This book explores the multifaceted aspects of India's energy security concerns. It sheds light on India's energy insecurity and explores its various dimensions, its nature and extent. It examines the role that trade, foreign and security policy should play in enhancing India's energy security. It is argued that the key challenge for India is to increase economic growth while at the same time keeping energy demands low. This is especially challenging with the transition from biomass to fossil fuels, the growth of the motorized private transport and rising incomes, aspirations and changing lifestyles. The book suggests that at this time there are strong arguments to lessen India's fossil fuel dependence and it argues for a need to engage with all the key sources of this dependence to implement a process of energy change.
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About the Author
Lt Col Vivek Dhall is a serving Infantry officer (Garhwal Rifles) who has served in various operational areas including counter insurgency in J & K (Valley) and high altitude areas. The officer was part of a brigade during Operation Vijay and part of a scouts unit during Operation Parakram. He was awarded Chief of Army Staff Commendation Card while serving in Territorial Army Directorate in Army Headquarters.
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India's Energy Mix
India with the estimated population of 1.24 billion is around 15 percent of the world's population and is the fifth largest consumer of energy resources. India's energy demand continues to rise drastically and exponentially, especially in the transport sector. India lacks sufficient energy resources and hence requires to import most of its energy resources in order to keep an equilibrium between the demand and the supply in the energy sector. In addition to pursuing domestic oil and gas exploration and production projects, India is also stepping up its natural gas imports, especially LNG (liquefied natural gas).
India's energy vulnerability is greater as could be seen in recent years. It has become an oil and natural gas importer which is likely to see an upsurge in future. It is very alarming and threatening trend which shows the dependency of the country on external sources for meeting the energy needs of the country and exposes the self-reliance of the country in the most important energy sector. Although current level of per capita energy consumption of India is extremely low as compared to rest of the world, with a moderate 8 percent growth of GDP, the energy mix size is projected to grow from 433.8 Mtoe in 2008 to 2123 Mtoe in 2030.
India's concern over the energy security arises from increased dependence on overseas supply of oil and natural gas and coal. Overall, India's energy future appears to be dependent on high volume imports of fossil fuel materials.
According to International Energy Agency (IEA), coal accounts for nearly 40 percent of India's total energy consumption followed by nearly 27 percent for renewables and waste. Oil accounts for nearly 24 percent of total energy consumption, natural gas six percent, hydroelectric power almost two percent. Nuclear power comprises only one percent and other renewables less than 0.5 percent. However it is likely to increase in light of civil nuclear energy cooperation deals with USA, France and other countries. In urban areas 93 percent had access to electricity compared to 50 percent in rural areas. Roughly 400 million people do not have access to electricity in India.
According to Oil and Gas Journal, India has approximately 5.6 billion barrels of proven oil reserves which is over 0.5 percent of global reserves with total proven, possible reserves close to 11 billion barrels, the second largest in the Asia Pacific region. India produced roughly 880 thousand barrels per day in 2009 from over 3600 operating oil wells however it consumed 3 million bbl/d making it the fourth largest consumer of oil in the world. It is worth mentioning that 70 percent of oil was imported mostly from Middle East countries primarily from Saudi Arabia followed by Iran. EIA expects approximately 100 thousand bbl/d annual consumption growth through 2011. India was the sixth largest net importer of oil in the world in 2009. EIA expects India to become fourth largest importer of oil by 2025 behind United States, China and Japan and that clearly indicates its growing dependency on the import of oil.
It has been reported that India is looking beyond the Gulf for seeking oil and to open up and explore new channels for the oil import. The investments in overseas oilfields by Indian Companies is expected to reach US $3 billion within a span of few years. India has also invested in Africa in Nigeria and Sudan. It has signed an agreement to purchase about 44 million barrels of crude oil per year on long term basis. India has invested in Syrian company for exploration and development of petroleum. In recent years Indian oil companies have tried to acquire equity stakes in E&P overseas. ONGC Videsh Ltd (OVL) which conducts overseas operations in 13 countries including Sakhlain in Russia, Vietnam and Myanmar in South East Asia, Iran, Iraq, Sudan ,Brazil and Colombia. OVL's investment and its share in the Greater Nile Petroleum operating company (GNPOC) is 25 percent. OVL also holds 20 percent stake in Exxon-Mobil that operates Sakhlain 1 in Russia. Caspian basin is another area where India is trying to befriend the regions leaders and if possible gain a foothold. Also these revelations indicate the desperation and keenness of India to broaden its import capabilities as the demand is continuously increasing day by day.
At the domestic front, the Indian government has drafted policies which are aimed at increasing exploration and production (E&P) of oil. As a part of an effort to attract oil majors with technical expertise, Ministry of Petroleum and Natural Gas created the New Exploration Licensing Policy (NELP) in year 2000. NELP VIII was launched in April 2009 and attracted $1. 1 billion investment. India is currently planning to launch NELP IX. This is a move towards creating an environment for self-sustainability.
India has 2.8 million bbl/d oil refining capacity at 18 facilities. It has the fifth largest refinery capacity in the world. The major refineries are Reliance Industries, Jamnagar complex with refining capacity of 1.24 million bbl/d. It is the largest oil refinery in the World. Other upcoming projects are Vadinar refinery with 110,000 bbl/d, 120,000 bbl/d greenfield refinery in Bina,180,000bbl/d grassroots refinery in Bhatinda.
Strategic Petroleum Reserves
To support India's energy security and a step towards its preparedness to encounter any eventualities in time of crisis, India is constructing a series of strategic petroleum reserves (SPR). The first storage facility at Vishakhapatnam, Andhra Pradesh will hold approximately 9.8 million bbl (1.33 million tons) of crude. The other facility at Mangalore, Karnataka will have a capacity of 11 million bbl (1.5 million tons). The third facility at Padur, Karnataka will have a capacity of 18.3 million bbl (2.5 million tons). The selection of coastal regions for storage facilities was made so that the reserves could be easily transported to refineries during the supply disruption. These facilities are expected to become operational soon. In order to strengthen the energy security measures, availability of such Strategic Petroleum Reserves in large numbers all across the country needs to become operational.
The natural gas is fast emerging preferred fuel of the future in view of it being an environmentally friendly and economically attractive fuel. According to OGJ India has approximately 38 trillion cubic feet (Tcf) of proven gas reserves. India's natural gas reserves comes from Bombay high complex on western off shores. The Bay of Bengal and Krishna-Godavari basin have added to India's energy security capabilities. Natural gas demand is expected to increase considerably owing to its large demand from power and fertilizer sector. It is worth reporting that the power and fertilizer sectors accounts for nearly three quarters of natural gas consumption in India. Despite the steady increase in India's natural gas production, demand has outgrown supply and India has been a net importer of natural gas. India's net imports reached an estimated 445 Bcf in 2009.
The Gas Authority of India's (GAIL) current natural gas pipeline network extends approximately 4100 miles and its transmission capacity is approximately 5.2 Bcf /d. It plans to build close to 3800 additional miles of pipeline by 2013 with total transmission capacity being 10.6 Bcf/ d.
Natural Gas Imports
India's natural gas demand is expected to increase in coming years. To meet this growing demand, a number of import schemes including both LNG and pipeline projects have either been implemented or are being considered.
Liquefied Natural Gas
India began importing LNG in 2004. In 2008 India imported 372 Bcf of LNG nearly 75 percent from Qatar making it the sixth largest importer of LNG in the world. India has two operational LNG import terminals Dahej and Hazira terminals. Dahej terminal in Gujrat has a capacity of 5 million tons per year (mtpa) (975 Bcf/y). India's second terminal Hazira LNG has a capacity of 2.5 mtpa which could be expanded to 5 mtpa in future. The 5 mtpa LNG processing plant at Dabohl has now been commissioned.
Cross Border Pipeline Projects
It is important to highlight the three main pipeline projects on which India is working currently. They are listed below:
Iran– Pakistan–India Pipeline
IPI (Iran-Pakistan-India) pipeline has been under consideration since 1994 by Government of India. The plan calls for nearly 1700-mile, 5.4Bcf/d pipeline to run from South Pars fields in Iran to Gujarat in India. A large number of economic and political issues have delayed the project commencement. Indian government has made it clear that any import pipeline crossing Pakistan would need to be accompanied by a security guarantee from Islamabad.
India has also initiated its plans to work for the Trans Afghan Pipeline originating in Turkmenistan's Dauletabad natural gas fields and transporting the fuel to Afghanistan, Pakistan and India. TAPI is projected to have a capacity of 3.2 Bcf/d but work is yet to begin on the project. The major concern about the project is to ensure the security of the pipeline route, which would travel through the unstable, terror infected regions in Afghanistan and Pakistan and also it is not quite convincing whether Turkmen natural gas supplies are adequate to meet proposed export commitments.
India-Myanmar Pipeline Project
In order to strengthen the ties, India and Myanmar signed a natural gas supply contract in 2006. Initially the two countries had planned out to build a pipeline crossing the soil of Bangladesh. As the Government of Bangladesh was indecisive over the proposed plans to provide a sanction to the laying over of the pipeline from their region, both countries studied the possibility of building a pipeline that would terminate in state of Tripura in eastern India thereby not crossing Bangladesh soil. However, it is worth mentioning that In March 2009 Myanmar signed a natural gas deal with China sourced from a field invested in by GAIL and ONGC, putting the India-Myanmar deal in dilemma.
Other Proposed Projects
In order to secure supply of natural gas to India and meet the growing demands of the nation, India is currently looking to invest in liquefaction projects abroad. An example being, ONGC and UK based Hinduja Group are considering service contracts in Iran to supply 5 mtpa (975Bcf) of LNG to India. However industry analyst note that Indian companies appear unwilling to commit for long term LNG supply contracts at international prices. While negotiations are on for several long term deals, Whether India's bid will be accepted is questionable in light of the low prices that India has offered to pay.
India is generating a large amount of electricity to meet its growing needs. There is a tremendous widening of the gap between the demand and the supply.
In 2007, India had approximately 159 gigawatts (GW) of installed capacity and generated 761 billion kilowatt hours. Nearly all electric power in India is generated with coal, oil or gas. The conventional thermal sources produced over 80 percent electricity. The Hydroelectricity which is entirely a seasonally dependent source in India, accounted for 16 percent of power generated. Nuclear energy produced 2 percent of electricity while geothermal and other renewable sources accounted for 2 percent only.
In July 2010, India and Bangladesh signed a 35 years power import deal wherein India will import upto 500 megawatts beginning in 2012. India also imports electricity from Bhutan and Nepal. However these imports will not prove sufficient for lack of India's electric generation capacity.
India, the largest democracy of the world with an estimated population of 1.24 billion suffers from a severe shortage of electricity generation capacity. According to World Bank, approximately 40 percent residents in India are without electricity. Further worsening the situation is the total demand for electricity in the country which continues to rise dramatically and is completely outpacing the increases in the capacity. The chief reasons attributed for the low capacity building measures, have been the market regulations, insufficient investment in the sector and difficulty in obtaining environmental approval and funding. The Indian government is keen to bridge up the gap and to address this shortfall. The 11th plan set an ambitious target of adding nearly 79000 MW by 2012. Moreover the country also has electricity efficiency issues. In order to improve efficiency standards, Energy Conservation Act was passed in 2002 which has led to the establishment of Bureau of Energy Efficiency.
The Indian government also striving hard to focus on the development of nuclear power to meet its power generation targets. The Indo-US nuclear cooperation deal between the two countries is targeted to increase India's installed nuclear power generation capacity. Inspired by the collaborative deal, the government has set a target of40000 MW by 2020. India currently has 14 nuclear reactors in commercial operations. India has recently bought six nuclear reactors from France and four from Russia. These ten nuclear reactors will add 11000 MW of electric capacity to the country which is much required by the nation.
Hydropower and Other Renewables
In order to diversify the sources of electric power generation and increasing the country's capacity by the increased use of hydroelectric power, the Indian government has ambitious plans for undertaking new projects to tap the hydropower and other renewable resources for electric power generation in the country. The World Bank is also funding many of these projects. The statistics shows that the Geothermal, solar and wind power hold very little share in electric power generation in the country and a lot more needs to be done to bring them into the main stream resources. India is the only country to have a separate Ministry of New and Renewable Energy.CHAPTER 2
Energy Security-Evolution and a Concept
In the 21st century, the seamless, uninterrupted access to energy sources depend on a wide array of factors including the growing complex global markets, vast infrastructure network, the primary energy suppliers and its dependability on financial markets and technology. The Energy Security has been able to take a prominent position in the policy agenda of the governments around the world.
The term energy security denotes unimpeded access or no planned interruptions to sources of energy, not relying on a limited number of energy sources, not being tied to a particular geographic region for energy sources, abundant energy resources, an energy supply which can withstand external shocks and /or some form of energy self-sufficiency.
World War 1
Historically speaking, the genesis of using Oil instead of coal, goes back to the time of the World War I, when in April 1912 Winston Churchill made the decision to switch the fuel used by British Navy from Coal to Oil which proved a crucial edge over Germany. Though the oil supplies were from Iran rather than from Wales wherein coal supplies used to be made available, the company Anglo Iranian oil later became British Petroleum with huge investment from the British government and also an increased military presence in the Persian Gulf. Hence the notion that energy policy, foreign policy and national security are all interlinked is not new in nature. Since this war the concept of energy security has evolved and grown much complicated.
Energy Regime Post World War II
Usage of term energy security has evolved with change in the world's energy regime. This change signified dominance of non-renewable fossil fuels, liberalization of energy markets, the development of nuclear energy, growing demands of developing nations, impacts of political instability and large scale natural events.
Increasing Reliance on Oil
After World War II, Countries particularly those belonging to the Organization for Economic Cooperation and Development (OECD) became heavily dependent on Middle East oil as an energy source. This fossil fuel was an integral part of the post war economic growth and currently accounts for nearly 34% of world energy use (IEA2009). The Oil was in abundance and cheap too until the oil price shocks of 1970's by the Organization of Petroleum Exporting Countries (OPEC) imposed restriction on the production. The shortfall in the global energy supplies led to formation of the International Energy Agency (IEA ) with member countries required to hold oil stocks for sharing in an oil supply emergency.
Liberalization of Energy Markets
By 1980s the global fraternity felt the need for greater competition and less government involvement and there has been a restructuring of markets subsequently. This entire process of restricting was encouraged by individual country governments and also by OECD, IMF and World Bank.(Continues…)
Excerpted from "India's Energy Security"
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Table of Contents
Introduction Chapter I: India’s Energy MixChapter II: Energy Security–Evolution and a ConceptChapter III: India’s Emerging Energy Challenges and OpportunitiesChapter IV: Energy and Poverty at Household level in IndiaChapter V: Role of West Asia and Central Asia in India’s Energy SecurityChapter VI: Gas without Borders : India’s Gas Pipelines, Geopolitics and Pipeline DiplomacyChapter VII: International Choke Points, Secure Routes and Supply of Energy to IndiaChapter VIII: Maritime Dimension of India’s Energy SecurityChapter IX: Renewable Energy in IndiaChapter X: Energy Security and Climate ChangeChapter XI: Policy Recommendations