New Delhi: The government is embarking upon an energy diplomacy programme to deal with all areas of energy by setting up a dedicated cell in the external affairs ministry.
The cell will identify ways to enhance diplomatic relationships with other oil consuming and producing countries as India tries to win multi-billion contracts in Russia’s Sakhalin and hydrocarbon blocks in Africa. It will also look to resolve contentious transnational gas pipeline issues among other things.
“The idea is to structure a well laid-out energy diplomacy programme, which will deal with all areas of energy, be it oil, gas, coal, nuclear or even green fuel. The ministry is expected to formalize this in the next few weeks,” said a government official familiar with the development. The move comes close on the heels of India having lost prestigious projects to China in Kazakhstan, Nigeria, Angola and Myanmar.
The cell, to be headed by an additional secretary-level official, will also act as a coordinator of technical issues that are being pursued by other ministries, such as petroleum and natural gas, coal, power and the department of atomic energy. It will also push the agenda on an integrated energy policy for the country.
Energy security is a key to sustaining 8%-plus economic growth. In 2006, the Asia-Pacific demand was 15.6 million barrels per day (mbpd), compared with local crude and gas production of 6.85 mbpd. India’s consumption of petroleum products is around 112 million tonnes per annum. India, the world’s fifth-largest oil importer, procures 78% of its energy needs from abroad.
An official of the ministry of external affairs said the cell would help India make new relations, revive old ones and improve bilateral ties. “India is leveraging its long-standing relationship with Russia to acquire a stake in Sakhalin-III,” he said. India already has a 20% stake in Sakhalin-I through ONGC Videsh Ltd, and is studying options to bring its share of gas to India through a swap deal with Japan.
According to G. Parthasarathy, former Indian high commissioner to Pakistan, this cell was long overdue. “Since there is no integrated energy policy, no proper study for geopolitics in energy and no proper coordination within the government, a huge mess-up has happened. This has led to (India) losing out deals to China,” Parthasarathy said.
The ongoing deals where the energy cell could help include the Iran-Pakistan-India pipeline. The issues of transit fee to Pakistan and the pricing of gas to Iran are likely to be resolved by June-end at a trilateral meeting. But the deal will hinge on India’s diplomatic ties with these countries as well the US, which is against this deal because of Iran’s nuclear programme.
“The entire pipeline strategy is flawed. India should have only negotiated with Iran and not bothered about Pakistan. The current strategy is for insecurity rather than security,” Parthasarathy said.
Another project India needs to close is the Turkmenistan-Afghanistan-Pakistan-India pipeline. The main issue here is of security as the pipeline passes through Afghanistan and Baluchistan (Pakistan), both routinely unstable areas.
The deals that India has recently lost to China include the H1 and H3 offshore hydrocarbon blocks in Myanmar. India also failed to acquire a stake in Petro Kazakh, Kazakhstan’s national oil firm, which went to China’s National Petroleum Corp. Chinese companies also beat Indian firms in Angola and Nigeria. Indian firms lost in Angola because they couldn’t match the Chinese’ offer of a $2 billion soft loan.
In order to sweeten hydrocarbon deals, China has used its permanent membership at UN Security Council where it has a veto power. Some experts attribute its recent win in the Myanmar deal to this clout.
India is now following the Chinese model of going beyond commercial considerations, although it is taking a different path.
For instance, NTPC Ltd offered to build power-generation projects in Nigeria in lieu of a gas block there. India has also offered to develop infrastructure networks like railways in Angola.
With Indian firms starting to acquire coal mines abroad for importing coal, the cell could help with the negotiations. Coal India wants to buy mines in Australia and Africa, and Tata Power recently bought a stake in Indonesia to import coal for its Mundra project.