Energy Security and India

The term ‘‘energy’’ covers the entire gamut of energy resources – primary, renewable and non-conventional. Energy is the very basis of modern civilisation and without adequate quantities of this commodity, man would not be able to enjoy a life of dignity.

National security is a holistic concept; energy security is one of its major components. Energy security, or security of supply, is a key component of energy policy in many countries. Since all economic activity requires the use of energy resources, the continuing availability of energy at a price that protects economic growth is a major concern of governments.

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As early as the beginning of 20th century, when oil was first discovered in Iran, Winston Churchill, then just a junior Minister in-charge of the Navy and though ostensibly a stalwart of private enterprise, stepped in to acquire a controlling interest in the oil fields on behalf of the British Government. Around the same time, recognising the technological trends, he converted the British Navy from coal-fired into oil-fired warships. No wonder it has been said about World War I, that the Allies floated to victory on a sea of oil.

The Germans recognised this and, in the following years, put a lot of efforts to develop processes to manufacture synthetic oil from coal. They realised that the next war, which they believed to be inevitable, would be fought with tanks and planes, and they needed to ensure adequate quantities of liquid fuel, no matter what the cost. All this was done when Hitler was still a rabble-rouser in the streets of Munich. Much discussion has taken place on why Hitler turned his troops eastwards and invaded both the USSR and North Africa when he had Britain at his mercy. The reasons are obvious.

The Germans urgently needed crude oil, which then was available, outside North America, predominantly in Central Asia and the Persian Gulf. Hence, the two eastward thrusts of the German Army were made to secure these resources. Being equally alive to the situation, Britain diverted much war effort, at considerable risk to itself, from the home front to protect the Middle East. Montgomery and Rommel were only figureheads in a vast energy scenario. The Japanese move in World War II towards the oilfields of South-East Asia was a reaction to an American-led oil embargo and the attack on Pearl Harbour was to protect its flanks.

In the post-World War II era, oil and gas politics is a big game. Global military deployment and ‘readiness’ to intervene are determined by the ‘Energy Assessment’ of the ‘ Oil Majors’, be it in West Asia, East Europe, Georgia, Azerbaijan, Caspian Sea Region, West Africa (Angola, Gulf of Guinea, Equatorial Guinea, Congo, Nigeria, Sahara) or Venezuela, Bolivia, Mexico or Indonesia, offshore and onshore Bangladesh and India. Shell companies with indigenous/local firms and front partners, with private military companies as backup, are the order of the day, especially in Africa, West Asia and Central Asia. Global military presence/pre-positioned facilities, prepared logistic and operational launch bases, avoid the difficulties of on-site military presence, which can be a political embarrassment to host oil(gas)-rich nations.

In July 1990 the failure of the last negotiation in Basra between Iraq and Kuwait about border issues, among them the oilfields on the border between the two countries, and about the OPEC price level for oil that were the two main factors behind Saddam Hussein decision to invade Kuwait two months later. Occupation of Afghanistan, Iraq and recent threats to Iran by the US and its Western allies are also a part of the great game mainly for their long-term energy security purposes.

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One of the leading threats to energy security is significant increases in energy prices, either in the world markets, as has occurred in a number of energy crises over the years, or by the imposition of price increases by an oligopoly or monopoly supplier, cartel or country. This has been done to exert pressure during economic negotiations, such as during the Russia-Belarus energy dispute, or to apply political pressure, for example by OPEC in response to Western support for Israel in the Yom Kippur War. Suspension of supplies may also come about as a result of worldwide international sanctions against a country.

Threats to energy security can also result from physical damage to the energy infrastructure either of the supplier, or of the importer as a result of natural events, misfortune, terrorism or warfare. The political and economic instability caused by war or other factors such as strike action can also prevent the proper functioning of the energy industry in a supplier country.

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Many countries hold strategic petroleum reserves as a buffer against the economic and political impacts of an energy crisis. All 26 members of the International Energy Agency hold a minimum of 90 days of their oil imports.

The value of such reserves was demonstrated by the relative lack of disruption caused by the 2007 Russia-Belarus energy dispute, when Russia indirectly cut exports to several countries in the European Union.

Natural Gas: Compared to petroleum, reliance on imported natural gas creates significant short-term vulnerabilities. Natural gas and other gaseous fuels are already seeing a significant increase in demand which can change the market structure rapidly. The three driving forces behind these changes are deregulation (liberalisation) of energy markets, widespread environmental concerns, and new technology developments. The substitution of natural gas to coal and petroleum products as an environment friendly fuel with lower emissions has gained momentum in developed as well as developing countries during the past two decades.

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Energy resources are limited and inadequate for India. India is also projected to run out of coal, its primary source of energy, in next forty years. Its domestic natural gas reserves are limited as well.

India’s civilian nuclear programme has regularly fallen behind schedule and large-scale development of hydroelectricity generation facilities has been stymied. Development of non-conventional energy sources has progressed, but their use is currently limited. The USA has also offered to resume nuclear cooperation with India. But the India-US agreement on nuclear energy cooperation has several implications that will unfold in future, especially on India’s thrust to import gas from Iran through pipeline. The issue of rapidly expanding Indian nuclear electricity generation has now come to centre stage. Commercial nuclear power remains an appealing but costlier energy option for India. As an energy-poor nation that wishes to harness the atom for electricity generation, India is set to develop a self-sustaining plutonium economy for its planned breeder reactors. Nuclear power, however, is likely to account for a small share in the mix of energy resources that India wants to use in the future.

India has consistently failed in the past years in its approach to issues of energy security. Inept diplomacy led India losing out to China for oil exploration contracts in Angola and Kazakhstan. New Delhi then messed up negotiations with Myanmar for the supply of offshore gas by insisting, much to Myanmar’s discomfiture, that the gas should be piped through Bangladesh. Similarly, rather than taking the simple route of negotiations only with Iran for guaranteed delivery of gas through the Iran-Pakistan-India (IPI) pipeline at our border, India got involved in messy tripartite negotiations with Iran and Pakistan despite warnings that India has received in the past from the highest level in Pakistan that gas supplies could be cut off in crisis situations.

Indian energy security, which exerts direct influence on our economy, society, and national security of our country, is an important common issue that confronts all Asian countries in the 21st century. The emergence of huge potential gas market in India, Pakistan, Turkey, and within Middle East countries will play an important role in supplying part of the increasing energy needs of Indian subcontinent in the 21st century.

Most of the growth in world gas reserves has come mainly from two areas: the former Soviet Union including Caspian Sea and the Persian Gulf States. Following Russia, Iran, Qatar, the United Arab Emirates, and Saudi Arabia have the second, third, fourth and fifth largest reserves in the world respectively. Cross border pipelines are one of the best long-term solutions to carry natural gas to regions with high-energy demand. While this concept is well established in North America and Europe, it still has a long way to be accepted in Asia.

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The developed nations have very long-term vision, unaffected by short-term political considerations and have factored this time-frame into their national and international policies. Advanced countries such as the UK and USA owe a major part of their development, initially to the successful harnessing of indigenously available energy and later to the control of the resources of energy surplus countries, such as those of the Middle East. As history has demonstrated time and again, they (UK and USA) have not hesitated to opt for war to secure their energy supplies. In fact most of their foreign policies are aimed towards energy security and also towards denying the same to potentially present and, more importantly, future adversaries.

The creation of modern Israel is a brilliant example of a very farsighted energy policy. The object would be not only protecting our lines of supply but, more importantly, the actual source of supply. For the United States, the global war on terror has allowed Washington to set up new military bases in the Caspian Sea basin and Central Asia, even as it attempts to subdue a spreading insurgency in Iraq, a state with large oil reserves. As India seeks to build a strategic partnership with the United States, it finds US forces now stationed in five neighbouring nations – Tajikistan, Kyrgyzstan, Uzbekistan, Afghanistan, and Pakistan.

The spectre of inadequate energy supply has intensified geopolitical rivalry among outside powers in oil-rich Central Asia, the Caspian Sea basin and West Asia. The two largest countries, India and China, which make up more than a third of the global population, are already competing to source and secure energy supplies from overseas.

Most Asian countries realise that their future economic growth lies in the development of gas. For those countries which are heavily dependent on oil imports, natural gas not only signifies a diversification of energy sources but a more secure supply. And for developing countries like India, Pakistan and Thailand, which have limited liquid reserves, it is a necessary supplement to oil. Even net oil exporters, like Indonesia, Brunei and Malaysia, view gas as a replacement of oil for domestic use, thereby freeing oil for export; abundant reserves of gas also create more opportunities for Liquefied Natural Gas (LNG) exports and ultimately pipeline exports. The reasons for this are: gas is cheaper, cleaner and plentiful, and in an increasingly environmentally conscious world, developed countries see this as an attractive alternative to oil and mineral fuels. Hence, oil-producing states in the Persian Gulf, like Qatar, Oman, Abu Dhabi and Iran are striving to develop their gas reserves to supplement their dwindling oil reserves.

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One way of meeting India’s oil and gas requirements is domestic production via more intensive exploration, both onshore and offshore. According to a Geological Survey of India report, India has 26 sedimentary basins out of which only six have been commercially explored. The Indian oil and gas industry is trying to acquire equity in Venezuela, Ecuador, Russia, Cuba, Angola, Nigeria, Sudan and Libya and closer home in Myanmar. The desperate search for equity oil abroad has been necessitated by the need to reduce dependence on West Asian sources, which are politically volatile and often impose discriminating conditions.

Imports: Even if domestic production picks up, India will continue to remain increasingly dependent for import of both oil and gas in the foreseeable future.

Gas Pipelines: Keeping in view the fact that LNG import will be limited in the near future, the options of bringing in gas through pipelines from Iran and Myanmar are more viable options for India. Hopefully, economics will prevail over politics to make this possible. In the subcontinent, Pakistan has not been co-operating with India on Indo-Iranian energy schemes. The ambitious plan of the Russian company, Gazprom, to connect Iranian gas to India through the Pakistani coastal areas is yet to be initiated. Again, due to Pakistan’s reluctance, the Turkmenistan pipeline could not be connected with India and it terminated to Pakistan only via Afghanistan. The case of Bangladesh is more frustrating. Despite Bangladesh possessing a good reserve of natural gas and India offering a huge market, Dhaka is reluctant to cooperate. Any imports via pipelines would necessitate cordial relations with not only source countries but also transit countries, including Pakistan. Though pipelines could be a future source of tension, they also could be used to build more cordial relations with neighbouring (transit) countries as it would be to the mutual benefit of both, as a larger market would bring down costs.

Even if pipelines are used to import much of the imported oil and natural gas in the future, a major portion of these will still be dependent on tankers. However, India’s port structure is inadequate to handle the expected hike in hydrocarbons imports. At present, India has 11 ports, and most of them are in dire need of expansion and modernisation. Therefore, it is necessary that this problem is dealt with on a priority basis.

India’s energy security strategy should comprise a balanced mix of overseas equity investment in oil and gas sources, astute energy diplomacy to draw up favourable long-term supply sources to reduce vulnerability to shock, increase in domestic production, building of sufficient strategic oil reserves to cater for disruption in supplies during war and peace, energy conservation and realistic reduction demand, improved efficiency in management of supply-side issues (generation and distribution of electricity) and the gradual substitution of fossil fuels by hydro-electric and nuclear power as well as unconventional sources of energy. India’s energy security strategy would be seriously flawed unless due emphasis is given to the security of the sources of supply, the energy infrastructure and the transportation of fuels through pipelines and ships.

To achieve energy security, India should take certain immediate steps. India should encourage the use of renewable sources of energy like solar, wind and hydroelectricity in large scale. India should take appropriate legal, fiscal and regulatory steps to create a more attractive environment for foreign investors such as streamlining the licence approval process for private power producers, offering more incentives for upstream oil and gas exploration and promoting joint ventures. India should improve energy infrastructure, which includes establishment of new refineries, urban gas transmission and distribution networks, a unified national grid and improved transportation facilities. The Government should consider promoting and strengthening its oil diplomacy on a regular basis.