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EAM’s Inaugural Address at Petrotech 2009 Conference
12th January
2009 ‘Energy Independence with Global Cooperation: Challenges & Solutions’
I am pleased that India’s premier hydrocarbon sector event Petrotech has rapidly evolved as one of the biggest forums in Asia for fostering partnership, knowledge sharing, technology display and global co-operation in the energy sector. I congratulate Indian Oil Corporation and the Ministry of Petroleum and Natural Gas for this. Ladies and Gentlemen, historically, and especially since the Industrial Revolution there has always been a correlation between economic growth and energy consumption. Energy is a prime driver of economic growth, but not all countries are equally blessed with energy resources. Over the last few years, India the world’s second fastest economy has grown at about 9 percent per year. We are also counted as the seventh largest energy producer. But our per capita energy consumption is less than one-third of the global average. We are way short of providing electricity to all our citizens. Over 70 per cent of our crude oil is imported. The energy deficit that we face poses one of the most important challenges to our economic development. Unless we are able to overcome this, we will have to re-evaluate our development expectations. The recently adopted Integrated Energy Policy envisages an energy mix that focuses on augmenting the domestic energy resource base and increasing efficiency while strategising our stakes in energy assets overseas. India aspires to a medium-to-long term strategy of shifting from fossil fuels to renewable and non-conventional sources of energy. Since oil and gas account for about 45 % of our current energy requirements, we are aware that even in the most optimistic of scenarios our dependence on hydrocarbons will continue in the coming decades. Despite these energy constraints we are determined to maintain our rate of growth because that is the only way to defeat poverty and meet our human development goals. Notwithstanding the global economic gloom, we hope to grow at a 7 percent this year. India is backed by strong fundamentals like sustained high domestic savings and investment rates, productivity growth and domestic demand. We are confident of coping with external shocks and sustaining the India growth story. The main challenge for us is to ensure the continuous availability of safe, clean and accessible energy at commercially competitive prices. Energy Security concerns are central to our national interest and an important aspect of our economic diplomacy. Our production of oil and gas is modest by international standards, but we are a significant player in the entire spectrum of the hydrocarbon value chain. In the years to come, India’s growth plans will undoubtedly make us a major contributor to the incremental global energy demand. As a growing energy market the potential for international investments is immense. The Government of India favours a competitive and market oriented hydrocarbon sector with increasing private sector and foreign investment in all the important segments of the industry. Friends, crude oil prices were on a roller coaster in 2008. Historic highs and 4-year lows were experienced in less than 6-months. Even in their dramatic drop, oil prices promise to hit back with a vengeance. It is not difficult to visualize that a recovery from the existing global meltdown could witness a sharp demand driven increase in prices. This extreme price volatility underscores the price sensitivity to short-term market imbalances, diminishing global spare capacity and ultimately the finite nature of oil and natural gas resources. What is more, hydrocarbons are not inspired by market principles alone. Geopolitics also have an influential voice in determining the availability and price of hydrocarbons. As I am not an astrologer in such matters, I shall not guess the route oil prices will take from here. What can, nevertheless, be said with a sense of surety is that, in the long run, this acute volatility in oil prices will profit neither the producer nor comfort the seller. The time has come to recognize that our past approach to energy issues has limitations. A ‘nationalist’ position on energy matters will close more doors than it will open. The theme for this Conference - ‘Energy Independence with Global Cooperation’ is extremely appropriate as it actually prescribes “energy inter-dependence,” which if accepted, is half way home to the idea of energy security. The logic of “energy inter-dependence” is more obvious than it appears. There is limited gain in taking an exclusivist, zero sum game approach on energy issues. For instance, any major development in oil supplies, whether a significant find or disruption to supplies by a blockade or militant action affects prices worldwide. On the larger canvas, energy interests of all countries are ultimately tied together. The imperative before us is to renew the global energy architecture by developing an arrangement that incorporates long-term supply and demand side concerns. A new cooperative framework, based on dialogue and transparent exchange of data that ensures an open, transparent, competitive and stable market ought to emerge. Increasing demand for hydrocarbons is given and will have to be met. The focus is on realistic answers to questions about supply, investments and technology up- gradation in the oil and gas sector. I look forward to Petrotech 2009 deliberating these issues. I would also in particular, draw your attention to the safety and security of oil and gas installations and their transport infrastructure. The recent terrorist attack in Mumbai was a direct strike at India’s economic development. This unpardonable criminal attack only underscores the risk all countries face from economic sabotage, irrespective of whether these acts are authored by states or merely carried out by so-called non-state actors. The global hydrocarbons sector would increasingly be even more vulnerable to such threats. Protecting these assets would not simply be a law and order problem for an individual country, whether an energy exporter or consumer. Stability of energy supplies, security of energy transportation and creation of new energy infrastructure and its protection has to be a common goal requiring coordination and cooperation of all countries. It would be my recommendation that this Conference pay some attention to this issue as well. In this New Year, talk of ‘recession and recovery’ has become common in the wake of one of the biggest global financial and economic downturns. I realize that this gloom also surrounds the hydrocarbons sector. Before I conclude, let me persuade the participants in this Conference to optimistically look above and beyond the pall of economic uncertainty. Let us prepare and plan for an energy future that is minus imbalances and shocks. With this, I declare the Petrotech 2009 - 8th International Oil and Gas Conference open and wish it all success!
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