India, China locked in energy game
By Chietigj Bajpaee
Mar 17, 2005
HONG KONG - In the words of Indian Prime Minister Manmohan Singh, "China is ahead of us in planning for its energy security - India can no longer be complacent." These words conveyed the sense of urgency that India holds over meeting its energy needs.
India is playing catch-up with other major players in the global energy game. This realization has not come a moment too soon, given the advent of rising oil prices, India's unprecedented growth levels, lack of energy-efficient technologies and reliance on energy-heavy industries for its development.
Power shortages and blackouts continue to plague India's major cities and undermine the confidence of investors and foreign companies operating in India. These power shortages have been fueled by a combination of burgeoning growth rates, inefficiencies by the state-run power sector and power being stolen or siphoned for votes. The growing popularity of gas-guzzling sports utility vehicles and multi-purpose vehicles in India is also placing strains on its energy needs.
India, as the world's number six energy consumer, is also in a more desperate situation compared to its peers. For example, oil imports account for two-thirds of India's oil consumption, while China imports a third of its crude oil consumption. Furthermore, China's proven oil reserves stand at 18 billion barrels, compared to 5 billion barrels in India.
Indian-owned Oil and Natural Gas Company (ONGC) has invested US$3.5 billion in overseas exploration since 2000, while Chinese-owned China National Petroleum Corporation (CNPC) has made overseas investments of an estimated $40 billion.
Indian policymakers have initiated numerous policies to address the country's growing energy needs. For example, India is pushing for the creation of 15-45 days of emergency reserves in Rajkot, Mangalore and Vishakapatnam. India is also diversifying beyond oil to access other energy resources, such as nuclear power, coal, natural gas and renewable energy resources, as well as stepping up exploration activities within its borders.
Nevertheless, for the short to medium term India will have to rely on an increasing amount of imported oil and gas to meet its energy needs. As a result, India is stepping up energy diplomacy with states in the South Asia region, as well as states further afield in Central Asia, Russia and the Middle East and as far away as Latin America and Africa.
ONGC, for example, has invested in offshore gas fields in Vietnam, as well as energy projects in Algeria, Kazakhstan, Indonesia, Venezuela, Libya and Syria, while Indian Oil Corporation is looking to invest in deepwater exploration in Sri Lanka. Reliance Industries, India's largest private sector oil firm, also has stakes in an offshore field in Yemen and a liquefied natural gas project in Iran, and is in talks to acquire energy assets in Nigeria, Chad, Angola, Cameroon, Congo and Gabon in Africa, as well as in South America and the Middle East.
However, this quest for energy security is being impeded by India's sometimes tense relations with energy suppliers, energy transit countries and energy competitors. For example, just as India and China have for centuries engaged in competition for leadership in Asia, the developing world and status on the world stage, so the need for energy security has now raised the possibility of further competition and confrontation in the energy sphere.
India's tense relations with Pakistan also have an added dimension with the question of a gas pipeline from Turkmenistan or Iran to India, which will have to traverse Pakistani territory. Nationalism and oil are proving to be a volatile mix. Resolving territorial disputes and improving relations with traditional adversaries will become increasingly important for India if it is to meet its energy import needs by peaceful means.
Festering disputes
While China has either resolved or shelved its border disputes, India has active conflicts on almost all of its borders with neighboring states. Apart from India's poor relations with Pakistan on its western borders, the ongoing violence in India's northeast with sporadic attacks on pipelines and India's poor relations with natural gas-rich Bangladesh and China-friendly Myanmar have prevented it from fully exploiting its proximity to a region rich in energy resources on its eastern borders.
Frosty relations between Bangladesh and India are rooted in accusations by India that Bangladesh is fueling terrorist movements in India's northeast in the presence of rising Islamic fundamentalism and anti-India sentiment in Bangladesh under the Bangladesh National Party (BNP)-led coalition government, illegal migration between both states, and Bangladesh accusing India of rerouting the Ganges and Brahmaputra river systems that traverse both states.
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