Diversification & Energy Security for India

Sandip Kr. Sarma

Introduction:
Every country’s vision for economic development depends primarily on availability of
economical energy. Energy security is an umbrella term. For consumers energy security
means availability of reasonably-priced energy on demand without worrying about
disruptions; for suppliers it means security of revenue; for E&P company energy security
means sustaining of the business - access to new reserves, ability to develop new
infrastructure and stable investment regimes. Developing countries always like to avoid
balance of payment shocks & sustaining their ability to pay for resources to drive their
economies. Power companies are concerned with the integrity of the entire network;
policymakers focus on the risks of supply disruption and the security of infrastructure due
to terrorism, war or natural disaster.
Like any other business, Diversification acts as risk reducer in energy sector. For India,
with limited in place energy resources, diversification is the starting point to secure
energy availability to achieve the vision to be a developed nation.
India - present energy scenario:
India is both a major energy producer and consumer. As energy producer, it ranks as the
world’s 11th greatest energy producer, accounting for about 2.4% of the world’s total
annual energy production. It also ranks the 6th greatest energy consumer, accounting for
about 3.3% of the world’s total annual energy consumption.

Oil sector:
About 30% of India's energy needs are met by oil, and more than 60% of that oil is
imported. As world's 6th greatest oil consumer, it accounts for about 2.9% of world's total
annual petroleum consumption.
Natural Gas:
India's natural gas reserves estimated at about 29-32 trillion cubic feet (tcf), or about
0.5% of the world total. Demand for natural gas is growing at about 4.8% per year and
forecasted to rise to 1.2 tcf per year by 2010 and 1.6 tcf per year by 2015.
Coal:
It is the backbone as fuel for India. India is 3rd largest coal-producing country in the
world after USA & China – it accounts for about 8.5% of the world's annual coal
production. Also, India is also 3rd largest coal consuming country - nearly 9% of the
world's total annual coal consumption. About 78% of India's electricity generation is
fueled by coal. India's steel industry imports coking coal, to meet about 25% of its annual
needs, as indigenous production is not of suitable quality.

India - future energy requirement:

Indian economy is projected to grow 7%-8% over the next two decades. At this growth
rate, energy requirements of the country are expected to grow at 5.6-6.4% per annum over
the next few years. Also, the known reserves of coal, India’s dominant energy source
today, are expected to last for around 45 years with current technologies for extraction.
For crude oil - the gap in demand and output will catapult India to one of the largest
consumers along with China. The 2 countries will account for 35 per cent of the world’s
incremental energy demand. Similarly for natural gas, India is expected to rival both
China and Japan in having the largest demand in Asia by 2025. Though India have proven
coal reserves of 765 Mtoe and indicated reserves of 1,260 – 2,340 Mtoe, clean energy
scenario prevents use of coal like now-a-days. Alternative scenario may be development
& use Coal Bed Methane as preferred fuel – it may create a larger opportunity than either
oil or natural gas.
Being a clean fuel, Nuclear power has become an emerging thrust area. DAE has plant
capacity targets of 25GW by 2030. Also, India is endowed with a hydroelectric potential
of about 150,000 MW – however, only 17% of the potential has been harnessed so far
with another 5% under various stages of development.
To sustain a growth rate of 7-8%, power generation capacity in India would have to
increase to 306 GW in the next 10 years which is 2.5 times current level. Hydroelectric is
the source of clean energy to share a part of the vast electricity requirement. Another area
of thrust, the renewable energy resources, is also expected to share a part of future
electricity requirement with increased investment and technology sharing.
G
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 Resource
Utilization Current
in 2031-32 Utilization
(Mtoe) (Mtoe)
Oil 350-486 119
NG 104-150 29
Coal 632-1022 167
Hydro 13-35 7
Nuclear 76-98 5
Solar 1200 <1
Wind 10 <1
Fuel Wood 620 140
Ethanol 10 <1
Bio diesel 20 <1

Diversification of Energy Need:

As a risk reducer, diversification becomes the first tool for an energy hungry country like
India. Diversification strategy may be divided into two types – supply source
diversification and energy resource diversification.
Supply source diversification is the import of energy from many countries – it is specially
required for fuel like oil, gas & nuclear fuel, which are the prime sources for world
politics & many conflicts. In fact, the emergence of oil as weapon, during & after 1973
Arab-Israeli war has strengthened the concept of Energy security in the world. The
diverse availability of energy sources allows compensating for energy crisis from one
source, which may even be created by devastation of hurricane or tsunami. This concept
may even be extended for in-country resources, where a simple strike may cut energy
supply from one source.
Energy resource diversification is a long term process and contribution from smaller
sources like renewable energy is very important in this context. Now-a-days, energy
conservation by efficient use has also been accepted as a resource. World concern is
towards a clean climate and minimizing emission of green house gases with increased

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effort towards commercial use of bio-fuel, renewable energy and replacement of use oil
by electricity for vehicle fuel. Natural Gas has become the preferred fuel today due to its
efficiency and environmental cleanliness. Diversifying energy supply to Natural Gas will
reduce the weight on oil (36%) & coal (51%) in the energy basket of India in the future.
World strategy towards diversification:
Started from oil embargo during 1970s by OPEC countries, developed countries have
adopted the concept of diversification – USA has diversified its supplier for oil from
OPEC to its neighboring countries. Vast inter-country pipeline networks are already in
place and further investment are going on. Emergence of Russia & African nations as
major energy supplier and emergence of India & China as major energy consumers have
changed the demand-supply scenario. As recent crude oil price shoot-up has produced
price-shock in many countries, similarly the sharp decline of crude oil price afterwards is
affecting economy of supplier countries.
Globalization has made the economy of countries interdependence. Countries are putting
combined efforts to secure energy supply system from effects of terrorism, natural
calamities etc. As per IEA’s energy outlook, countries have adopted time-frame based
specific targets to secure energy supply in the areas of bio-fuels, renewable energy,
nuclear power, industry sector, building sector, transport sector etc.
Diversification strategy of India:
The prime motto of energy security measures is that India needs clean, convenient and
reliable energy not only for today’s survival but also to secure the future. To achieve the
objective various steps are already in implementation stage & many are in planning stage.
The whole process is to be developed continually. The world energy & economic scenario
is to be considered at every step of planning & implementation.
India is presently augmenting of in-place energy reserves in a planned manner via NELP.
For India it is not a question of choosing among alternate domestic energy resources but
exploiting all available domestic energy resources to the maximum as long as they are
competitive. Success is already in hand – we are exploring huge proven gas reserves.
India must ensure availability of adequate supply of coal with consistent quality. Though
we are trying to reduce the pressure on this core source of energy, mainly due to climate
change issues, it will continue to be major energy source for next half century.
Development of technology for commercial use of Coal Bed Methane will be a important
steps to increase its efficiency both in terms of climate change scenario & calorific value.
Natural Gas is becoming the fuel of choice in whole world in spite of its transportation
limitations. Technologies are being developed to reduce its liquefaction cost to reduce
cost of producing LNG. To cope up high natural gas demands in coming years in all user
sectors, we must explore, produce & transport indigenous gas reserves. Bitter relations
with immediate neighbours, political situation in Myanmar & effect of China’s energy
need are hampering our efforts to import natural gas from gas rich countries through
pipelines. As India must have to import gas in near future through pipelines, long term
practical solution must be found out. Indian E&P companies are presently bidding for
blocks in faraway countries, mainly in Africa – ways for transporting the energy,
specifically natural gas is to be considered to achieve best results.
Power sector reform in India is already in place with objective of Expansion & Efficiency
of transmission & distribution network to achieve required target to fulfill the goal of
maintaining GDP growth.

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India has already moved a step forward by signing India-US Nuke deal. Use of diverse
supply sources of Nuclear Energy especially that of Russia & European countries
including exploration of indigenous fuel will improve our bargaining power.
Reducing energy requirements and increasing efficiency in use of energy are two
measures very seriously promoted in developed countries as a means for energy security.
In every sector, small amount of energy saved by use of suitable technology and good
practices – we can increase the availability of useful energy to us.
From the inception of the conception to diversify energy sources for energy security,
renewable energy sources remain important to India’s energy sector. It is argues that solar
power could be an important player in India attaining energy independence in the long
run. The vast pool of renewable energy resources especially solar energy, wind energy,
bio-fuels & mini-hydroelectric projects if suitably explored and used, contribution of
these resources to primary energy may account for 5 to 6% of India’s energy mix by
2031-2032. Though huge investment is required compared to achievable output, the
distributed nature of renewable resources can provide many socio-economic benefits.
Maintaining emergency oil stock for at least 90 days at strategic locations is an important
short term measure to cope up price shocks & supply shortfalls due to wars, natural
calamities etc. IEA member countries are already maintaining such stocks – India has
taken steps in this regard to construct ‘Strategic crude oil storages’ of five million tones
capacity.
Conclusion:
Energy is the hinge of world economy and its security must be guaranteed for
development of energy hungry country like India. With the development of new
technologies & changing world scenario, finding means to trap every calorie of energy
from possible generating sources and implementing the same in a economic way with
continual improvement in the process can only make us successful in achieving the goal.

Reference:
1. India Hydrocarbon Vision – 2025.
2. World Energy Outlook 2006 - IEA publication.
3. India’s Strategy toward Energy Development and Energy Security – Mr. R V
Shahi.
4. Country Analysis Briefs – India, January 2007 – IEA publication.
5. The New Energy Security Paradigm – World Economic Forum publication.
6. India’s Quest for Energy Security: The Oil and Gas Perspective, Speech by Shri
Murii Deora, Minister of Petroleum and Natural Gas, GoI, 31st March 2006.