Energy security is critical for a country like India with a population of 1.2 billion and one that aspires to be in the league of superpowers.
Energy demand has been growing steadily, only to be expected of a growing economy of the size of India. However, supply is unable to keep pace with it, thus pushing the nation to the brink of an energy crisis.
India’s Integrated Energy Policy, touches upon the following key issues related to energy security in the country:
-- Meeting India’s large energy demand to sustain an annual economic growth rate of 8 to 9 percent through 2031-32-- Meeting the energy demands of all sectors including the lifeline energy needs of vulnerable households-- To ensuring sustainability in energy supply and use
Demand-Supply Gap
During the Eleventh Five Year Plan, nearly 55,000 MW of new generation capacity (electricity) was created, yet there continued to be an overall energy deficit of 8.7% and peak shortage of 9.00%, according to a Central Statistics Office report.
Resources currently allocated to the energy sector are not sufficient to narrow the demand-supply gap. As a result, our dependence on imports is increasing.
Going further, this demand-supply rift is only set to widen. In fact, according to the World Energy Outlook 2012, global energy demand is likely to grow by one-third over the period to 2035 with China, India and the Middle East accounting for 60% of the increase.
Not to forget, India is the fourth largest primary energy consumer after China, USA and Russia. Besides, it accounts for more than 4.6 % of the total global annual energy consumption.
If India is to maintain an average growth rate of about 8% in the coming years, its energy resources will continue to feel the strain.
Challenges related to energy security
Low number of proven hydrocarbon reserves and lack of interest of foreign players in exploration and production is having a negative impact on India’s energy sector.
Only 22% of our sedimentary basins have been explored for energy resources. The rest are oscillating between ‘exploration initiated’ to ‘poorly explored’.
More oil and gas imports: The volume of gas imports has been steadily increasing in India, all the more after the once lucrative KG-D6 basin began to see a dip in its production. Our crude oil import bills too are inflating.
During the Twelfth Five Year Plan (2012-2017), import dependence on crude oil is expected to increase from ~76% in FY11 to ~80% in FY17 and import dependence on natural gas is expected to increase from ~21% in FY11 to 35% in FY17.
Rising imports highlight the lack of self-sufficiency of the energy sector, which is a matter of grave concern.
Reducing coal supply: According to the Coal Ministry website, production of coal has risen from 70 million tonnes at the time of nationalization of coal mines in early 1970's to nearly 557.66 million tonnes in 2012-13.
The Twelfth Five Year Plan stresses that it is essential to ramp up coal production to 795 million tones by 2016-17. However, Coal India foresees a 20% shortage in the next five years.
The coal sector has been facing challenges on the domestic as well as imports front. While production is seen as going down, imports face infrastructure and cost hurdles.
Renewable and unconventional sources of energy: Renewable energy resources can go a long away in mitigating in India’s energy woes, however their full potential is yet to be realized. As of now, wind contributes to most of our renewable energy.
Mounting pressure on conventional energy sources is making India turn towards unconventional ones. As a result, there has been talk of shale gas exploration, which has been a huge success in the US.
However, it’s still in the nascent stages and will need a liberal fiscal and policy framework to succeed.
Policy and Regulatory Hurdles
Pricing is a huge concern in the hydrocarbon and coal sector, as domestic prices are often disconnected from global trends.
Regulatory uncertainties come in the way of investments in the oil and gas upstream sector. It would do well if an independent regulator were to oversee contract administration, monitoring and review. At present, the government is involved in these tasks. The downstream sector is yet evolving in terms of policies.
Other issues that plague India’s energy sector are delays in land acquisition, rehabilitation and resettlement and obtaining environment and forest clearances.
It is only when we have a stable regulatory environment can investments in the oil and gas sector increase.
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