Participants at a seminar organised by the Institute of Social Studies entitled, ‘India’s Energy Diplomacy: Opportunities And Challenges.’
INDIA’S ENERGY POLICY

Power Games: Challenges And Opportunities For India’s Energy Diplomacy

Ashwin Ahmad New Delhi 11 May 2019

Being one of the fastest growing economies in the world today, India’s success story has not surprisingly come with an ever increasing demand for energy. According to an annual report by BP which looks at the global energy scenario in 2019, India will account for more than a quarter of net global primary energy demand growth between 2017-2040.

The report also predicts that the country, which currently ranks behind the U.S. and China in terms of global energy consumption, will overtake China as the world’s largest energy growth market by the end of the 2020s. This ever increasing demand, coupled with the fact that India currently imports 80 per cent of its oil requirements, suggests that an active and well thought out energy policy will be crucial in determining India’s economic future in the coming years.

 

The China challenge in Central Asia

Determining such a policy requires a long hard look at the energy challenges India is facing and where the opportunities lie. Ashok Sajjanhar, energy expert and former ambassador to Kazakhstan, Sweden and Latvia, believes that India needs to focus on Central Asia — an area that he believes has been neglected for far too long by the country. “India has strong civilizational and historical links with Central Asia which China does not have but so far we have not capitalised on our advantages. From 1995-2015 only four prime ministerial visits were made by India to this region. Today, we have no major oil project in Central Asia to date.”

Sajjanhar also points out that post 2015 that India had done much to redress this. Prime Minister Narendra Modi had during his tenure had made it a point to visit all the five Central Asian republics and had earned mass goodwill as a result but so far India was being kept out by China when it came to acquiring projects in Central Asia. “This scenario has to change especially when it comes to Kazakhstan. The Central Asian republic currently produces three percent of the world’s oil resources at 78 million tonnes a year which translates into 1.8 million barrels of oil a day. What is more crucial for India is that because of its small population Kazakhstan only use 13-14 percent of its oil domestically.”

“If one looks at the reality, India and China both started working in Kazakhstan since the 1990s. Today, China owns 30 percent of the Kazakh oil reserves in the country while India has nothing to show so far. We need a more robust and muscular policy if we are to secure our energy needs.”

 

It’s an oil buyer’s market

But while conflict with China may be unavoidable in some cases, New Delhi may also need to work with Beijing when it came to securing fair prices on the oil market. Girijesh Pant, a former professor at JNU at the Centre for West Asian and African Studies, is firmly of this view. “The global energy landscape today has entirely changed. Today with the U.S. recently coming into the picture as a major energy exporter and the rise in small suppliers — you can today talk about getting oil from Mexico —  global oil reserves are actually increasing. As a result, we are moving from a sellers’ market to a buyers’ market.

Commenting then on why India continues to pay high oil prices, Pant says that the OPEC countries decision to cut production and increase costs which has led to countries like India and China paying more for their oil. “Oil importing nations are forced to pay higher prices because Iran’s 1.5 million barrels of oil are officially off the market and the OPEC nations have cut production. However, given the fact that alternate suppliers have come up oil importing nations such as India and China can negotiate a fair price if they come together. Let us be clear, all oil producing nations will compete for India’s huge energy market. We should leverage that to our advantage.”

Commenting on the long term, Pant believes that India has no option but to look to alternative energy resources and in that he says solar energy is the way forward. India has already begun an International Solar Alliance project with the aim of harnessing solar energy. Continuous attention and constant upgradation in technology needed to be done to make this project viable.  

 

Challenges of diversification  

The issue of diversification left experts divided. Md. Muddasir Quamar, Research Fellow, IDSA was of the view that geo-political as well as practical  considerations ensured that diversification of one’s energy resources would not be that easy. “Statistics show that Gulf countries which includes GCC members as well as Iran and Iraq account for an estimated 60 percent of India’s crude oil demands. To give them up will not be easy. Say for instance, India decides to import more oil from Latin American countries than Gulf countries. The oil bill may be lower but the freight charges would increase. Piracy problems could also ensure greater risks at sea.”

Quamar also believes that when constructing its energy policy, India must take into account the ground realities of the nation it is dealing with. “India has a number of choices to make today. Apart from deciding on the Iran question, there are Central Asian nations and certain countries in West Africa where Indian can look to do business. Alternatively, given our strong ties with the U.S. importing more U.S. shale oil may make sense. Alternatively, we could decide to import more from the UAE and Saudi Arabia. There are difficult questions and the geo-political and diplomatic ramifications must be considered when deciding our energy policy.”

 

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