India’s Energy Diplomacy: 10 Years of Modi Government
Amb D P Srivastava, Distinguished Fellow, VIF

India’s GDP was a little over USD 2 trillion in 2014. [1] That has grown to USD 3.7 trillion currently. This near doubling of the GDP in ten years of the Modi government has also increased India’s energy demand. This was managed despite fluctuations of international prices of oil and LNG. The prices dipped during the pandemic in 2020. Since the outbreak of the Russia-Ukraine war, there has been a sharp escalation. This was accompanied by diversification in sources of energy imports. Nearer home, India worked with Nepal and Bhutan in cooperative arrangements in the energy sector (hydro-power projects), which have been mutually beneficial. Prime Minister Narendra Modi’s visits to Saudi Arabia and the UAE laid the foundations for increased cooperation with the two countries which are major suppliers of crude oil to India.

PM Modi visited Saudi Arabia in April 2016. He visited that country again in October 2019. He received the Crown Prince of Saudi Arabia Prince Mohammad Bin Salman in India in September 2023. He visited UAE and Qatar in February 2024. The UAE President Sheikh Mohammad Bin Zayed Al Nahyan has visited India in different capacities - as Crown Prince and as President three times. His last visit was in September 2023. These mutual visits have strengthened cooperation with India’s major energy suppliers.

PM Modi also visited Nepal and Bhutan which have potential for cooperation in the power sector. These countries have enormous hydropower potential. He has visited Nepal on five occasions since taking over in 2016. His last visit to that country was in May 2022.[2] His last visit to Bhutan was in March 2024.[3] While cooperation with Nepal is in the discussion stage, India has already been importing electricity from Bhutan. As concerns for climate change mounts, hydro-power becomes an attractive option. India has also been supporting the International Solar Alliance (ISA) in a major way.

India has made impressive strides in diversifying to renewable and nuclear, the two primary sources of emission-less energy. India has set the target of setting up 500 GW of capacity for producing electricity from renewable sources by 2030. During PM Modi’s term as Prime Minister, a decision was taken to set up 10 nuclear power plants in fleet mode. The work is in progress. A major milestone was reached in India’s three stage programme to produce electricity from thorium, which is abundantly available in India. Recently, the Prototype Fast Breeder Reactor (PFBP) has achieved criticality. These are by their very nature part of domestic development and hence go beyond the scope of this article on energy diplomacy.

Oil

Though concerns for climate change have produced calls for transitioning away from fossil fuels, India’s dependency on oil imports has grown from 82% in the past to around 87% now. Paradoxically, as the age of fossil fuels moves closer to an end, their demand has not abated. India has rising oil consumption and declining production at home. It is necessary, therefore, to venture overseas in search of prospective fields. This strategy has been adopted by many countries, including Japan and China. The history of oil began with Anglo-Persian and Royal Dutch Shell prospecting in Persia and the Far East. Even American companies, which had plenty of oil at home, aggressively bid for oil in the Middle East. ARAMCO in Saudi Arabia has defined American interests and policies in that region for decades. Since its nationalisation in the seventies, ARAMCO is a Saudi company.

Indian oil companies including ONGC Videsh Limited (OVL), IOCL, Oil India, and BPCIL are active in oil exploration overseas. OVL is the primary vehicle chosen by the Indian government for oil exploration overseas. A major success story is OVL’s investment in the “CPO – 5” block in Colombia. The block was awarded in the bid round of 2008. The OVL is the Operator in the block with a participatory interest (PI) of 70%. The remaining 30% of PI is held by GEOPARK.[4]The block has touched a peak production of more than 30,000 barrels per day. The current production of the block is 27,600 barrels per day.

OVL had invested in oil exploration and production in South Sudan. There, it has two joint ventures - GPOC and SPOC. GPOC is a joint venture between CNPC (40%), Petronas (30%), OVL (25%), and Nilepet (5%).[5] The current production of GPOC is around 55,000 barrels per day. The SPOC (SUDD Petroleum Operating Company) does not have any production for the time being. The oil produced in South Sudan is evacuated via a pipeline transiting through Sudan to Port of Sudan. Due to long years of civil war in Sudan, and dispute over pipeline tariff, there was an interruption in evacuating this oil. These issues have been settled now. India has also invested in the Lower Zakum oil field in the UAE. A consortium led by OVL and including IOCL acquired 10% participatory interest in the field in 2018. The Operator is ADNOC, an UAE government company. The concession agreement is for 40 years.[6] The field is giving good returns.

OVL has invested over USD 12 billion in the Rovuma offshore block in Angola. The OVL has a total of 16% participatory interest (PI) in the block through two subsidiaries, one of which also has Oil India as a partner. Total Energy is the Operator with 26.5% PI. Other partners are Mistui (20%), BPRL (10% PI), ENH (National Oil Company of Mozambique) (15% PI) and PTTEP (8.5%).[7] The Area 1 has 75 TCF reserves. OVL has formed a joint venture with Oil India called Beas Rovuma Energy Mozambique Ltd. (BREM). Due to the problems of terrorism, the work was stalled and EXXON, the operator, had declared Force Majeure. This has been lifted now. Exxon is also building a LNG plant in Mozambique. This will make it easier for evacuating LNG to India once the plant is finished.

Indian oil companies have also invested in upstream oil exploration in Libya. OVL has invested in Contract Area 43 located in Cyrenaica offshore area of Libya. This consists of 4 blocks consisting of 7449 square km. [8] Similarly, Oil India secured 4 oil blocks in Areas 95/96. It has drilled five wells. All five wells have struck oil. Due to civil war in the country, the company has declared Force Majeure and the work has been suspended. All the 8 blocks in Libya held by OVL and Oil India were won during the author’s term as Indian Ambassador to Libya from 2004-2007.

Diversification of Supplies

India has also diversified sources of supplies of oil and LNG. One of the most dramatic examples is the import of crude oil from Russia to India. In the aftermath of the Russia-Ukraine war, India increased its import of Russian crude oil. Its share in India’s import basket rose from negligible to 41% of India’s imports of 4.85 million barrels per day in May 2024. In absolute terms, this amounted to 1.98 million barrels per day. [9] This has boosted India’s energy security as well as saved a very large amount of foreign exchange. Due to US sanctions, this trade is in Indian rupees. The import of Russian crude oil has cemented bilateral ties as well as underlining India’s commitment to strategic autonomy. India has also diversified the import of LNG. While in the past, it was largely dependent upon the import of the commodity from Qatar, India now imports LNG both from the USA as well as Russia. This diversification away from the Persian Gulf ensures more secure supplies insulated from any geopolitical shock which leads to the closure of the Gulf.

Pipelines

Pipelines are a cheaper route for the import of gas than LNG. LNG production is a two-stage process involving the liquefaction of gas for storage and transport at minus 160°C temperature and then re-gasification at the destination. By its very nature, a two-stage process is more costly than natural gas transported through pipelines. Natural gas could be imported from Myanmar or Iran. The absence of a sub-sea or overland pipeline to bring gas from Myanmar to India was, and remains, a major handicap in India making a bid for upstream oil in Myanmar. Similarly, the absence of a pipeline from the Middle East to India has constrained India from bringing gas from either the UAE or Oman to India. SAGE, a private company, has been pursuing a proposal to bring gas from the Middle East to India.

Power

Import of hydroelectricity from Bhutan and Nepal adds to India’s energy security as well as helps lower the country’s carbon footprint. This would also help our partner countries to earn handsome revenue. India has already been importing electricity from Bhutan.

Bhutan

Bhutan was Modi Ji’s first visit abroad after taking over as Prime Minister in 2014. During the visit, he laid the foundation stone of the 600 MW Kholongchu hydropower project. The two countries also reiterated their pledge to achieving the 10,000 MW target in hydropower cooperation. Bhutan is supplying 1400 MW of Hydro Power to India. Out of this Chukha supplies 336 MW, Tala 1020 MW and Kurichu 60 MW. The Prime Minister made a State Visit to Bhutan in August 2019. During the visit, he inaugurated the 720 MW Mangdechhu Hydroelectric Plant. ‘With the coming on stream of this Project, the jointly created generation capacity in Bhutan has crossed 2,000 MW.’ The two sides also “resolved to continue working together to expedite the completion of other ongoing projects such as Punatsangchhu-1, Punatsangchhu-2 and Kholongchhu-1.” They also reviewed the ongoing bilateral discussion on the Sankosh Reservoir.[10] There were two high-level back-to-back visits between India and Bhutan in 2024. Bhutanese Prime Minister Lyonchhen Tshering Tobgay visited India on March 16. This was followed a week later by Prime Minister Modi’s visit to Bhutan.

The Joint Statement issued at the end of the Bhutanese Prime Minister’s visit on March 16, 2024, mentioned “Both Prime Ministers reiterated their firm commitment to expanding hydro-power cooperation.” They expressed satisfaction with the progress in the construction of the 1020 MW Punatsangchhu - II hydropower and looked forward to its commissioning in 2024.[11] Prime Minister Modi visited Bhutan from March 22-23, 2024. The two leaders agreed that the India-Bhutan energy partnership has the potential to benefit both countries by enhancing energy security.[12] The Joint Statement mentioned that “We will continue to expand our clean energy partnership in the sectors of hydropower, solar and green hydrogen.” The agreements included an MOU on cooperation in the field of Energy Efficiency and Energy Conservation measures.

Nepal

During his visit to Lumbini, Nepal in May 2022, PM Modi along with his Nepalese counterpart Prime Minister Deuba reviewed bilateral cooperation in the hydro power sector. PM Modi assured India’s full support for the development of the sector which will benefit both countries. Nepal is estimated to have a hydro-power potential of 80,000 MW. Out of this, 45,000 MW is commercially available. Some of the major schemes are:

  1. Pancheshwar

    An ambitious project, this will be the largest bilateral project on a border river. The project was initially agreed in 1996. Unfortunately, this has remained embroiled in Nepal’s internal politics. The project was revived during PM Modi’s visit to that country in 2014. However, this again got stuck and the joint DPR has still not been completed. Initially, this was conceived as a 6750 MW project with a cost of 12,000 crores. Since then the cost has escalated to Rs. 34,000 crores at 2015 prices, while the projected capacity has been reduced to “5,040 MW largely due to hydrological factors.” [13] (Source: Kathmandu Dilemma- Resetting India-Nepal Ties by Ambassador Ranjit Rae, Page 147)

  2. Upper Karnali

    Situated on Karnali River, the 900 MW hydro-power plant will be constructed by GMR company. GMR is keen to sell power to Bangladesh, which offers better prices expressed in dollar terms. Direct sale was not possible hitherto. The electricity was required to be first sold to India and then re-sold to Bangladesh. The Indian regulations have since been modified and it is possible now to sell electricity directly to Bangladesh.

  3. Arun III project

    Situated in eastern Nepal on the Arun River, the project will have a capacity of 900 MW. It was awarded to Satluj Jal Vikas Nigam (SJVN). The project is progressing reasonably well largely since it is fully funded by the GOI and does not need PPA immediately.

  4. West Seti

    The project is located on the river Seti. The hydro-power plant will have a capacity of 750 MW. A subsidiary of the Chinese company Three Gorges Corporation had received the contract. The success of the project depends upon the evacuation of power to India. No headway has been made. The licence for the project has since been cancelled. [14]

    While these projects will take time to mature, in the meantime, India has allowed Nepalese electricity exports to be sold on Day Ahead market and Spot market. India has also allowed 40 MW of electricity from Nepal to be exported directly to Bangladesh though transmission lines running through India.

Future

Prime Minister Modi has stated that India should join the ranks of advanced economies by 2047. This will require a sharp increase in energy consumption. The task is complicated by the need to bring down emissions while the energy consumption grows. This dilemma is not faced by the developed countries and China, who have already achieved a high level of development. Their per capita emissions are far higher than those of India. We need to harness all forms of energy, while gradually making the transition to clean sources of energy. Oil is often found in difficult geographies. There are geopolitical risks, which can be minimized, but never eliminated entirely. Oil Majors like Exxon, Shell, ENI, and Total have taken these risks. Lately, the Chinese companies have joined in a big way. These companies have enjoyed their government’s backing.

Guyana, Myanmar, and Iran are some of the areas where we could have done more. Guyana has been the biggest success story for oil in recent years. Exxon has invested in a big way. The Indian diaspora could provide a bridge between the two countries. In Myanmar, Indian companies have invested in the pipeline, which has proved to be a profitable investment. But the gas from this field is evacuated to China. India has a stake in Farzad B, an offshore gas block in the Persian Gulf. There are currently US sanctions against Iran. There is a need to do more to secure upstream oil fields to meet India’s increasing energy needs.

The expansion of civil nuclear power could bring in foreign investment but would require a review of India’s Civil Liability for Nuclear Damage Act. There is a need to also review the Atomic Energy Act. Nuclear power provides emission-less energy. Renewable energy has to be deployed in distributed energy mode independent of the grid in view of enormous transmission costs. Renewables are also the most land-intensive option requiring 50-100 times more land than thermal or nuclear plants of the same capacity. We need to tap energy resources available in the region Bhutan and Nepal have enormous hydro-power potential. While Bhutan is already producing and exporting electricity, Nepal has not benefited from the export of hydro-power to India. The challenge of Indian diplomacy is to find a way of harmonising the interests of both countries.

References

[1] https://macro trends.net
[2] Indian Embassy, Kathmandu, website
[3] Ministry of External Affairs, GOI, XP Division
[4] www.ongcvidesh.com
[5] www.ongcvidesh.com
[6] www.ongcvidesh.com
[7] www.ongcvidesh.com
[8] www.oil-India.com
[9] “OPEC meets to shape India’s Russian oil purchases as May levels stay high.” Business Standard. June 1, 2024.
[10] Media Center, Ministry of External Affairs, GOI, August 18, 2019.
[11] Media Center, Ministry of External Affairs, GOI, August 18, 2019.
[12] Bhutan PM Tshering Topgay lauds PM Modi for visiting: ‘Must be Modi Ka Guarantee’. 23 March 2024.
[13] Rae, Ranjit. “Kathmandu Dilemma- Resetting India-Nepal Ties.” Page 147.
[14] Rae, Ranjit. “Kathmandu Dilemma- Resetting India-Nepal Ties.” Page 149.

(The paper is the author’s individual scholastic articulation. The author certifies that the article/paper is original in content, unpublished and it has not been submitted for publication/web upload elsewhere, and that the facts and figures quoted are duly referenced, as needed, and are believed to be correct). (The paper does not necessarily represent the organisational stance... More >>


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