INTRODUCTION
1. Background. The global system has undergone significant changes since the end of the cold war and the subsequent collapse of the erstwhile Soviet Union. While advanced industrial powers are still the driving forces of global economy, nevertheless the emerging powers including African countries are also seeking increasing participation in global economic decisions.
2. Relevance of Africa and World’s Interest in Africa. Over the past 30 years, the world has witnessed a sharp rise in oil consumption. Since 1980, the global oil consumption has increased by 45% essentially attributed to the developing economies like India and China. In view of this unprecedented growth in the demand for energy, and changing geo political scenario, nations are looking to diversify their energy sources. Africa, thus, has emerged as an energy storehouse for all developing and developed economies. Africa offers diversification away from the Middle East for both oil and natural gas.
3. African countries are heavily dependent on natural resources as drivers of their economic growth. Africa’s share of global production of some of the important natural resources is as tabulated :-
Sr No Minerals Share of World Production in % Major African Producers
(a) Cobalt 57 DRC, Zambia, Morocco
(b) Diamond 53 Botswana, DRC, South Africa, Angola, Namibia
(c) Manganese 39 South Africa, Gabon, Ghana
(d) Phosphate 31 Morocco, Tunisia, Egypt, South Africa, Senegal
(e) Gold 21 South Africa, Ghana, Mali, Tanzania
(f) Oil 10.4 Nigeria, Angola, Algeria, Libya
(g) Bauxite 9 Guinea, Sierra Leone, Ghana
(h) Nickel 7.5 South Africa, Botswana, Zimbabwe
(j) Natural Gas 6.2 Algeria, Nigeria, Egypt
(k) Copper 5 Zambia, DRC, South Africa
4. Oil and Natural Gas in Africa. Africa’s share of world’s oil production has increased from a meagre 1.3% in 1960 to a credible 10.4% in 2011. Africa holds 8% of world’s proven oil reserves and 7% of the proven natural gas reserves. Currently, Africa produces 10.4% of the world’s oil and 6.2% of world’s natural gas. According to the 2012 BP Statistical Energy Survey, Africa has an equivalent of 41.2 years of confirmed oil reserves as per current production rates. Over the last 20 years, new discoveries of oil and gas coupled with increased production have enhanced African revenues by 25%, and 100% respectively.
OBJECTIVES AND SCOPE OF STUDY
Statement of the Problem
5. Africa in general and Libya in particular has substantial oil and natural gas resources and has attracted investments from countries around the world. India’s energy needs are growing and it is imperative for India to engage and seek cooperation from African countries mainly Libya to tap these resources.
6. The paper will analyse India’s engagement with Libya to cater for its growing demand for oil and gas and the need for diversification of energy sources to ensure energy security and subsequently develop a way ahead to ensure positive and meaningful Indo- Libyan engagement. The paper aims at focussing on oil and natural gas in Africa as a driver for Indian economy thus enabling our energy security.
Scope of the Study
7. Libya has much to offer in the form of oil and gas, minerals, uranium etc. This study intends to focus on the oil and gas reserves in the Libya to augment and diversify India’s energy basket. The paper will also undertake a comparative study of other major suppliers in African continent. It is further intended to analyse and deliberate upon weather India should engage India for its energy security issues and the way ahead for India to increase its footprint in Libya.
RESEARCH PROBLEM AND HYPOTHESIS
Research Problem
8. India being one of the fastest growing economies has already embarked on the path to progress from a developing to a developed country. India’s conventional energy resources both proven and unproven can last only for few decades and the rising gap between demand and supply has already forced the country to depend on foreign countries to meet its exponentially increasing energy requirement.
9. Conventional or fossil fuel resources are limited, therefore it is imp to look for alternatives source in Africa continent apart from OPEC regions and CAR regions. India thus needs secure means of energy resources and optimum utilization of all existing resource.
Hypothesis
10. India in order to satisfy its ever increasing demand for oil and natural gas resources needs to engage and seek positive cooperation from the African countries. India needs to be more focused and undertake long term measure to spread its footprint in the African countries in general and Libya in particular. Nevertheless the political and social volatility of the region sill remains a major deciding factor. In view of the above should India engage Libya in all spheres to secure and guarantee its future energy security scenario?
METHODOLOGY FOR RESEARCH
11. Methods of Data Collection.
(a) The study has been carried out by referring to books, papers and material available on the internet. In addition experts in this field were interviewed. A detailed bibliography has been attached at the end of the paper.
(i) Reports on Energy Statistics.
(ii) Interaction with experts.
(iii) Books.
(iv) Journals and Periodicals.
(v) Internet and published articles.
12. Methods of Data Analysis. The data will be analysed based on the statistics available and the extrapolations based on the current trends. It is also intended to use a Decision Support System to analyse and suggest future initiatives to address areas of mutual interest.
Justification of Study
13. India is a fast growing economy and an energy dependent nation, with most of its energy resources being imported from the Middle East. India needs to diversify its oil and gas imports due to the increasing volatility in the Middle East Considering the geographical proximity and potential for oil and gas, Africa is a natural choice for India. The competition for African oil is heating up, US and China have already surged ahead by investing heavily to secure their energy interests. Therefore, to cater to its growing energy needs, India needs to be more focussed and undertake long-term measures to proactively engage and spread its existing footprint in the African with special focus on Libya oil and gas industry.
Scope
14. Initially the study will centre its attention upon the energy basket of India and its primary energy mix as envisaged for the next two decades. This study intends to focus on the oil and gas reserves in the in Libya to justify the level of surplus oil and gas available for export purposes.
15. During the course of dissertation, the research shall also centre upon the present political, economical and diplomatic influence and ventures presently in vogue between India and Libya. It is further intended to carry out a SWOT analysis along with various geo political and geo strategic factors affecting Libya as an potential partner and deliberate upon the way ahead for India to increase its footprint in Libya with an aim for securing its energy resources for a sustained future growth of the nation.
ORGANIZATION OF THE DISSERTATION
16. The chapterisation of the dissertation is as under:-
(a) Chapter I – Introduction & Methodology.
(b) Chapter II – Energy Requirement of India upto Year 2030.
(c) Chapter III – Countries of Interest in African Continent for Energy Resources.
(d) Chapter IV – Libya’s Energy Resources Proven Reserves, Potential, Supply Capabilities along with SWOT Analysis.
(e) Chapter V – Geopolitical and Geostrategic Imperatives Governing India’s Strategies for Treating Libya as a Potential Supplier.
(f) Chapter VI – India’s present Political, Economical and Diplomatic influence and ventures with Libya.
(g) Chapter VII – Recommendation and Conclusion.
CHAPTER II
ENERGY REQUIREMENT OF INDIA UPTO YEAR 2030
‘ We are energy safe when we can supply lifeline energy to all our citizens irrespective of their ability to pay for it as well as meet their effective demand for safe and convenient energy to satisfy their various needs at competitive prices, at all times and with a prescribed confidence level considering surprises and disruptions that can be reasonably expected.’
Integrated Energy Policy, Government of India Energy Consumption Patterns
1. India today is the fourth largest end user of energy in the world, accounting for 4.6 % of the world’s consumption. Its total primary energy demand is expected to almost double by 2030 (figure 2.1). Its primary commercial energy consumption in 2012 stood at 559.1 mtoe and involved coal, oil, gas, and electricity produced from nuclear, hydroelectric, and renewable sources . India’s commercial energy consumption is expected to more than double to 1026 mtoe in 2030 excluding energy that is used up from traditional sources by 800 million people of Indian households.
2. Estimates of energy use from traditional sources tend to be ballpark, but figures indicate that in 2011, 25 percent of energy came from such sources as fuel wood, dung, crop residue, biogas, and waste. This use is expected to grow by 2030, though as a percentage of the total primary energy consumption, their shares will descent from 25 percent to 21 percent.
3. Per capita primary energy consumption is still fairly low in the country (879 kilograms of oil equivalent-less than a third the world average), with large disparities in the energy consumption pattern. India’s energy intensity, however, is still fairly high. This is particularly true of its oil intensity, which in 2004 was double the world average – the country consumed 1.5 million barrels of oil for every $1 billion of gross domestic product (GDP). There already has been a diminishing trend with a 30 percent reduction in the country’s energy intensity from 1994 to 2009.
Figure 2.1 India’s Primary Energy Demand
Source: World Energy Outlook 2012
Analysing Energy Resources of India : Ingredients of Energy Basket
4. India’s energy blend is (and has long been) coal dominant, with coal accounting for more than half of key commercial consumption and oil accounting for almost a third. Given below is a brief look at the sources ‘ oil, natural gas, coal, hydroelectricity and nuclear energy ‘ where reaching out to foreign coasts gains importance. See figure 2.2 below.
Figure 2.2 India’s Energy Mix
Source: BP Statistical Review of World Energy 2012
Oil
5. India is the world’s fourth largest consumer of oil, and has been consuming increasing amounts of oil fuelling an economy that has been growing at over 7 percent a year since 2003. While this growth rate is expected to slow down ultimately, the Indian economy is still expected to grow at over 5 percent a year over the next twenty-five years .India’s demand for oil is expected to increase at an average rate of 2.9 percent per annum from 2012 to 2030. India has 0.5% of world’s proven oil reserves vis a vis more than 15% of the world’s population. India’s present domestic production of about 858,000 barrels of oil per day (bopd) is less than 25% of its current consumption of 3,473,000 bopd, creating a wide gap which is widening even faster. As a result, the crude oil imports have been increasing rapidly surpassing 75% of our total crude requirement in 2012. We in the previous decade have shifted to ‘import dependent’ from ‘self sufficient’ status.
6. Oil and its products are consumed in the transport, commercial, industrial, and domestic sectors . With India’s domestic production of crude oil standing at just 38.1mmt in 2011, contributing only 1 percent of the world’s total oil output, the bulk of India’s supply comes from beyond its borders. In 2012 India imported 70 percent of its oil.
7. Oil Reserves. The estimated reserves of crude oil in India as on 31 Mar 2012 were pegged 759.59 million tons. Maximum reserves are in the Western Offshore (44.46%) followed by Assam (22.71%), whereas the maximum reserves of Natural Gas are in the Eastern Offshore (34.73%) followed by Western offshore (31.62%). There was an increase of 0.29% in the estimated reserve of crude oil for the country during 2011-12 including an estimated Crude Oil reserves increase by 7.09% in Andhra Pradesh followed by Tamil Nadu (4.48%). See figure 2.3 below.
Figure 2.3 : Estimated Reserves of Crude Oil in India (Indian Petroleum & Natural Gas Statistics, 2013)
8. Oil Production. In the year 2011-12, the production of Petroleum products in the country was 196.71 million tons as against 190.32 million tons during 2010-11, indicating an increase of 3.36% in production. High speed diesel oil accounted for the maximum share (41.63%), followed by Motor Gasoline (13.67), Kerosene (3.8%) and Aviation Turbine Fuel (5.11%). Production of Natural Gas decreased from 51.25 billion cubic meters (BCM) in 2010-11 to 46.48 BCM in 2011-12 registering a negative growth of 9.30% . Estimate of Crude Oil production in Indian in 12th Plan is as under, see Table 1 below.
Sr No Company Crude Oil Production
2012-13 2013-14 2014-15 2015-16 2016-17 Total
(a) ONGC 25.045 28.270 28.002 26.286 25.456 133.059
(b) OIL 3.920 4.000 4.060 4.160 4.200 20.340
(c) Pvt./JV 13.340 13.300 12.700 12.100 11.500 62.940
Total 42.305 45.570 44.762 42.546 41.156 216.339
9. Oil Consumption. The estimated consumption of crude oil has shown a steady increase, from 18.38 million tons during 1970-71 to 211.42 million tons during 2011-12. High speed diesel oil in 2011-12 accounted for 39.62% of total consumption of all types of petroleum products. This was followed by LPG (9.4%), Petrol (9.17%) and Naptha (6.8%). See figure 2.4 below :-
Figure 2.4 : Production vs Consumption of Oil in India
10. Oil Imports. Both gross and net imports of crude oil have increased from 11.68 million tons during 1970-71 to 171.73 million tons during 2011-12. There has been an annual increase of 4.97% during 2011-12 over 2010-11, as the net import increased from 163.60 MTs to 171.73 million tons. See figure 2.5 & 2.6 below
Figure 2.5 : India Oil Production, Consumption & Imports 2005-11
Figure 2.6 : Imports of Petroleum Products in India (Indian Petroleum & Natural Gas Statistics, 2013)
11. Crude Oil Imports. With only 0.4 percent of the world’s proven reserves and production estimated by the International Energy Agency (IEA) to be less in 2030 than it is currently, this dependence on foreign oil is projected to grow to 91 percent by then India’s dependence on foreign oil is longer standing than that of China. Contributing to almost 67% India’s largest oil suppliers are Saudi Arabia (providing 25 percent), Nigeria (15. percent), Kuwait (11.9 percent), Iran (10 percent) and Iraq (8.7 percent). India’s crude oil imports by source in the year 2012 are represented in form of pie chart as given in figure 2.7 below.
Figure 2.7 : India’s Crude Oil Imports by Source, 2012.
Natural Gas
12. The IEA estimates that over the course of 2002’30 Indian oil consumption will grow at 2.9 percent a year, it expects the use of natural gas in the country to grow at a rate of 5 percent a year over the same period. By 2030 natural gas is expected to account for more than 12 percent of India’s energy consumption. India imported gas for the first time in 2004, in the form of liquefied natural gas (LNG) from Qatar. Currently the country has two LNG terminals at Hazira and Dahej and the private companies too have ventured in this sector. With only 0.5 percent of the world’s confirmed gas reserves, however, and consumption expected to increase, with India becoming increasingly reliant on imported gas.
13. The estimated reserves of natural gas in India as on 31 Mar 2012 were pegged at 1330.26 billion cubic meters (BCM). In case of Natural Gas, the increase in the estimated reserves over the last year has been 4.08%. The maximum contribution to this increase has been from Cold Bed Methane (CBM) (11.32%). See figure 2.8.
Figure 2.8 : Estimated Reserves of Natural Gas in India (Indian Petroleum & Natural Gas Statistics, 2013)
14. Estimated Production of Natural Gas in 12th Plan (2012-17). The production figures of ONGC are more or less stable. However, a sharp jump is anticipated around year 2016-17. There is thus a need to begin thinking, diversifying and exploiting newer sources for oil and natural gas. The estimated production of Natural Gas is given as under in Table 2 :-
Table 2 : Estimates of Natural Gas Production (in MMSCMD) in 12th Plan
Ser No Company Natural Gas Production
2012-13 2013-14 2014-15 2015-16 2016-17 Total
(a) ONGC 24.877 25.472 26.669 28.215 38.676 143.909
(b) OIL 3.140 3.800 4.000 4.100 4.200 19.240
(c) Pvt/JV 15.000 14.500 16.500 18.500 21.000 85.500
Total 43.017 43.772 47.169 50.815 63.876 248.649
Total in (MMSCMD) 117.800 119.90 129.20 138.80 175.00 136.200
15. Gas Consumption. Gas consumption has grown at an annual rate of 10% from 2001-2011. In 2011, India consumed 2.3 trillion cubic feet (Tcf), and LNG imports were 25% of total gas demand. This trend will result in India’s gas demand doubling in the next five years. The power sector at 45 % and fertilizer sector at 28 % were prime consumers of natural gas in 2010.
16. Natural Gas Imports. Natural gas mainly serves as a substitute for coal for electricity generation in India. India increasingly relies on imported LNG. India was the sixth largest LNG importer in 2011. Although Indian companies are entering into both long-term supply contracts and more expensive spot LNG contracts, the lack of infrastructure development has hindered the production capacity. In 2012, India imported 12,559 mcm of natural gas, representing 19.7% of its domestic consumption. India’s natural gas imports by source in the year 2012 is represented in form of pie chart as under given in figure 2.9 :-
Figure 2.9 : India’s Natural Gas Imports by Source, 2012.
Coal
17. India is the world’s third largest consumer of energy from coal, consuming 700MT (in 2012), which accounts for more than half of the country’s total commercial energy intake. While coal’s supremacy as an energy source in India has slowly been decreasing, it is expected to continue; still accounting for more than 40 percent of consumption in 2030. The IEA estimates that 362 mtoe of India’s commercial energy will come from coal by then. Of late, India has had to start importing coal, as production has struggled to keep up with consumption. The domestic coal shortage is expected to continue for at least another four years, with India likely to spend $6 billion a year importing coal until 2015.
18. Coal is India’s primary source of energy. The country has the world’s fifth largest coal reserves. The state retains a near-monopoly on the coal sector. The power sector makes up the majority of coal consumption. But with a widening gap between supply and demand, India has increased coal imports over recent years from several key countries. India imports thermal coal (for power plants) mainly from Indonesia and South Africa and imports coking coal (for steel production) from Australia. Imports reached about 11 percent of total coal demand in 2011. India’s coal imports by source in the year 2012 is represented in form of pie chart in figure 2.10 as under :-
Figure 2.10 : India’s Coal Imports by Source, 2012.
Hydroelectricity
19. India is the eighth largest consumer of hydroelectricity in the world, and this power supply accounts for 5 percent of the country’s total intake of commercial energy. India is estimated to have the potential to produce 150,000 megawatts (MW) of energy through hydro sources. Currently, there is installed capacity to produce only about 39,300 MW of energy (2012). This hydroelectricity is generated using a number of rivers around the country as well as in neighbouring Bhutan.
Nuclear Energy
20. Nuclear energy accounts for only 1 percent of India’s key commercial energy consumption. In 2012 it accounted for twenty mtoe of the commercial energy supply; by 2030 this is expected to increase from one percent to five percent. There are currently twenty nuclear power plants run by the state-owned Nuclear Power Corporation of India Ltd. (NPCIL) in the states of Karnataka, Gujarat, Tamil Nadu, Uttar Pradesh, Rajasthan, and Maharashtra. Together they have a capacity of 4.4 GW.
Biomass and Waste
21. Rural areas of India tend to hinge on traditional biomass (including firewood, animal dung, and agricultural residue) for cooking, heating, and lighting. According to the 2011 India census, 62.5 percent of rural households use firewood as the primary fuel for cooking, 12.3 percent use crop residue as the primary cooking fuel, and 10.9 percent use dung. India has 288 biomass power and cogeneration plants with 2.7 GW of installed capability and has potential biomass electricity generation capacity of 18 GW.
Latest Discovery of Oil.
22. Indigenous Oil Discoveries. Cairn India discovered oil in the 26th oil Bearing structure in Rajasthan on 23 Mar 2013 and now the total capacity of the oil field increased from 300,000 barrels/day to 310,000 barrel/day. ONGC discovered oil in D1 field of Mumbai High ‘ 200 Kms West of Mumbai. It promises 60,000 barrels/day.
23. Strategic Petroleum Reserves. In 2005, the Indian Government decided to set up strategic storage of 37 million barrels of crude oil. The Indian Strategic Petroleum Reserves Limited (ISPRL), owned by the Oil Industry Development Board, would manage the proposed facilities. The government has plans to reach a crude reserve capacity of 132 million barrels by 2020 . The Government now is in the process of creating crude oil storage capacity for 15 days at Vishakhapatnam (1.33 million tons), Mangalore (1.50 million tons) and Padur (2.5 million tons) .
Assessment
24. According to Indian oil officials, by 2025, with the demand for oil projected to touch 370 million tones, India should produce at least 110 million tonnes per year. ‘Hence to maintain this level, we need to add 60 million tonnes of oil every year. We thought the only way to get this was to get if from outside India as equity oil. India’s mission, therefore, is to get this 60 million tones every year by 2025’, said Atul Chandra, managing director of ONGC Videsh Limited (OVL), in 2003.
25. Oil. India consumes 4.4% of the world’s total energy resources (524.2 MTOE). Of the total energy consumption basket, oil and gas constitute 45% share. About 78 % of India’s petroleum consumption is met from imports. As far as the exploration activity in India is concerned the unexplored area has already been reduced to mere 15% which is not a good indication & is an indicator of diminishing prospects. It is also estimated that in the coming years, the import dependency for crude oil alone would reach above 90% level. Though India is diversifying its sources for import there is a need to engage the emerging players in Africa and CAR in a big way.
26. Natural Gas. 25% of the imports of natural gas are met from imports . The Demand of natural gas is likely to rise commensurating with developmental activity taking place in India’s rural areas. Production of Natural Gas decreased from 51.25 billion cubic meters (BCM) in 2010-11 to 46.48 CM in 2011-12 registering a negative growth of 9.30%. The prospects of natural gas reservoirs in India is good but the lack of infrastructure inhibits production to meet own requirements and reduce imports.
27. As can be seen the import dependence is on the rise. However, while the consumption of oil has increased at the rate of 3.8 per cent per annum, India’s domestic production has remained relatively stagnant. Above findings have also been corroborated by BP Statistical Review 2012, see Figure 2.11 below.
Figure 2.11 : Indian Primary Energy Mix (2009 – 2025)