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Opinion - Leader Page Articles

India's gas deficit

By Bhamy V. Shenoy and A. Madhavan

Pipelines could be the friendship lines of the future in the Asian region.

THE BLOOD feud between Israel and the Palestinians threatens to undermine the global economy and polity. India will be directly hit by a disruption in West Asian oil supplies. Politically, there is a fear that Islamic countries will band together against the United States and Israel. India, which has been cultivating both these countries, could be damaged by Arab resentment of its languid support for Palestine in the current intifada or uprising. India has gone down in the world because of the unchecked incitement to Hindu-Muslim animosity by communalists and mobster-monsters. Pakistan, on the other hand, has been able to side with the Arab states and the Palestinians, while also serving the American cause against Ladenism.

Bleak as the outlook is, it is no good sitting back and waiting for the worst to come. We have to think beyond the current crisis to a time when a relatively durable international order will be restored, affording scope for India to develop into an increasingly prosperous force for regional stability.

One of the first essentials that India has to envision is energy security. Much has been written on our oil dependency. This article focusses on a less discussed, but important segment of the energy mix, viz., natural gas. India's endowment of hydrocarbon resources is meagre in relation to its projected demand. Of the three main sources — oil, gas and coal — India is deficient in the first two; more so in gas than in oil. For environmental and ecological reasons, coal must yield place to gas wherever feasible and in some cases even oil should yield to gas. India's current production and consumption of gas are matched at 26 billion cubic metres (bcm) per year. However, India's potential gas demand, if supplies are available, could be significantly more. Thus gas consumption in India is now constrained by gas availability. By 2010, the country could consume as much as bcm per year. But, gas production is unlikely to be more than 30 bcm per year, whether from the Bombay High or the Northeast sector. Prospecting in the Gulf of Cambay and the Krishna-Godavari basin has not yet shown up enough flares of hope. We are therefore bound to face a shortage of gas to meet our rapidly rising urban, industrial and transport needs. With the conversion of vehicles from diesel to Compressed Natural Gas (CNG)-powered motion, the problem will become more acute. One can imagine the scenario of a run on cooking gas (LPG) and the consequent civil unrest.

Importing oil is standardised in the form of tankers across the seas. Importing gas is more problematic. India can import gas from Qatar and other Persian Gulf countries, Indonesia and even from relatively distant places such as Nigeria and Australia in the form of Liquefied Natural Gas (LNG). This option involves the costs of liquefying the gas at the supplier's end and re-vaporising it at the Indian end.

Further, it has to be delivered inland at various points by Indian pipelines. India is currently considering several LNG projects, which are heavily capital-intensive. Some multinational companies have shown interest in participating in them. Since energy is a key input in the cost of production of goods and services, our export performance will be handicapped unless we choose the optimum gas supply alternatives.

Our tentative probes for obtaining gas by pipeline from Iran and Turkmenistan in the west and from Bangladesh in the east have been stymied for various political, economic and technical reasons. Of these three, Iran has by far the largest gas reserves and is also politically the most compatible partner for India. A possible pipeline from Turkmenistan would have to traverse Afghanistan first before reaching Pakistan.

Iran is contiguous with Pakistan and, though the terrain is rugged, the engineering problems of an overland pipeline to India can be solved. Transit through Pakistan is admittedly a bugbear for India.

In the current state of Indo-Pakistan tension there are few takers for a concept. The U.S. antagonism towards Iran (which it has incongruously bracketed with Iraq and North Korea as "the axis of evil") is also a definite impediment for any such project.

But we have to look beyond the politics of hate and conflict. A time will come when economic logic finds a way through the political morass. Iran and Pakistan are, in principle, in favour of the pipeline. Pakistan stands to benefit from substantial guaranteed transit fees. It is possible to work out contracts that make it expensive for Pakistan to cut off the gas supply.

Turkey and Greece have their tensions, but recently they signed an agreement for the supply of gas from Turkey to Greece. If there is a war, the pipeline could be choked off, but the ships bearing oil and gas will be equally vulnerable. We cannot make constructive enterprises hostage to the worst-case kind of security threats.

It has been suggested that a deep-sea pipeline between Iran and India would be less vulnerable to terrorists and wartime insecurity than an offshore shallow-level pipeline or the overland route.

The cost of laying such a pipeline would, however, be prohibitive. India has already wasted precious time in exploring these offshore pipeline alternatives.

The third possible supplier, Bangladesh, is indeed a prospect India must work on, particularly since West Bengal and its adjacent areas must have their needs looked after. There were reports emanating from American companies a few years back that Bangladesh is a land floating on gas, with an estimated proven reserve of 300 billion cubic metres and a potential discovery of as much as 2,000 bcm.

But Bangladesh is not yet convinced of them. It wants to be sure it can meet its projected demand for about 30 years before thinking of exporting gas.

Its reluctance to sell gas to India is similar to Nepal's in hydel power; it is a function of a deeper psychological resentment of India which we must try to alter by sensitively responsive diplomacy built on complementary relations rather than on exacting reciprocity.

It is possible that Bangladesh may be obliged by its serious foreign exchange deficit to supply gas to West Bengal, but if it is not willingly done, it is better to go slow on the idea.

Pipelines could be the friendship lines of the future in the Asian region. Indian foreign policy should begin thinking with a vision in which the whole region from West Asia to South-East Asia will come out of the imprisoning mindset of conflictual relations and work together on mutually beneficial projects.

(The writers are respectively an energy analyst and a former diplomat.)

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