Energy Security For India Environmental Sciences Essay

India stands on the verge of achieving its dream of being a world power today as her economy races ahead seemingly unstoppable. Though we have been able to achieve food security to feed our burgeoning population, the hunger of our economy is yet to be satiated. A growing economy demands energy & an uninterrupted supply of energy. Today in this world of competing economies, the conflict of securing means of energy within the rising economy of the world has the potential of being the spark needed to ignite a new world war. No country produces enough energy in the required forms to satisfy its energy needs, thus we are facing the possibility of conflict as each nation tries to nudge out the other from the energy producing areas of the world in order to ensure a continuous supply of energy. India today faces this formidable challenge of not only meeting her energy needs but also providing adequate & varied energy of desired quality to the users at a reasonable cost in a sustainable manner. With an economic growth of 8-10 percent sought after, the quality & quantity of energy required is only going to increase exponentially.

4. As India looks to the future and aims to secure her rightful place in the emerging new world order, it is imperative for the nation to understand and plan for a secure energy environment to cater for sustained economic growth. Energy security will play a pivotal role around which India’s rapid progress and development may be sustained in the foreseeable future. It is incumbent on each one of us to have sufficient knowledge of the complexities of this issue which will play such an important role in our day to day lives in the years to come.

7. There are certain terms and definitions which are peculiar to the concept of ‘Energy Security’. The term ‘Energy Security’ itself is yet to get a single definition and various interpretations of this term abound. The following few terms relevant to the syndicate research effort are clarified in the subsequent paragraphs.

8. Energy Security. Energy security can be defined as “The continuous availability of energy in varied forms in sufficient quantities at reasonable price This definition of energy security implies the following:-

(a) Energy should be provided to all citizens and if this is not possible, then it is not a sustainable situation for a country.

(b) Energy security requires that the lifeline energy needs of the nation are met in full. Lifeline energy is the basic necessity of a person to live.

(d) Safe and convenient energy is desirable as use of traditional fuels such as wood or cow dung cakes lead to indoor air pollution which has adverse impact on the health of women and children.

(e) Energy is required in different forms to meet different needs. Energy in one form cannot be easily substituted by other forms. If we try this substitution, it would cost a lot of money and quality of the end product also goes down. For example, using kerosene for lighting houses instead of electricity.

(f) Energy should be available at all times. An interruption in this chain imposes high cost on the economy.

(g) To ensure energy security at all times, shocks and disruptions should be anticipated. A country should have the ability to absorb these shocks or disruptions.

9. The Minister of Petroleum and Natural Gas, Shri M.M.Deora, delivered a speech in the Shell Distinguished Lectures Series at Rice University, in Houston, Texas, U.S.A. on 31 March 2006. During this speech, he defined energy security in the Indian context as ‘the assurance of energy supply to all Indian citizens at affordable cost at all times with a prescribed confidence level considering shocks and disruptions that can be expected.’ [2]

10. In our context, the above definition could be further modified. In India, energy security can be defined as follows “We are energy secure when we can supply lifeline energy to all our citizens irrespective of their ability to pay for it as well as meet their effective demand for safe and convenient energy to satisfy their various needs at competitive prices, at all times and with prescribed confidence level considering shocks and disruptions that can be reasonably expected”. [3]

11. Relevant Terminologies.

(a) Energy Independence. The condition in which a country is not beholden to foreign nations or fluctuations of the market in meeting its energy needs. Most countries would like to have a greater degree of energy independence.

(b) Energy Interdependence. The idea that oil producers and consumers are mutually dependent on one another. An appreciation of interdependence is an important component in the evolving conception of energy security.

(c) Resilience. Resilience as the term itself implies, refers to a security margin that would allow a country to absorb any minor shocks to its energy supply and facilitate recovery after disruptions.

Global Energy Situation

12. For the first time since 1998, global primary energy consumption fell in 2009, but like the broader economic downturn, changes varied greatly across regions. With consumption falling, energy prices declined in 2009, though again the pattern varied by fuel. Oil prices began the year below $40 per barrel, and increased steadily during the year as Oil Producing and Exporting Countries (OPEC) production cuts were greater than the decline in consumption. Natural gas in competitive markets fell sharply and remained weak through most of the year due to falling consumption, continued development of unconventional resources in the US and rising Liquefied Natural Gas (LNG) supply. Coal prices also fell and then started to recover, while displaying regional variety. The recession and now, hopefully, the recovery, has taught us how interlinked the world really is. [4]

13. Oil. Global oil consumption declined by 1.2 million barrels per day (b/d), or 1.7percent, the largest decline since 1982. China, India and Middle Eastern countries accounted for all of the non- Organisation for Economic Cooperation and Development (OECD) growth. Global oil production dropped even more rapidly than consumption, falling by 2 million b/d, or 2.6 percent, the largest drop, again, since 1982. OPEC production cuts implemented late in 2008 were maintained throughout 2009, resulting in a decline of 2.5 million b/d, or 7.3 percent. Every OPEC member participating in the production-cutting agreement reduced output in 2009. OPEC’s Middle Eastern members accounted for nearly 75 percent of the overall reductions. Oil production outside OPEC grew by 0.9 percent or 450,000b/d. Non-OECD capacity surpassed OECD capacity for the first time. The Asia-Pacific region accounted for more than 80 percent of the global growth, largely due to increases in India (+19.5percent, or 580,000b/d) and China (+10.5percent, or 820,000b/d). Global crude runs fell along with oil consumption, declining by 1.5 million b/d, or 2 percent.

The proved oil resources and oil consumption by the region are enumerated in the map and graph :-

14. Natural Gas. Globally, natural gas was the fuel that experienced the most rapid decline in consumption, falling by 2.1 percent, the largest decline on record. Consumption declined in all regions except the Middle East and Asia Pacific. Russia had the world’s largest decline (in volumetric terms), with consumption falling by 6.1percent. OECD consumption fell by 3.1 percent, the largest decline since 1982; the decline in the US was a relatively modest 1.5 percent, as weak prices improved gas’s competitive standing against other fuels. Iran saw the world’s largest volumetric consumption growth, while Indian consumption growth of 25.9 percent was the highest among major countries in percentage terms. Global gas production declined for the first time on record. Production fell sharply in Russia (-12.1 percent) and Turkmenistan (-44.8 percent), driven by declining consumption – in Russia and much of the rest of Europe – and the availability in Europe of competitively priced liquefied natural gas (LNG). [5] Continued expansion of unconventional supplies allowed the US to record the world’s largest increase in production for the third consecutive year, surpassing Russia as the world’s largest producer. Production in the Middle East and Asia Pacific also increased, driven by growth in Iran, Qatar, India and China. The proved natural gas reserves of the world are shown below:-

15. Coal. World coal consumption was essentially flat in 2009, the weakest year since 1999. For the first time since 2002 , coal was not the fastest growing fuel in the world. The OECD and the former Soviet Union experienced the steepest decline on record, while the growth elsewhere was near average, largely due to above average growth in China, which accounted for 46.9 percent of global coal consumption. [6] Today coal accounts for 23.3 percent of the world’s energy demands and this figure is likely to increase by 60 percent by 2030.

16. Nuclear Fuel. Global nuclear power generation declined by 1.3 percent a third consecutive annual decline. Lower output in Europe and Eurasia as well as North America,outweighed increases in Asia Pacific. [7] Nuclear fuel contributes to only 6.8 percent of global energy requirements; however, this is likely to see a sharp rise by 2030.

17. Hydroelectricity. Hydroelectricity output grew by a below average 1.5 percent which was non the less sufficient to make it the world’s most rapidly growing major fuel in 2009. Growth was led by China Brazil and the USA.

USA’s Energy Policies and their Impact on India

18. The first decade of the new millennium has seen the energy interests of India and the United States of America intertwine like never before. The issues of continuing reliance on fossil fuels, increasing dependence on imports to satiate energy hunger and the need to address the issue of climate change has further enhanced the cooperation between the two countries. The United States of America has enunciated the following as the strategic goals and the measures to achieve them, for its energy policy:-

(a) Energy Diversity. Increase energy options and reduce dependence on oil, thereby reducing vulnerability to disruption. The strategies to reach this goal are as follows:-

(i) Reduce dependence on energy imports, particularly oil in the transportation sector, by developing and effectively deploying technologies to increase fuel efficiency and enable the substitution of alternatives such as bio fuels, electricity, and hydrogen.

(ii) Collaborate globally with governments and scientists to expedite the development and deployment of unconventional energy resources, such as bio fuels, that can substitute for oil and natural gas.

(iii) Collaborate globally with governments and scientists to expedite the development and deployment of nuclear power which can substitute for oil and natural gas.

(iv) Ensure adequate crude and regional home heating oil supplies during emergency shortages by maintaining the operational readiness of the Strategic Petroleum Reserve and North East Home Heating Oil Reserve.

(v) Ensure an expanding supply of domestic energy for the American public by promoting the construction of an Alaska Natural Gas Pipeline and the environmentally responsible development of the Outer Continental Shelf and the Artic National Wildlife Refuge.

(b) Environmental Impacts and Energy Strategies to Reach this Goal.

(i) Support the creation of new nuclear generation capacity to produce carbon-free electricity in the near term (2015); complete a permanent repository for nuclear waste at Yucca Mountain by 2017; and, develop next generation advanced reactor and fuel cycle technologies for deployment in the long term (2025) for both electricity and hydrogen production.

(ii) Advance clean coal technology through public-private partnerships for continued electricity generation from the country’s extensive coal resources, ultimately resulting in near-zero atmospheric emissions power plants.

(iii) Support research and development efforts to reduce the costs of renewable energy technologies and accelerate the large-scale use of carbon-free electricity sources.

(iv) Develop technologies to reduce vehicle emissions by improving efficiency and greatly expanding the use of clean fuels, while maintaining vehicle safety, performance, and cost characteristics.

(i) Develop advanced wires and coils to increase the capacity, efficiency, and reliability of the electricity system.

(ii) Advance real-time visualization and control tools to improve the reliability and efficiency of the Nation’s electricity delivery system by increasing the utilization of transmission and distribution assets.

(iii) Integrate advanced technologies, including distributed generation, storage, and load management on distribution utility feeders to improve the efficiency and reliability of constrained sections of the electricity grid.

(d) Energy Productivity and Strategies To Reach This Goal.

(i) Support enhancements to existing energy markets that will help stimulate private investment in more efficient and economically productive end-use technologies.

(ii) Develop integrated building technologies and formulate appliance standards to significantly increase the energy efficiency of residential and commercial buildings.

(iii) Partner with energy-intensive industries to develop technologies that enable more efficient use of energy in their industrial processes.

(iv) Develop technologies that enable cars and trucks to be fuel efficient, while remaining cost and performance competitive.

19. Impact on India.

(a) Development and Deployment of Renewable Energy Technologies. The domain of renewable energy offers tremendous opportunities for strengthening Indo-US relations. While US companies have already invested heavily in the Indian market, especially in the field of solar energy, India’s own Suzlon Energy Cooperation has emerged as the worlds fifth largest supplier of wind turbines and the US forms a hub for its operations. Thus this two way exchange benefits both countries.

(b) Promoting Energy Efficiency and Power Sector Reforms. The Unites States of America had set this as a major target for its energy security goals in the coming future. At the same time,the Indian energy security policy also aims at achieving better energy efficiency across all sectors. The USAID collaboration with the Government of India has already brought out the formulation of the Bureau of Energy Efficiency (BEE) in India which has set the energy efficiency standards for various appliances in the country. As the US take further strides in this field, India too can benefit from its experience.

(c) Civil Nuclear Deal. The signing of the civil nuclear deal has opened up new opportunities for the Indian nuclear industry. With the technology now available as a result of the deal, India would be able to increase the share of nuclear energy in its energy basket form a meagre three percent now to nearly eight percent by 2030.

(d) Clean Technologies in the Field of Non Renewable Resources. With the world still dependent on non renewable sources such as oil and coal, the need of the hour is to develop technologies which can assist in better utilisation of the fuel in a more energy efficient and environmentally friendly manner. The two countries can collaborate in this field to develop these technologies.

China’s Energy Policies and thier Impact on India

20. China become a net importer of oil in 1993 and since then embarked on wide ranging changes in its energy policies in order to ensure a continuous supply of energy to fuel its phenomenal growth. With its entry into the global oil bazaar as a major importer, China quickly learned the hazards of relying solely on purchase policies in the open markets. The more aggressive recent foreign investments of its state owned enterprises, notably China National Petroleum Corporation (CNPC) and China National Offshore Oil Company (CNOOC), stem directly from a May 1997 policy paper in which former Premier Li Peng blessed Chinese involvement in the exploration and development of international oil and gas resources .He also tied such projects specifically to the objective of stable, long-term supplies of oil and gas. The Chinese government’s energy policies are dominated by the country’s growing demand for oil and its reliance on oil imports. The National Development and Reform Commission (NDRC) is the primary policymaking and regulatory authority in the energy sector, while four other ministries oversee various components of the country’s oil policy. The government launched the National Energy Administration (NEA) in July 2008 in order to act as the key energy regulator for the country .The policy focused on the following areas:

(a) Self sufficiency.

(b) Encouraging the diversity of energy structure and imports.

(d) Energy conservation.

21. Impact on India.

(a) China’s String of Pearls strategy is well known as a means of encircling India; however the origin of this strategy lay in securing her energy needs. These ‘pearls’ extend from the coast of mainland China through the littorals of the South China Sea, the Strait of Malacca, across the Indian Ocean, and onto the littorals of the Arabian Sea and Persian Gulf. China is building strategic relationships and developing naval forward presence along the SLOCs that connect China to the Middle East. The list of ‘pearls’ include the following: upgraded military facilities in Hainan Island, upgraded airstrip on Woody Island located in the Paracel archipelago about 300 nautical miles east of Vietnam, container shipping facility in Chittagong, Bangladesh, construction of a deep water port in Sittwe, Burma, construction of navy base in Gwadar, Pakistan, pipeline through Islamabad and over Karakoram Highway to Kashgar in Xinjiang province that would transport fuel to China itself, intelligence gathering facilities on islands in the Bay of Bengal near the Malacca Strait and construction of Hambantota port in Sri Lanka.

(b) Loan for Oil. China is taking advantage of the economic downturn to step up its global acquisitions and financing of projects. One of the financing strategies is to secure long-term deals is China’s bilateral loan-for-oil deals with several countries. These loans amount to about $50 billion or 70 percent of the total investments by the 3 major NOCs since 2008 according to industry sources. While several resource-rich countries have been strapped for cash during the credit crunch of 2008-09, China can use its vast foreign exchange reserves, estimated at $2 trillion, to help leverage such investments. China finalized loan for oil deals recently with Russia, Brazil, Venezuela, Kazakhstan, Ecuador and reportedly agreed to a loan of $3 billion to Turkmenistan to assist in developing the South Iolotan gas field project to feed the Central Asia Gas Pipeline. China agreed to loan Russian companies, Rosneft and Transneft $25 billlion to finance the East Siberia Pacific Ocean oil pipeline in exchange for 300,000 bbl/d of oil shipments. The Chinese Development Bank (CDB) also agreed to loan Petrobras of Brazil $10 billion so that Sinopec can access 200,000 bbl/d of oil for export to China. The loan to Venezuela stands at $4 billion to finance various projects increasing oil exports to China almost three-fold to 1 million bbl/d by 2015. CNPC and the China Export-Import Bank intend to lend Kazakhstan $5 billion each in two loans allowing CNPC a much larger role in the upstream oil development in the Central Asian country, following the company’s acquisition of Petro Kazakhstan in 2005.

(c) Acquisitions in Africa. Many in the oil industry agree that the most pragmatic acquisition strategy would be to look for good exploration blocks. But this is predicated on having a corporate team capable of evaluating possible exploration acreages in the world, which the big international oil companies have. Unfortunately, however, most of the Indian oil companies, unlike the Chinese companies, do not have a comprehensive set-up or database to follow this strategy, with the result that India ends up acquiring blocks that are in the “very high risk” category. Neither are the exploration blocks acquired in the bidding round examined in depth due to shortage of time available thanks to lack of adequate research of the area. Although Indian oil companies have notched up some successes over the last few years in buying equity stakes in foreign oil and gas blocks, the most notable being the Sakhalin-1 (offshore) project in Russia and the Greater Nile project in Sudan where the Chinese also have a major interest, they have failed in many more or managed to acquire marginal stakes in others. For instance, India lost a bid to acquire Royal Dutch/Shell’s 50 per cent interest in Block 18 offshore Angola, which includes the Greater Plutonia development, with reserves of one billion barrels, after the Chinese government offered the Angolan government a 17-year, $2 billion loan at a low (1.5 per cent) interest rate along with the offer to build hospitals, and electronics manufacturing factories. [8] The Indian government was also prepared to support ONGC by offering $200 million to help build a railway, but this was dwarfed by the Chinese package.

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