New Delhi: India is playing a key role in creating a new energy security architecture for its neighbours, ranging from cross-border electricity trade to supplying petroleum products. The latest announcement by state-run Petronet LNG Ltd of setting up a liquefied natural gas (LNG) terminal in Sri Lanka forms an integral part of this strategy and also helps exert economic and strategic influence.
The Wednesday announcement comes in the backdrop of increasing Chinese influence in the island nation that New Delhi has traditionally considered within its sphere of influence. Sri Lanka has joined China’s controversial One Belt One Road (Obor) infrastructure initiative aimed at connecting around 60 countries across Asia, Africa and Europe.
The proposed LNG terminal is an important development and follows after state-run NTPC Ltd’s plan to set up a coal-fuelled power project in Trincomalee didn’t make much headway and was eventually scrapped after Colombo asked India to change—for the second time—the location of the stalled $500 million project.
“Sri Lanka has decided to go ahead with the setting up of an LNG terminal near Colombo with Indian and Japanese companies. The two countries in their efforts to strengthen relations have been in discussions on this issue since last more than one year.The Sri Lankan Government issued a Letter of Intent to the Govt. of India during the visit of External Affairs Minister to Colombo on 1 September," Petronet LNG said in a 6 September statement.
Natural gas is shipped in its liquid form and reconverted to gas at LNG terminals. Apart from Japanese firms’ wide-ranging LNG experience, the Shinzo Abe-led government is also helping India’s Act East plans to aggressively develop infrastructure projects.
“The LNG terminal would be set up on the western coast of Sri Lanka in close vicinity of Colombo where most of the power projects (operating mainly on costly liquid fuel) are located.The Colombo Metropolitan Area is inhabited by more than 5 million people or roughly 25% of the total population of Sri Lanka generating over 50% of the GDP. The LNG terminal near Colombo would improve economics of various power plants and also generate immense direct and indirect benefits for vast majority of Sri Lankan people," the Petronet statement added.
The South Asia-focused neighbourhood-first policy is an initiative of Prime Minister Narendra Modi and a cornerstone of his government’s foreign policy.
Fostering cross-border energy trade is an important part of this and has also been articulated in federal think tank Niti Aayog’s draft national energy policy.
“India’s northern neighbours have a huge hydro-power potential — Nepal 83 GW (gigawatts) and Bhutan 30 GW. Exploring cross border electricity trade among the South Asian nations by developing competitive market, will help India to optimize the utilization of its grid and also meet electricity need through clean sources. Balancing of the grid will be better due to varying peaking demand across in different time zones across the east-west expanse of the South Asian grid," the policy states.
Apart from building power projects in Bhutan, Nepal and Bangladesh, India already has power grid links with Bhutan, Nepal and Bangladesh, and plans to develop power transmission links with Myanmar and Sri Lanka.
India is also championing for a South Asian Association for Regional Cooperation (Saarc) Energy Initiative to create sub-regional hydrocarbon infrastructure such as gas networks. This is on the lines of the Saarc electricity grid which envisages meeting electricity demand in the region.
Saarc groups India, Pakistan, Nepal, Bhutan, Bangladesh, Sri Lanka, Afghanistan and the Maldives.
India, which currently consumes 185 million tonnes of petroleum products on an annual basis, also supplies petroleum products to its neighbours such as Nepal and is building a pipeline to supply petrol, diesel and kerosene to the landlocked country. Earlier this week, India sent the first diesel consignment to Myanmar through the land route.