Policy makers need to put on their thinking caps and set out a clear action plan to ensure the country’s energy security, as international crude oil prices show signs of hardening. Otherwise, they might be caught unaware in the event of a spike in global crude oil prices, and India?s marvellous economic growth story could get short-circuited.
As a possible option, India can sharpen its focus on energy conservation. Besides, it can also expedite the pace of domestic oil and gas exploration and take a fresh look at securing natural gas supplies from neighbouring countries like Myanmar, Bangladesh and Iran through transnational pipelines.While India has achieved some measure of success in energy conservation and domestic exploration, there is not much headway in projects envisaged by India to access natural gas reserves in neighbouring countries through pipelines.
?India needs to take a fresh look at getting into energy cooperation with its neighbours just as Russia and China have done recently,? says Kalpana Jain, senior director, Deloitte India. Russia is supplying natural gas to China through the Eastern Siberia Pacific Ocean (ESPO) pipeline, which was commissioned recently. While Russia needed market for its surplus natural gas, China wanted a cheaper alternative to imported LNG. Both countries have benefitted from the pipeline.
?Russia and China have their own bilateral problems. But despite that, they have managed to collaborate in the energy sector. Similarly, Russia and Vietnam have also stepped up energy cooperation in recent years. There is no question why India cannot succeed in enhancing energy collaboration with its neighbours,? Jain said. If these transnational gas pipelines are laid, they will provide infrastructure for other energy-deficient countries in the region to tap gas supplies from overseas. That would facilitate development of a natural gas market in the region.Besides, India?s oil companies also stand to benefit as enhanced energy cooperation would open more business opportunities for them in these countries.
While India has shown a renewed interest in the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline, similar projects envisaged to evacuate gas supplies from Myanmar, Bangladesh and Iran remain pipe dreams. India has added reserves of over 600 million tonnes of oil and oil equivalent under the new exploration licensing policy (Nelp) regime. That speaks a lot about the success of the new system for allocation of oil and gas acreages. India needs to further intensify its focus on domestic oil and gas exploration. ?We have to explore whatever possibility is there in domestic exploration, both onshore and offshore,? said Jain.
However, if the government is really serious about expediting the pace of exploration, it needs to improve its terms for offering oil and gas acreages for exploration to private players. With international crude oil prices hardening in anticipation of strong demand from a severe winter this year, tough challenges are looming for Indian policy makers.
The government is already staring at a sizeable current account deficit because of a high import bill in this fiscal. A possible jump in international crude oil prices could further complicate things for the government?s finances. With India meeting about 80% of its crude oil requirement through imports, the government needs to brace itself for meeting the challenges of a hardening global crude oil market.
The Indian economy seems to be getting back on the track after a slowdown. That would mean stronger demand for energy. Because of its high dependence on imported energy, India will face a stark choice in such a scenario?to ensure energy security or compromise on economic growth.