Pipeline Politics in Asia: The Intersection of Demand, Energy Markets, and Supply Routes

India’s Gas Pipeline Efforts: An Analysis of the Problems That Have Prevented Success

43 the national bureau of asian research nbr special report #23 | september 2010 India’s Gas Pipeline Efforts: An Analysis of the Problems That Have Prevented Success Marie Lall marie lall is an Associate Fellow in the Asia Programme at Chatham House and Senior Lecturer at the Institute of Education, University of London. She can be reached at . 45 india’s gas pipeline eFForts u lall I n February 2005, the Indian government approved plans for talks with six countries on the construction of gas pipelines that would pass through Afghanistan, Bangladesh, Iran, Myanmar, Pakistan, and Turkmenistan. This new “pipeline diplomacy” was seen as a key foreign policy priority, as India’s energy requirements are rising quickly. This paper will review the drivers that have led to India’s pipeline diplomacy, then look at the three proposed pipelines before analyzing the problems that have frustrated their development. the centrality of the Question of energy security India needs energy security for domestic and foreign policy reasons. First and foremost, economic growth at 8%–9% must be secured, even in the current economic slump. Regarding foreign policy, the drivers are India’s aim to play a leading global role and to be recognized both economically and politically as a rising power. This was former prime minister Jawaharlal Nehru’s vision for India, and only the means to achieve this vision have been altered to fit the times. In order to maintain economic growth and the popular image of a rising power, India needs to secure energy at a rate that outstrips population growth. India’s growing population is expected to reach 1.18 billion by 2010, 1.36 billion by 2020, and 1.57 billion by 2030—i.e., a more than 50% increase in less than 30 years. Since India is an energy supply–constrained economy, the sustainability of development and growth will depend on the availability of affordable, adequate, and reliable energy supplies and massive investments in social and physical infrastructure. Compared to its neighbors, India’s projected energy needs are huge (see Figure 1). India’s primary energy demand is expected to grow by 6% if GDP grows at the estimated 7%– 8% over the next decade. Coal is the largest energy source, constituting 51% of the total primary energy basket; the rest includes 36% oil, 9% gas, and 4% nuclear and renewable sources.1 India imports 75% of its 960 million barrels of oil per annum, raising the country’s vulnerability to volatile oil markets. The Reserve Bank of India reports that every one-dollar rise in the international price per barrel of crude oil adds $600 million (around 28 billion Indian rupees) to the country’s import bill.2 According to the International Energy Agency, a $10 rise in crude prices (from $25 to $35) would reduce India’s GDP by 1%.3 Hence, there is an acute need to diversify types as well as regional sources of energy to ensure the continuous availability of energy at affordable prices.4 India’s proven natural gas reserves are 38 trillion cubic feet (tcf) (or 1.075 trillion cubic meters [tcm]).5 India produces 85 million metric standard cubic meters per day (mmscmd) or 1.08 tcf per 1 See figure in Marie Lall and Iftikhar A. Lodhi, “The Political Economy of the Iran-Pakistan-India Pipeline,” Institute of South Asia Studies (ISAS), Working Paper, no. 26, October 23, 2007. 2 Paranjoy Guha Thakurta, “High Oil Prices Would Hit Indian Economy,” Hindu Business Line, March 20, 2004, http://www. thehindubusinessline.com/2004/03/20/stories/2004032000240800.htm; and Asian Development Bank (ADB), Asian Development Outlook 2006 (Hong Kong: ADB, 2006). 3 “Emerging Oil Price Scenario and Indian Industry,” Federation of Indian Chambers of Commerce and Industry, December 2004, http:// www.ficci.com/surveys/FICCI-oil-survey-dec2004.pdf. 4 A slightly different scenario is painted by the U.S. Energy Information Agency in whose reference case scenario the primary energy demand in India is expected to grow by 3.6% per year, doubling from 537 million tons of oil equivalent (Mtoe) in 2005 to 1,299 Mtoe in 2030. India will need to quintuple its electricity-generation capacity from 1,600 gigawatts to nearly 8,000 gigawatts. See Ariel Cohen, Lisa Curtis, and Owen Graham, “The Proposed Iran-Pakistan-India Gas Pipeline: An Unacceptable Risk to Regional Security,” Heritage Foundation, Backgrounder 2139, May 30, 2008, http://www...