Indian Council for Research on International Economic Relations

Seminar Details

25 Oct 2005

Panel discussion on ‘Energy Security: The Future of Oil & Gas in India’
October 25, 2005
Mr.Talmiz Ahmed, Ms.Sudha Mahalingam, Dr.T L Shankar
ICRIER organized a panel discussion on ‘Energy Security: The Future of Oil & Gas in India’ on October 25, 2005 to review prospects in the light of mounting oil prices, rising demand and uncertain supplies; uncertainties surrounding global energy prospects, and moreover to discuss both domestic and international policy options needed to take care of India’s energy security. 

The panelists included Talmiz Ahmad, Additional Secretary, Ministry of Petroleum & Natural Gas, Sudha Mahalingam, Senior Fellow, Nehru Memorial Museum & Library and TL Sankar, Consultant, Administrative Staff College of India, Hyderabad. 

Sharing the government’s perspective, Mr. Talmiz Ahmad emphasized that energy security is an integral part of national security. Oil and gas continue to be dominant sources of energy but the present oil and gas scenario is characterized by distorted, non market and irrational features. With a 70% gap between domestic supply and demand for oil signifying India’s dependency on oil imports, he cautioned that India has to ensure existing supplies while at the same time diversify to foreign sources. He drew attention to the efforts in the Caspian, Latin America and Africa as examples. At the same time domestic efforts at exploration and production must also be strengthened. For gas, he maintained that pipelines to bring gas from neighbouring countries are important. Multiple pipelines do not compete with each other as all the supplies will be needed. Roundtables to bring consumers and producers together, setting up a World Energy Forum in the UN, were among the global options mentioned. He posed the question about what proportion of domestic demand should be covered by equity oil from concessions, given the FOREX reserves and BOP status of India 

Ms. Sudha Mahalingam emphasized demand-side management as an integral part of managing energy security. But even with aggressive demand-side management measures, especially in the transportation sector, India will continue to be dependent on imported hydrocarbons, especially from the Middle East Persian Gulf region. Hedging, overseas oil equity and long-term contracts could address price volatility to some extent. Gas is a regional resource. Pricing is a key issue in gas imports whether through pipelines or LNG since downstream industries like power and fertilizer cannot absorb high prices. Dual pricing of gas in domestic markets will have to continue. As far as possible, future capacities in power generation should be fuelled by domestic gas as well as hydel sources. India should also consider importing electricity from Central Asia, especially Kyrgyzstan and Tajikistan which have abundant hydel capacity. 

Mr. TL Sankar started out by saying that while there have been various ideas and efforts on energy security, there has not been much of an effort to anchor them together. For this he emphasized on greater stress on coordination of the main elements of the energy chain. He also pointed out that while oil may be used for transport, he was not very sure about the usefulness and sustainability of using gas for producing electricity. Additionally, price of electricity in India has hit the international standards and there is not much of a room to increase its price any further. The key issue to energy security is wide scale availability of cheap electricity. It is technically feasible to produce electricity for less than Rs. 2/- per unit using domestic coal. This is one option to reduce India’s import dependence on gas. He also focused on energy efficiency improvements and substitution of bio fuels which would reduce import requirements of oil. 

The discussion that followed focused on the geopolitical risks of relying on imports from politically volatile regions and the need to exploit more fully indigenous coal resources, using new technologies like underground gasification and coal-bed methanation. 

Concluding the ICRIER discussion Mr. Nitin Desai stated that energy security is more than tying up sources of oil supply. It must look beyond to demand management and alternatives to oil. This requires coordination. But coordination can become a bureaucratic routine of meetings unless it has a purpose. This could be demand assessment and management and setting priorities for long-term technology options. The sectoral bodies should be left free to undertake supply planning on the basis of this assessment and priority setting. 

Seminar was chaired by Nitin Desai, Honorary Professor, ICRIER (Former Under Secretary-General of the UN). It was attended by academicians, scholars, experts, ministry representative and media


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