. India has historic links with the Gulf region for over 50 years, and now Africa provides another opportunity for India. The challenge for India is to engage in a deeper diplomatic dialogue with African countries.
To reduce over-dependence on Middle-East countries for its energy requirements, India has emerged as a new entrant to the ‘great game’ of oil hunt in Central Asia. Both India and China are going to be key players in this new ‘great game’ due to their rapid economic growth and insatiable demand for energy.
China is profusely investing in Angola, Sudan, Indonesia, and also in the Caspian basin. The manner in which China seized opportunities in Sudan and Angola deserves much thought for India’s energy ministry. “Earlier ONGC Videsh...was on the verge of completing a deal that would have given it an 11percent stake in a proven oilfield in Sudan. While the company waited for the necessary approval from India’s Cabinet, China National Petroleum Corporation (CNPC) swooped in with an offer that was reportedly 17 percent higher, and snatched the oil deal for China,” reported Time.
Manishankar Aiyar, the Union Minister for Petroleum and Natural Gas, nicknamed as India’s first oil diplomat, has been lending government’s support to the ongoing efforts of ONGC and others. In his first bid at the Organisation of Petroleum Exporting Countries (OPEC) meeting in Vienna, Aiyar coaxed his Iranian counterpart to offer a stake in the Yadaveran oilfield. As a result, Indian Oil Corporation (IOC) signed a memorandum of understanding (MoU) to develop the South Pars gas fields, at a cost of US$3 billion (phase wise). He also secured a place for India in Kurmangazy and Alibekmola oilfields of Kazakhstan with a massive US$3 billon investment ($1.5 billion in Sakhalin III and $1.5 billion jointly with Russia). As a result of this investment, India is now importing 4.5 mt per annum, and it is expected to rise to 20 mt in 2012.
Furthermore, to give an impetus to the process of oil diplomacy, India has appointed a standing committee, which is headed by former diplomats. And the Union Ministry for Petroleum and Natural Gas is working with the Ministry of External Affairs (MEA) to chalk out amicable solutions.
Pipeline for peace
The new dimension of India’s oil diplomacy is heading towards construction of pipelines through countries. The issue of the pipeline route has assumed strategic dimensions, in relation to the question of energy security. The question of oil pipeline control has gained prominence due to the fact that the country that eventually turns out to be the outlet for energy would acquire significant privileges. Therefore, apart from the economic considerations, political parameters have also been injected into the picture. The ‘pipeline diplomacy’, as it is called, has assumed new dimensions and political rivalry between Russia, United States, Iran, India, Pakistan, Bangladesh, etc., have come into the picture, regarding the determination of the final pipeline route. According to many analysts, Iran can be considered as a natural oil and gas market of the Caspian region.
In the coming days, India and Pakistan have to depend heavily on natural gas. India’s gas demand will almost double by 2015, and due to decline of its reserves, it will be forced to import increasing amounts of gas. Iran—with the world’s second largest gas reserves—is slated to be the most convenient supplier of gas to both the countries. The most preferred one is an overland pipeline through Pakistan, the second one is a shallow water pipeline through Pakistan, the third one is through a deep-sea pipeline, and the fourth one is to ship the gas in Liquified Natural Gas (LNG) form. A land-based pipeline is four times cheaper than any other option.
But for a long time the prevailing political tension between India and Pakistan has made it difficult for Delhi to accept an energy project passing through Baluchistan, in southern Pakistan. In order to gain a broader market for its gas, Iran is trying to gain political support from India, and in return, it has awarded Indian gas companies major service contracts and allowed them to participate in refining and other energy related projects.
Iran’s relation with Pakistan is strategically important and thus a gas pipeline from Iran to India through Pakistan is a ‘win-win’ situation. However, this ‘win-win’ situation is repeatedly threatened by terrorist attacks in Baluchistan. Pakistani President, Gen. Pervez Musharraf warned the Baluch tribesmen to stop violence: “Don’t push us…it is not the 1970s, and this time you won’t even know what has hit you,” he said. Only time will tell whether the proposed Asian gas pipeline could be a pipeline for peace.
A conclave of progress
The assembly of petroleum purchasing and selling nations in New Delhi, organised by the Ministry of Petroleum and Natural Gas, was the first ever effort to forge an Asian market for crude and concerned products to countermand the Organisation of Petroleum Exporting Countries’ (OPEC) price volatility. It was an effort to combine energy, commerce and diplomacy into one fold to secure oil security in the Asian region. The principal Asian consumers—Japan, China, India and Korea—and producers including Saudi Arabia, Kuwait, United Arab Emirates and Iran attended the conclave.
Discussions in the conference centered around the possibility of a price band for Asian countries, and topics pertaining to the nature of crude purchase contracts. There was a suggestion for the creation of an Asian oil market for Asian countries, in line with the Western Texas Intermediate for US markets and the Brent for European markets. However, the problem is that Asian markets are not so well organised as that of American and European markets. Succinctly, the New Delhi assembly was a significant step taken by the Petroleum Minister Mr Aiyar to foster oil diplomacy.
However, always playing the game of diplomacy will not suffice for long term energy security in India, at a time when the economy is heading towards rapid growth. India needs a long-term plan, aiming at the right mix of hydel, thermal, fossil fuel, wind, and nuclear sources of energy. India needs to firm up arrangements to get hydel power from neighbours like Nepal and Bhutan, gas from Bangladesh, and above all, make the Iran-Pakistan-India gas pipeline a reality. On this account, the Petroleum Minister’s efforts need to be supported by other ministries, so that our dependence on Middle-East countries for petroleum and gas comes down and our energy security is not in any way compromised.
(With inputs from Shakti Pradayani, JNU, New Delhi)
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