PROBLEMS AND POSSIBILITIES IN THE PIPELINE

Energy access, conservation, investment and renewability must guide India’s energy security policy, writes Pinak Ranjan Chakravarty

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A coal mine in Dhanbad

During the Industrial Revolution, the steam engine ensured that coal reigned supreme as the primary source of energy, although over 4,000 years ago in Mesopotamia, naturally occurring tar or asphalt was in use. It was only from the 16th to the 18th centuries CE that the mining and use of crude oil increased, and after the discovery of fractional distillation, the first modern refinery was built in the Alsace region of France in the 1850s. The internal combustion engine revolutionized transport. The military conflicts of the 20th century boosted demand for petroleum products. By the 1950s, oil had dethroned King Coal as the principal fossil fuel and lifeblood for economic growth. Affordability, accessibility and availability of energy supplies became integral to national energy security and the sine qua non for economic growth and prosperity.

India’s economic growth depends crucially on primary energy supplies. Power generation alone must rise to about 9,60,000 megawatts in the next three decades, and India’s energy security will continue to be import-dependent. Sixty-six per cent of India’s requirement of coal, 90 per cent of oil and 60 per cent of natural gas will be imported by 2030. Increasing and intensifying exploration of onshore and offshore blocks, acquisition of oil and gas assets abroad, increasing energy efficiency of transportation and other sectors, blending oil with ethanol and replacement with renewable sources, wherever possible, are options that must be explored for India’s energy security.

The new exploration licensing policy of 1999 allowed 100 per cent foreign direct investment and 47.3 per cent of the Indian sedimentary basin are under exploration, as are coal bed methane blocks. ONGC Videsh Limited has acquired and invested altogether $15 billion in oil and gas assets abroad, with Oil India, Indian Oil, Bharat Petroleum, GAIL, Reliance, Essar and Videocon following suit. Import diversification measures have increased crude-oil supplies from Africa (16.19 per cent) and Latin America (15.82 per cent). The share of West Asian crude has reduced from around 80 per cent, ten years ago, to 62 per cent.

A 90-day strategic reserve of oil to deal with likely disruption in supplies has been planned. A new public-sector unit, Indian Strategic Petroleum Reserves Private Limited, is constructing underground caverns in southern India to serve as strategic reserve storage. The tenth round of bidding under the NELP will be a under different paradigm, moving away from the production sharing contracts of earlier rounds that permitted explorers to first recover sunken costs and then share production with the government. This led to disputes with companies like Reliance with allegations of the hoarding of gas and lowering of production.

The availability of gas in the global market has increased, following the shale gas revolution in the United States of America. India has approved a restrictive shale-gas policy, which permits exploration in five on-land basins by public-sector companies only. The availability of shale gas in India is limited. The current “fracking” or hydraulic fracturing technology for extracting shale gas has associated environmental concerns. The ambitious attempt to bring 13.87 billion cubic metres of gas each year into India from Turkmenistan, through a pipeline, over a 30-year period, and also from the US, is being pursued. A renewed look at a sea-bed pipeline, which can bring gas from Iran, will become feasible, after the nuclear deal with Iran and progressive lifting of sanctions on Iranian exports. Natural gas forms around 9 per cent of the energy consumption in India, as compared to 24 per cent in developed countries. India is expanding its capacity to import liquefied natural gas to 50 million tonnes in the next five years. Simultaneously, expansion in the national gas pipeline network is under way.

Domestic coal production has stagnated because of environmental and other constraints. Imports have increased to around 135 million tonnes last year. A new PSU, International Coal Ventures Limited, is set to acquire and invest in coal assets abroad. Coal is the mainstay of India’s electricity production. Establishing super-critical and ultra-super-critical power-plants based on clean-coal technologies during the 12th plan will improve power yields and decrease emissions. A nationwide power grid by early next year will increase efficiency for both producers and consumers.

India has developed around 38,000 MW of large hydropower projects and around 27,000 MW of renewable power. The national action plan for climate change includes a national solar mission, which aims for 20 GWs of grid-connected solar power, 2 GWs of off-grid solar applications, 20 million sq metres of solar collectors and 20 million solar lighting systems by 2022. The cost of the production of wind energy has reached grid parity — that is, its unit price can compete with the unit cost of coal-based or hydro power. Nuclear power capacity is to expand to 60,000 MW by 2032 with international collaboration helping low-carbon growth. The problem of liability related to imported nuclear power reactors, however, continues to dog international cooperation. Regional initiatives to promote hydro-power in Bhutan and Nepal can help to add to the hydro-power capacity of South Asia as a whole, as will the ongoing effort to link the electricity grids of South Asian countries. A regional electricity grid creates the paradigm for electricity trading, wherein electricity is given the legal status of a tradable commodity. This helps consumers and facilitates transfer of electricity from surplus to deficit areas.

The national mission for enhanced energy efficiency seeks to create a market for energy efficiency by lowering the energy intensity of the economy by 20-25 per cent. By 2015, about 23 million tonnes oil-equivalent of fuel savings will be achieved annually and over 19,000 MW of thermal power can be avoided, reducing carbon dioxide emission by 98.55 million tonnes annually. The bureau of energy efficiency has introduced standards and labelling requirements for 16 products, including air- conditioners, refrigerators, distribution transformers and tube-lights. New commercial buildings will be subject to a national energy conservation building code.

The blending of petroleum with 5 per cent ethanol has commenced with the aim of scaling up to 10 per cent to reduce the carbon footprint. In developed countries, the adoption of low carbon growth, renewable technologies and energy efficiency measures has raised gas consumption. In developing and emerging economies, where per capita energy consumption remains low, consumption is likely to go up before peaking. Almost 40 per cent of India’s population, and 2.4 billion people globally, have no access to modern commercial energy.

Energy access, affordability, problems of climate change, conservation, investment and a greater reliance on renewable energy resources must guide India’s energy security policy. More effective coordination between domestic and foreign policy-makers, an aggressive domestic exploration policy with realistic pricing benchmarks, encouraging energy PSUs to quickly establish joint ventures with technology-rich international energy companies for exploration of captive blocks, boosting efforts for acquisition of energy assets abroad will secure an uninterrupted supply of energy from all available sources to sustain India’s inclusive economic growth.

The author is former secretary (economic relations), ministry of external affairs, India’s high commissioner and ambassador to Bangladesh and Thailand