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Energy Security of India- GD PI Booster Series for IIM-IIFT-MDI-XLRI

Energy Security – Propelling India into an Economic Super power of the future

"Energy is a key driver of economic growth. Sustainable, stable and reasonably priced energy is essential for the fruits of economic development to reach the bottom of the pyramid.”

India’s Prime Minister presented a carefully crafted outlook for the Indian Energy Sector with these opening lines at the Petrotech Conference. India is today the world’s fastest growing large economy. This growth has been well complemented by a series of policy measures taken by the Government.

While the global economy is expected to grow at an average rate of 3.4% per year, India is expected to grow at over 6% every year till 2040. The world population is also expected to expand from 7.4 billion today to more than 9 billion in 2040 accelerated by a spectacular growth in the urbanization process which is adding a city the size of Shanghai to the world’s urban population every four months.

This growth will create an enormous amount of energy demand in the future and the largest contribution to the demand growth – almost 30% – will come from India, whose share of global energy use is expected to rise to 11% by 2040 (still well below its 18% share in the anticipated global population).

Fig. 1.1 Primary Energy Demand Change (2016-40) Source – IEA
India is expected to consume more oil in 2040 than the whole of Europe. It is expected that manufacturing sector alone would account for 25 per cent of GDP by 2022 against 16 per cent now.
Our transport infrastructure is also expected to increase manifold. Commercial Vehicles’ population of 30 million is projected to reach 56 million by 2040. In civil aviation, India is currently the eighth largest market and is set to become the world’s third largest market by 2034. Growth in the aviation sector is expected to raise demand for aviation fuel four times by 2040. All this will affect energy demand and raises a challenging situation for the government to ensure energy security for the future.

From the strategic point of view India is not well endowed with natural energy resources when compared to its population, it account for around 17 percent of the world population but only has 0.3 percent of oil, 0.8 percent of natural gas and 6.8 percent of the world’s, oil, and gas and coal reserves, respectively.

Keeping the above statistics in mind, Government of India has been striving hard to increase energy supply by exploiting all possible sources of conventional and non-conventional energy domestically as well as globally to cater the demand for energy for a sustainable economic growth.

To increase the share of Renewable Energy in the overall energy production in the country, Government of India has launched the World’s largest renewable energy expansion programme with an aim to generate 175 GW of renewable energy by 2022 from the current capacity of 58.30 GW, major contributors to this growth would be Solar and Wind Energy which would account for over 90% of the overall installed capacity.

With an increasing demand for natural gas and its limited resource domestically, India has been looking to tap into the global market to procure natural gas from the world’s largest producer Iran through the various transnational projects like –
  • Iran-Pakistan- India (IPI) Gas Pipeline – India has not been participating in talks on the 1,036-km Iran-Pakistan-India gas pipeline since 2007 citing security and commercial concerns but has never officially pulled out of the $7.6 billion project. But with the recent inauguration of Chabahar Port in Iran, India is looking to build a 1,300-km undersea pipeline from Iran, avoiding Pakistani waters completely, which has the potential to bring natural gas from the Persian Gulf to India at rates less than the price of Liquefied Natural Gas available in the spot market.
  • Turkmenistan – Afghanistan – Pakistan – India (TAPI) Gas Pipeline - India is finally looking at arriving to a solution to the proposed $15-billion TAPI (Turkmenistan–Afghanistan–Pakistan–India) Pipeline, also called Trans-Afghanistan Pipeline with more interest now than ever before. On February 23, India will be participating at a ground-breaking ceremony for TAPI at Afghanistan that will mark the beginning of formal round of talks amongst the participating countries on the pipeline that is slated to connect central Asia with south Asia covering 1,814 kms.
There has been a steady decline in India’s domestic Oil and Gas production—oil production fell by 4.7 percent in the last four years, i.e., 37.8 MMT in 2013–14 to 36 MMT in 2016–17, while natural gas production fell by 7.7 percent, i.e., 97 MMSCMD to 87.4 MMSCMD21. Therefore, increasing domestic production is critical to reduce India’s import bill and to build a gas-based economy. The Honourable Prime Minister’s aspiration for the industry is to reduce crude oil import dependence by 10 percent between 2014 and 2022. Domestic production would need to more than double to meet this aspiration. In order to achieve this the Government Of India has come up with a number of investor-friendly policies like the following –
  • Hydrocarbon Exploration Licensing Policy (HELP) which is aimed to provide a revenue-sharing model expected to replace the older cost recovery-linked Production Sharing Contract (PSC) model. HELP is also expected to provide for marketing and pricing freedom for natural gas.
  • Discovered Small Field Round in 2016 wherein 31 contracts have been signed with a potential peak production of 15,000 BOPD of oil and 2 MMSCMD of gas.
  • Policy framework for relaxations, extensions and clarifications at the development and production stage under PSC regime, aimed at early monetization of hydrocarbon discovery.

Thank you reading along! More on this topic will be shared in the Part II of this article which is slated to be released tomorrow with insights into the various government policies and how India is looking to achieve Energy Security on it’s way to become an economic super power.
Keep following the page for more insights on this topic and a range of other topics to boost your GDPI Preparations.

About the Author – The Author of this article is Ashish Mishra, a Management Professional by the day; a Consultant, reader, an experimental cook and a Quizzer by night. He has deep interest in Government policies, Geo-Political events around the world and is a keen observer of all major sectors and industries.

References –

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