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3. India’s Energy Security: Will This Be a Dream Only

Coal has been the primary source of India’s energy demand for more than a century accounting for almost 43% of the country’s primary energy mix. However, it is apparent that coal is not the long-term answer to the country’s ever increasing energy demand. The twin power blackouts during late July 2012 (the peak summer demand) period threw more than 300 million people into darkness across the states in northern India, including the capital city New Delhi, that created chaos, disrupted railways, hospitals and other emergency services. This was a grim reminder of the huge supply shortfall, the country is facing. Coupled with increasing environmental issues associated with coal based power plants and the declining domestic reserves, it is high time that the people of the country have to think about other cleaner and economically competitive alternatives.

A Highly Promising Start, But Unmet Expectations

Back in 2002, when Reliance Industries’ made a giant discovery of 14 trillion cubic feet (tcf) of natural gas in the KG-D6 block of Krishna Godavari basin, the country boasted of it’s path towards gas ambitions. However, things have not played out as expected. Gas output from the block has fallen to 48.13 million metric standard cubic meters per day (mmscmd)during 2010-11 against the approved production of 53.40 mmscmd; during 2011-12, it came down to 35.33 mmscmd, against 61.88 mmscmdand is expected to decline further. It’s under these circumstances that the government of India has decided to raise gas prices to attract higher upstream investments, resulting in higher domestic natural gas output and the reduction or even elimination of India’s import dependence on even costlier liquefied natural gas (LNG), thereby bettering the country’s fiscal stability and energy security. Unfortunately, the government’s argument is a matter of dispute because of various reasons.

The New Exploration Licensing Policy (NELP), which started in 1998 with an aim to attract foreign investment in the oil sector, has failed to attract large multinational oil companies such as Chevron, Exxon Mobil, Shell and the likes. The only major investment made by any foreign player was BP which had bought 30% stake in 21 blocks of Reliance Industries for $7.2 billion in 2011. However, the blocks were relinquished as they were not promising. Coupled with inconsistency in implementation of the production sharing contracts, royalty and pricing issues, the government of India is struggling to find foreign investors.

Road towards Shale Gas, Obstacles Are Many

According to the US Energy Information Administration (EIA), the recoverable shale gas reserves in India were estimated to be 96tcf. If these reserves are commercially explored, this could satisfy the country’s gas demand for more than 26 years. However, obstacles are too many.

• Environmental concerns

On the brink of announcing a shale gas development policy, the government of India is facing a vault from the Ministry of Environment, which argues that sufficient study has not been done on aspects of usage of water in the exploitation of shale gas resources.

• Infrastructural challenges

The major challenge for India will lie in developing associated infrastructures such as LNG terminals, and pipelines for storage, transmission and distribution of gas.

• Lack of technical expertise

Shale gas exploration requires advanced extractive technologies. However, India’s major upstream national oil companies (NOCs) such as Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) lack the funds or expertise to develop shale gas. At a time when the country is struggling to attract foreign investors for exploring conventional resources, the government of India needs to frame policies such that it attracts private participation from foreign companies with best shale technologies.

Huge obstacles lie ahead for India on way to ensure energy security in the future. To meet its long-term needs, the country must act on the rapid development of its own unconventional gas resources. If systematically and commercially explored, the gas option can serve India’s energy demands well in the future.

Related Reports:

Oil and Gas Security Market [by Applications (Exploration and Drilling, Refining and Storage, Pipeline, Transportation and Distribution), by Technologies (Physical Security, Network Security)] - Global Advancements, Forecasts & Analysis (2013 - 2018)

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