FEATURE- India steps up energy diplomacy
By DINESH C. SHARMA, The Bangkok Post
NEW DELHI, May 31, 2005 — India is not a major oil producer, but is beginning to cause a flutter in international energy markets.
For a change, major players in the oil market are sitting up and taking note of India as a leading consumer of petroleum products. The country is teaming up with other Asian consumers, including China, to project Asia as a bigger oil buyer than the United States and is trying to tilt the energy equation in favour of Asia.
India depends on imports for over 70% of its petroleum products requirements. New Delhi has been engaging in aggressive oil diplomacy for the past one year or so. As part of its larger goal of achieving energy security, India has been actively talking to both oil producers and consumers in the region, while Indian oil companies are buying equity and property in far-off countries in Africa and Latin America.
Transnational gas pipelines have been proposed with Central Asia as well as Southeast Asian producers. India’s oil business has suddenly acquired a strategic hue.
In January this year, India hosted a unique event: a meeting of petroleum purchasing and selling countries to promote security and sustainability in the Asian oil economy through regional cooperation.
This was seen as an effort to organise an Asian market for crude and products representing economic giants of the region: China, India, South Korea and Japan.
Saudi Arabian delegates pointed out that already 60% of production from their country was sold to Asia, making it their top customer replacing the US. At this meeting, India stressed the need for Opec to have a price band for Asian countries.
In addition, the need for oil producers to sign long-term supply contracts was highlighted. Following this conclave, Saudi Arabia has initiated talks with India for such a contract which might include the setting up of a Saudi refinery in India as well, to import crude and sell refined products to the Indian market. The success of this meeting has promoted India and other Asian countries to hold such gatherings every year, according to the ministry of petroleum and natural gas. It has also been proposed to hold another roundtable of oil ministers of North and Central Asian oil-producing countries.
In addition, Indian exploration and production companies are pursuing acquisition of equity in foreign oil companies as well as acquiring oil and gas exploration acreages and producing properties.
These firms already have “participating interest” in oil and gas projects located in Vietnam, Sudan, Russia, Iraq, Iran, Burma, Libya, Syria, Australia, Ivory Coast, Qatar and Egypt. The committed investment in these ventures is over US$5 billion. More opportunities are being scouted in countries such as Venezuela, Kazakhstan, Kuwait, Yemen, Chad, Niger, Nigeria, Angola, Cuba, Sierra Leone and Ecuador. The government-run oil drilling company, ONGC Videsh, has already invested $3.5 billion in overseas exploration since 2000.
The increasing cooperation with China, another major player in energy hunting, is a key point in India’s oil diplomacy efforts, says a recent study by the Confederation of Indian Industries (CII).
When global players were dumping Sudan, an oil producer, citing human rights violations, India and China have jointly moved in to explore the potential of oil fields in the African country, the study pointed out.
Clearly, India and China have agreed on a common strategic goal to mitigate the risk of depending on imported energy by owning or controlling foreign oil fields. Indo-China energy cooperation is set to bloom in the future, with a proposal of a gas pipeline between India and Xinjiang, China’s western province.
With an increasing demand for oil and limited sources of supply, competition for existing and future reserves is likely to hot up into a clash of interests between major oil-consuming nations. The tension emanating from the geopolitics of oil would drive diplomatic and strategic interests of major nations quite aggressively in the future involving the US as the largest consumer, and, increasingly, China and India too, feels Dr R K Pachauri, leading energy expert and head of the Energy and Resources Institute in New Delhi.
It is this realisation that has promoted the Indian government to pursue vigorously the proposal for a liquefied natural gas pipeline between Iran and India via Pakistan, originally mooted by Dr Pachauri in 1989. The thawing of political relations between India and Pakistan has now made the idea of this 2,800km-long pipeline feasible. The project is estimated to cost about $4 billion. India’s Oil Minister Mani Shankar Aiyer, a former diplomat-turned-politician, has proposed that this pipeline may be extended to China. In addition, a tripartite agreement among India, Bangladesh and Burma is ready for constructing a 900km-long gas pipeline from Burma to India via Bangladesh.
Such pipelines are crucial for India’s energy security, as the country has identified natural gas as the fuel for the future, to reduce dependence on crude oil imports. Sectors such as power generation, fertiliser and petrochemical production are turning to natural gas as an energy feedstock. At the same time, it is also building up a crude oil storage of five million tonnes to take care of emergency situations.
“India has fostered alliances with other major oil importers such as China and Japan. Soon, the country could become the most important Asian oil junction, with oil and natural gas pipelines branching to Burma, Thailand and Bangladesh in the east, China in the north, and Iran, Turkmenistan and other Central Asian republics in the west and northwest,” the CII study predicts.
Perhaps, for the first time, the oil-producing nations are discovering what a determined group of consumer nations, led by India and China, could do to alter the energy power structure.