New Paradigm In Energy Security in India

Global energy consumption has nearly doubled in the past few decades, and this increase has been driven by population growth, rising living standards, invention of energy-dependent technologies, and consumerism.

While coal usage has decreased marginally, consumption of every other major energy source has increased markedly. Electricity use has nearly tripled. If these trends continue, global energy consumption will double again by mid-century.

Without changes in the overall energy mix, fossil fuels will continue to dominate and the share of nuclear power and renewable energy sources — wind, solar, and geothermal energy — will remain limited.

According to broad estimates, about 2 billion people do not have access to electricity. Further, one sixth of the world’s population lack safe drinking water; half lack adequate sanitation; and, half live on less that $2 per day. A reliable energy supply is a prerequisite for addressing these needs – the basis of United Nations Millennium Goals set a decade ago.

Energy security is, then, a key global challenge — one which will require global perspectives, global thinking, global solutions, and innovation of the highest order.

The global nature of these challenges provides a measure of the urgent need to advance discovery and innovation to resolve them. Evidently, attainment of a sustainable global energy framework, capable of meeting the energy needs of people, without causing irreparable environmental damage, will require continuing technological advances that modify our current production and use of energy.

Energy Consumtion in India

The pattern of primary energy consumtion in India from 2004-05 to 2008-09 is shown in Table-1

TABLE-1, PRIMARY COMMERCIAL ENERGY CONSUMPTION IN INDIA

*: Provisional              BCM: Billion Cubic Metres

N.B.: Data reflects despatches of Coal/Lignite (incl. stock differential).

Source: Ministry of Finance (Economic Survey) & Ministry of Petroleum & Natural Gas

It can be observed from Table-1 that there has been consistent increase in the primary commercial consumtion in the country in recent years. The consumption of petroleum products in 2004-05 was 102.17 MMT and by 2008-09 it rose to 145.31 MMT. The consumtion of natural gas has almost remained the same during these years with slight increase in 2008-09. There has been substantial increase in consumption of coal and electricity all these years. The coal consumption which stood at 382.61 MMT in 2004-05 rose to 493.28 in 2008-09.

India ranks fifth in the world in terms of primary energy consumption, accounting for about 3.5 per cent of the world’s commercial energy demand.

India’s rapidly increasing demand for energy is likely to vault it to third place by 2030—behind only the United States and China. An important driver of this escalating demand in the ensuing years will be the many Indian households expected to transition from traditional energy sources to commercial ones such as oil and natural gas and nuclear energy.

Oil and Gas

India’s oil and gas reserves are shown in Table-2

TABLE-2, OIL AND GAS RESERVES

Source: ONGC, OIL and DGH.

Broad estimates put India’s proven oil reserves at 5.6 billion barrels, the second-largest in the Asia-Pacific region after China. There are over 3,600 operating oil wells in India. However, India’s oil consumption has witnessed continuous increase in recent years. In 2007, India consumption stood at about 2.8 million bbl/d, and demand rose to nearly 3 million bbl/d in 2008. The combination of rising oil consumption and relatively flat production has left India increasingly dependent on imports to meet its petroleum demand.

In 2006, India was the seventh largest net importer of oil in the world. With 2007 net imports of 1.8 million bbl/d, India is currently dependent on imports for 68 percent of its oil consumption. The EIA expects India to become the fourth largest net importer of oil in the world by 2025, behind the United States, China, and Japan.

India’s largest crude oil import partner is Saudi Arabia, followed by Iran. Nearly three-fourths of India’s crude oil imports come from the Middle East. The experts expect this geographical dependence to rise in light of limited prospects for domestic production.

Iran accounts merely for about 8 percent of Indian oil imports.  Moreover, both the major energy deals signed in recent years between New Delhi and Tehran are in limbo as of now.  India’s 25-year $22 billion agreement with Iran for the supply of LNG has not moved an inch since signed in 2005, as it requires India to build a LNG plant in Iran that would need American components.  This might end up violating the US Iran-Libya Sanctions Act.

The other project involving the construction of 1700 mile $7 billion pipeline to carry natural gas from Iran to India via Pakistan is also stuck for a number of reasons.  The Indian government initially viewed the pipeline project as a confidence building measure between India and Pakistan, but when pressure started mounting, the Indian Prime Minister went so far as saying that he didn’t know if any international consortium of bankers would underwrite the project given the uncertainties in Iran.  The Indian strategic community has never been in favor of this proposal, as in their opinion it ends up giving Pakistan too great a leverage over India’s energy security.  The price Pakistan has been demanding for security and transit is another reason the project has not moved forward.

In order to secure these imports, the state-owned Oil and Natural Gas Corporation (ONGC) acquired shares in oil fields in countries like Sudan, Syria, Iran, and Nigeria – investments that have led to diplomatic tensions with the United States.

India has the ambitious plan to develop a strategic petroleum reserve (SPR). The decision has been made to set up a strategic reserve of 5 million tons (36.6 million barrels) of crude oil in underground structures in Mangalore, Visakhapatnam, and Padur. The project is expected to come online in 2012. The location of the storage facilities was selected to be along the coast so that the reserves could be easily transported to refineries during a supply disruption. The SPR project is being managed by the Indian Strategic Petroleum Reserves Limited (ISPRL), which is part of Oil Industry Development Board (OIDB), a state-controlled organization. Despite these plans, India does not have any strategic crude oil stocks presently.

Broad estimates put India’s proven natural gas reserves at 38 trillion cubic feet (Tcf). The bulk of India’s natural gas production comes from the western offshore regions, especially the Mumbai High complex. The onshore fields in Assam, Andhra Pradesh, and Gujarat states are also significant sources of natural gas. The Bay of Bengal has also become an important source of natural gas for the country.

In 2007, India consumed roughly 1.5 Tcf of natural gas, and according to EIA estimates. Natural gas demand is expected to grow considerably, largely driven by demand in the power sector. The power and fertilizer sectors account for nearly three-quarters of natural gas consumption in India. Natural gas is expected to be an increasingly important component of energy consumption as the country pursues energy resource diversification and overall energy security.

Although India’s natural gas production has consistently increased, demand has already exceeded supply and the country has been a net importer of natural gas since 2004. India’s net imports reached an estimated 353 Bcf in 2007. India imports natural gas via liquefied natural gas (LNG).

India began importing liquefied natural gas (LNG) in 2004. In 2006, India imported 254 Bcf of LNG, making it the seventh largest importer of LNG in the world. India’s LNG imports in 2006 came from Algeria, Egypt, Nigeria, Oman, Qatar, United Arab Emirates, Australia, and Malaysia. Qatar was by far the largest supplier in 2006, accounting for nearly 86 percent of imports. India imports LNG through both long-term contracts and spot shipments.

Long-term growth in demand for LNG remains unclear however, as price is an issue of contention in India and increasing domestic natural gas production is expected from eastern offshore fields.

Nuclear Energy

India has a flourishing and largely indigenous nuclear power program and expects to have 20,000 MWe nuclear capacities on line by 2020 and 63,000 MWe by 2032.  It aims to supply 25% of electricity from nuclear power by 2050. Because India is outside the Nuclear Non-Proliferation Treaty due to its weapons programme, it has been for 34 years largely excluded from trade in nuclear plant or materials, which has hampered its development of civil nuclear energy until 2009.  

Due to these trade bans and lack of indigenous uranium, India has uniquely been developing a nuclear fuel cycle to exploit its reserves of thorium.  

Now, foreign technology and fuel are expected to boost India’s nuclear power plans considerably.  All plants will have high indigenous engineering content. India has a vision of becoming a world leader in nuclear technology due to its expertise in fast reactors and thorium fuel cycle.

Nuclear power supplied 15.8 billion kWh (2.5%) of India’s electricity in 2007 from 3.7 GWe (of 110 GWe total) capacity and this will increase steadily as imported uranium becomes available and new plants come on line.  In the year to March 2010, 22 billion kWh is forecast.  Some 300 reactor-years of operation had been achieved by mid 2009. India’s fuel situation, with shortage of fossil fuels, is driving the nuclear investment for electricity, and 25% nuclear contribution is foreseen by 2050, from one hundred times the 2002 capacity. Almost as much investment in the grid system as in power plants is necessary.

Renewable Energy

India is facing an acute energy scarcity which is hampering its industrial growth and economic progress. Setting up of new power plants is inevitably dependent on import of highly volatile fossil fuels. Thus, it is essential to tackle the energy crisis through judicious utilization of abundant the renewable energy resources, such as biomass energy, solar energy, wind energy, and geothermal energy. Apart from augmenting the energy supply, renewable resources will help India in mitigating climate change. India is heavily dependent on fossil fuels for its energy needs. Most of the power generation is carried out by coal and mineral oil-based power plants which contribute heavily to greenhouse gases emission.

The cumulative achievements in new and renewable energy are shown in Table-3.

Table-3 Cumulative Achievements in New & Renewable Energy June 2010

Source: Ministry of New & Renewable Energy, Government of India.

The average per capita consumption of energy in India is around 500 W, which is much lower than that of developed countries like USA, Europe, Australia, Japan etc. However, this figure is expected to rise sharply due to high economic growth and rapid industrialization. The consumption of electricity is growing on the worldwide basis. Energy is a necessity and sustainable renewable energy is a vital link in industrialization and development of India. A transition from conventional energy systems to those based on renewable resources is necessary to meet the ever-increasing demand for energy and to address environmental concerns.

Conclusion

Energy security is of immense significance for India because of its burgeoning economy accompanied by increase in demand for energy. Generation of hydroelectric power and nuclear power hold promise for India and can be helpful in limiting India’s dependence on oil imports. However, India should continue to tap oil and gas resources abroad to ensure continued energy supplies. Renewable energy can also alleviate some of India’s energy-related burden.

Dr. Arvind Kumar: Article published in SAR Economist/August 2010/P.No.41/