Energy Security for India: An Analysis of Issues and Challenges for Policy Development

Abstract

ABSTRACT: This study attempts to analyze aspects related to Energy Security for India so as to develop a policy framework for ensuring energy security. Energy security is related to welfare, economic growth, and more importantly national security of a country itself and therefore the topic of energy security occupies an important position among strategy planners as well as policy makers.

Chapter one of this report examines the rationale for this study and analyzes the current world energy sector trends. The analysis includes demand, supply, and consumption pattern of fossil fuels in the total energy basket. Though fossil fuels like oil, and coal have shown a slight decline in the consumption basket, they still occupy the largest items of fuel consumed all over the world and this trend is expected to continue in the coming 20 years, though slight decline over the period of time is expected as technology and financial feasibility for renewable energy further develops in the coming years. Investment in wind and solar energy sector has been steadily going up but will take some time to be a dominant item in the energy basket.

After examination of the current world energy scenario, the Indian energy sector has been reviewed. The Indian hydrocarbon sector, trends in crude oil imports, hydrocarbon exploration and production trends, natural gas scenario, and trends in electricity sector have been examined. The analysis clearly brings out that in the coming years too we will have to depend upon the hydrocarbon sector majorly for India’s energy needs, though renewable energy sector has been making steady progress in India.

We have studied the swings in prices of energy in the world market and their impact on the economy especially on the Indian exchequer and established the need to have a robust energy security policy regime so as to tackle this perennial problem of modern times.

Chapter Two surveys literature on energy security. The meaning of the word energy security, its slippery nature, market centric approach to defining energy security, its limitations, stake-holder and sustainability issues, political dimensions of energy security, militarization, terrorism and social unrest and their impact on energy security, strategy for ensuring energy security, strategies of cooperation and competition are some of the aspects examined in detail. We have also examined the concept and the meaning of energy security from the Indian perspective taking the stakeholder requirements and the concern for environment as we are a signatory to UN declarations on climate change. We have also examined aspects related risks and resilience. On the basis of the literature survey, we have prepared conceptual maps in the context of India explaining the possible future options, which have been taken up for further examination in the subsequent chapters starting from four through eight. A search for an appropriate methodology to study the problem of energy security revealed, on review of literature, that scenario planning would be an appropriate method to study the problem on hand. We have reviewed literature on scenario building methodology, which included meaning, process, and techniques of scenario planning. We had also observed while reviewing the literature that scenario-building technique has been employed by world-class organizations such as Shell. We have therefore, chosen scenario building as the technique to carry out our study. Building scenarios and analyzing options have been done using (1) published data by authentic international/supranational agencies, and (2) Delphi techniques. A Seminar and a Work Shop attended by Energy Experts in the country were held to collect information, which was used for the purpose of analysis of options. Wild swings in energy prices from time to time have serious repercussions on the economy. Chapter Four examines the impact of energy imports on the Indian economy. In addition to examining the current position, projections and sensitivity analysis have been carried out and different scenarios worked out in this chapter as a prelude to developing strategies in the subsequent chapters. Subsidies on petroleum products and their impact on the Indian economy have also been analyzed for obtaining a holistic picture. Resilience in times of disturbances, especially due to political dimensions of energy supply, is dictated by domestic production of oil and gas. Though oil and gas exploration was in the hands of the government in the past, after liberalization of the economy, private participation has been encouraged through changes in the policy framework by launching a New Exploration and Licensing Policy (NELP). Chapter Five, therefore, examines the importance of domestic policy, the present status of NELP, and progress in Coal Bed Methane development. Rangarajan Committee and Vijay Kelkar Committee recommendations in this connection have been examined and compared, and our observations made regarding major recommendations of the above committees. This chapter also examines Open Acreage Licensing Policy (OALP), juxtaposing it against NELP. Key points made by Dr. Avinash Chandra, former Director General of Hydrocarbons in the workshop specially arranged to discuss the issues pertaining to energy security have also been used to investigate NELP and OALP Countries which are deficient on energy resources, but on the fast track in terms of economic growth have in the recent times followed a strategy of acquisition of energy assets abroad. As militarization strategy employed to obtain energy resources in the past was found to be highly counterproductive, acquiring assets in other countries for exploration and production either independently or by joining other national and international oil companies has been in vogue in the recent times. In Chapter Six we have, therefore, examined the strategy of China’s national oil companies which are major players in the international arena in acquiring energy assets abroad, with the idea of learning lessons from their experience. China’s cooperative as well as competitive strategy in acquiring assets has also been studied. After analysing India’s own record in acquiring assets abroad, recommendations have been made and policy changes suggested facilitating a programme of efficient energy asset acquisitions abroad. Financial outlays needed for the programme of assets acquisition have also been taken up for discussion in this chapter. (Chapter Six) In the recent times, cross border gas pipelines have occupied the centre stage to transport gas from the producing country to the consuming country or countries. After a thorough examination of the experience of Europe and China in this connection, and study of (1) commercial and technical issues related to cross border gas pipeline, and (2) geo-political challenges (the pipelines may have to traverse through politically unstable states), policy recommendations have been made in Chapter Seven. Chapter Eight examines the feasibility of importing LNG from USA by way of a solution to India’s energy security problems. For this purpose, we have examined the North American supply scenario, the Rasgas formula, and the type of changes needed in the policy framework of USA, which, perhaps, India may be in a position to influence now. The final Chapter, (Chapter Nine), consolidates the analysis and ecommendations which were given in chapter four through chapter eight. After examination of the challenges pertaining to (1) augmenting domestic production, (2) expanding domestic Exploration and Production efforts through suitable changes in the Policy framework, (3) accelerating acquisitions of energy assets programme abroad by learning lessons from the experience of other nations by following cooperative as well as competitive strategies as the situation demands, (4) studying the techno-commercial feasibility and geo-political aspects of crossborder gas pipeline, and finally, (5) analysis of feasibility of importing LNG from North America, we have reported our findings and recommendations on each of the above aspects with the idea of improving energy security. We have also examined the recent decline in prices of oil and incorporated this aspect into long run energy security programme.