Together with Chinese demand, growing Indian oil consumption is one of the reasons behind recent increases in oil prices. With massive investments in hydropower and coal, India tries to avoid the oil trap.
 | ElectrificationIndian workers install electric cables in a hamlet south of Madras. India tries to improve access to electricity in rural areas, but power shortages and blackouts continue to plague its major cities (Photo: Reuters) |
With GDP growth rates equaling China, India is catching up economically. Unfortunately, its consumption of energy is catching up as well. But the country is finding it increasingly difficult to source all the oil, natural gas, and electricity it needs to run its booming factories, fuel its cars, and light up its homes. To meet its future energy needs, India will have to invest some 800 billion dollars by 2030, estimates the International Energy Agency.
Overall, India accounts for about 2.4 percent of the world’s total annual energy production, but consumes about 3.3 percent of the world’s total annual energy. The imbalance is growing and the country is projected to surpass Japan and Russia to become the world’s third biggest energy consumer by 2030. Researcher Tanvi Madan, author of a Brookings report on Indian energy issues, noted a “tremendous amount of concern” that the gap between the energy demand and supply will slow down the economy.
The poor quality of Indian coal, however, coupled with a lack of infrastructure to clean it, poses a major environmental threat. India’s important steel industry already has to import large amounts of high-quality coal from abroad. India’s real energy problem, however, lies with oil, natural gas, and the infrastructure necessary to produce and distribute electricity.
The oil trap
India has to import more than 60 percent of its oil despite proven reserves of about 5.6 billion barrels, the second-largest amount in the Asia-Pacific region behind China. This figure could rise to 90 percent by 2025, according to a report by the Center for Strategic and International Studies.
India’s most important source for energy is coal. More than half of India’s energy needs are met by coal, as well as about 70 percent of its electricity generation. With more than 90,000 million metric tons of proven coal reserves, about 10 percent of the world's total, the country could be self-sufficient for more than a century.
 | Energy giantMukesh Ambani, chairman of Reliance Industries, India's biggest private-sector refiner, announces in 2005 that the company would double capacity at its Jamnagar unit, making it the world's single-largest oil refinery (Photo: Reuters) |
To secure these imports, the state-owned Oil and Natural Gas Corporation (ONGC) acquired shares in oil fields in countries like Sudan, Syria, Iran, and Nigeria – investments that have led to diplomatic tensions with the United States. India also holds significant reserves of natural gas. But gas consumption has risen faster than any other type of energy source, forcing India to start importing liquefied natural gas (LNG) from Qatar in 2004. Negotiations about gas imports include politically problematic countries like Iran and Myanmar.
India’s steady evolution from a self-sufficient country to net-importer of gas and oil has created new dependencies similar to those experienced by industrialized countries in Europe and Asia. Indian officials have thus decided to follow their example and create a strategic petroleum reserve. Plans have been approved for the construction of storage tanks with 36.7 million barrels of crude oil storage capacity. At the current rate of consumption, this amount would give India less than two weeks of independence from oil imports.
Water-fueled
India’s need for electricity is outgrowing even its thirst for oil. Annual electricity generation and consumption in India have increased by about 64 percent in the past decade. Its projected annual rate of increase for the next decade is nearly 10 percent, one of the highest in the world.
India has been relying on hydro power for years to reduce its dependency on fossil fuels. One fourth of the country’s electricity comes from hydro power plants and new dams will go online in the coming years, especially along the Brahmaputra River. Himalayan glaciers that feed India’s major rivers are essential for a steady supply of hydro power. With climate change and shrinking glaciers, the most important source for India's rivers, the country risks of experiencing even more blackouts during dry seasons are increasing.
Powerful neighbors
India produces a lot of electricity, but 30 to 50 percent is lost along the delivery chain, reports Forbes magazine. Unreliable power grids also cause regular blackouts. India’s power infrastructure is run by state-owned electricity boards. They are in poor financial shape, because they have to subsidize electricity prices, especially in rural areas. Farmers use a lot of energy to pump water. With shrinking resources and sinking water tables, more and more energy is needed to pump ground water for irrigation.
According to reports in the Indian press, the government is working on plans to build a pan-South Asia electricity ring. India already buys hydro power from neighboring Bhutan and plans to improve electricity networks to enable up to 5,000 Megawatts (MW) of electricity imports by 2020.
In Myanmar, a 1,200-MW hydro project, along with a link to India, is being planned. India is also working on a 450-million dollar undersea power transmission link with Sri Lanka. Hydro power projects in neighboring Nepal, with an economically feasible hydro-electric potential of 83,000 MW, are also under way.
Read more:
Energy Security in Europe: From Russia with Love
Energy Security in China: Catching up with Growth
Energy Security in Brazil: The Next Oil Boom?
Energy Security in the USA: A Declaration of Dependence
editor: Thilo Kunzemann
publishing date: May 27, 2008
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