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Address by Secretary(ER) on Ensuring India's Energy Security 09/03/2009
Address by Sh. H.S.
Puri, Secretary(ER), Ministry of External Affairs on Ensuring India's
Energy Security:
Dr. Bhartia
Thank you for inviting me
to address the National Conference on “Ensuring India’s Energy Security:
Domestic Measures and External Policy Approaches.” It stands to reason
that when there is a Guest of Honour, it should not be necessary for
others to address the same session. But, since I am here, let me say a
few words.
4. In a 2004 report, the
International Energy Agency (IEA) estimated that by 2030 the world would
be consuming around 121 million barrels per day and, to achieve this,
the global oil industry requires an investment of approximately $3
trillion. In a 2006 report, the agency revised the estimated investment
volume upwards to $4.3 trillion to produce a little less quantum of oil,
116 million barrels per day, by 2030. This rise of 43% in investment
volume to produce 5 million barrels less per day for the same period has
been attributed to the end of ‘cheap oil era’. This in turn is a result
of the ageing existing “giant and super giant” oil fields as well as the
need to drill for oil in new and small sized wells, whose marginal cost
would be much higher than that of existing giant and super giant fields.
6. According to the
Integrated Energy Policy India needs to sustain an economic growth rate
of 8-10% over the next 25 years, in order to eradicate poverty and meet
its human development needs. This would require augmentation of primary
energy supplies by 4-5 times by 2030-31. At present, India consumes
approximately 3.1 million barrels of oil a day and this is expected to
grow to a couple of million barrels more, making India the third largest
consuming country in Asia and the fourth largest in the world.
Expenditure-wise, year-on-year basis, a rise in the price of oil by a
single dollar costs the economy approximately Rs.17.7 million. Besides,
it would trigger oil-induced cascading effects, including inflation,
unemployment, and social unrest.
8. Ensuring continuous
availability of commercial energy at competitive prices to support
economic growth and meet our energy needs with safe, clean and
convenient forms of energy is vital for the continued growth of the
economy. We need to adopt a multi-pronged and coordinated energy
strategy which requires: increasing the domestic supply of crude oil and
gas by fast-tracking upstream activities; substituting oil consumption
by gas and clean coal (keeping in view the relative energy yields in
dollar terms of various fuel options); increasing reliance on renewable
sources of energy such as nuclear energy, solar energy, wind energy and
bio-fuels; increasing our own hydro-electricity production and
developing mutually beneficial models to tap the hydro-electricity
potential in neighboring countries; improving energy efficiency;
diversifying our supply sources and acquiring energy assets abroad.
ii. Diversification of
sources of oil and gas supply is the key to the promotion of our energy
security. While maintaining our traditional supply lines from the Middle
East, we must augment our energy supplies from countries in Africa,
Latin America and South-East Asia. In 2007-08, India actually sourced
nearly 18% of its oil from Africa. We are also seriously looking at the
CIS region for oil, natural gas, hydropower and uranium resources. Latin
America is another attractive energy supply source for India. In South
Asia, a network of gas pipelines and power grids will enhance energy
security in the region, essentially of India, and also significantly
benefit its smaller neighbors, reduce cost of fuel transportation and
help in an optimal and efficient harnessing of energy resources.
iv. Creation of a
Strategic Petroleum Reserve (SPR), though expensive to create and
maintain, would reduce the country’s vulnerability to short-term oil
shocks and soothe price fluctuations. Apart from the creation of SPR,
co-operation with other Asian countries, which maintain strategic
reserves, is required. For instance, mutually beneficial co-operation
with Japan, South Korea, Taiwan and Singapore is possible in areas such
as joint identification and storage of reserves at low-cost locations,
co-coordinated response to global and regional energy crisis and
short-term lending and borrowing facility in the event of temporary
shortage.
vii. Nuclear energy is
another potential source to ensure India’s energy security in the medium
and long term. Nuclear power development is essential not only in the
context of energy security but also in terms of its environmental
advantages. With the Indo-US nuclear cooperation agreement we can hope
to secure the required supplies of nuclear fuel for enhancing our
nuclear power generation. 11. I believe that the current economic downturn provides both oil producing countries and oil consuming countries a perfect opportunity to enhance cooperation on mutually agreed terms and conditions and enter into long-term contracts. Oil exporting countries faced with falling revenues are anxious to manage the volatility of oil markets and stabilize their oil incomes. According to the International Monetary Fund, a decline of $1 in the price of crude would translate into a loss in revenues of $3.5 billion for Saudi Arabia, $300 million for Qatar, $1 billion for the United Arab Emirates (UAE) and $960 million for Kuwait. The recent drop in demand has drastically reduced prices leading oil refineries to build up huge stocks, both stable and mobile. According to the Wall Street Journal, oil supplies are now building at such a rate that over 40 million barrels are being held in idle supertankers around the world. Thus, it is obvious that the present situation is opportune for both oil producing and consuming countries to enter into ‘contracts’ to hedge their losses from unforeseen shocks and spikes.
12. Ladies and Gentlemen,
as we grow as a nation, our energy needs are bound to grow concurrently.
With depleting reserves, energy security takes on a serious connotation.
If we are to meet India’s overall growth objectives, ensuring energy
security of the country is of critical importance. It is imperative that
all stakeholders strive towards reducing our dependence on fossil fuels
in the medium to long term by increasing the share of renewables in our
overall energy mix. The challenge before us is to augment our domestic
supplies while consolidating and diversifying our external resources so
as to achieve a more rational and sustainable energy matrix over the
next 10-15 years. We strongly support efforts to develop a cooperative
framework through intensive consumer-producer dialogue, transparent
exchange of data and information and cooperation in R&D in conventional
and non-conventional energy resources. The current slump will not in any
way dampen India’s investment thrust in the field of energy. The need of
the hour is to plan ahead and secure the future of our younger
generation. |
