CERAWeek '17: India poised to become an emerging energy powerhouse

By Adrienne Blume, Executive Editor

HOUSTON—At a late-morning panel on Wednesday at CERAWeek by IHS Markit, government officials and strategists discussed India's evolving role in the global gas market. The panel was moderated by Gauri Jauhar, Director of Consulting and Research (Chair) at IHS Markit.

India is "open for business." Atanu Chakraborty, Director General of Hydrocarbons for India's Ministry of Petroleum and Natural Gas, spoke about India's bright economic growth and said that the country will retain the status of the world's fastest-growing large economy in 2017. He noted that India's GDP is likely to increase by 7.5% over the near term.

Photo Courtesy of IHS Markit.
Photo Courtesy of IHS Markit.

India's energy basket continues to rely heavily on hydrocarbons, such as coal (58%), oil (28%) and natural gas (6.5%). Its energy demand accounts for approximately 5.3% of global primary energy consumption. India is also anticipated to be the largest contributor to incremental global energy demand by 2040.

Factors that make India an attractive place for investors on the E&P side include low political, regulatory, demand, revenue, project and legal risk, Mr. Chakraborty said. "Project risk, at low to medium, is about as high as anywhere else," he said. "India is open for business on the supply side."

Growing partnerships between Asia and Middle East. Sarah Ladislaw, Director and Senior Fellow of the US Energy and National Security Program at the Center for Strategic and International Studies (CSIS), spoke about the role that India will play in the global energy market.

Ms. Ladislaw said her think tank is focusing intensely on India, particularly with regard to its role in the energy transformation process. This process will change going forward, she noted. Investors and companies are looking for opportunities to create new markets and new business models.

"India's strategic significance is in its consumption," Ms. Ladislaw said. She noted that the country will receive much attention over the near term for its demand growth. However, she also cautioned that the international competitiveness of India's refining sector will be an important issue for the country to consider into the future, particularly with regard to crude imports.

India will also serve as a "pivot point" between the Middle East and Asia. Supply relationships will build and evolve over the next several decades in the two regions. India will be a major emerging powerhouse in that evolution.

This growth is not without challenges, however. Energy access and modernization continue to limit the widespread utilization of power and fuels. However, Ms. Ladislaw noted that "now is a great time for India to have an access agenda" because it will receive a large amount of international support.

Challenges in power sector. Charles Ebinger, Senior Fellow at Atlantic Council, spoke about some of the challenges India is facing in its energy sector, particularly with regard to power.

India is on the cusp of a major economic transformation. It is experiencing a substantial population explosion, yet it has the lowest per-capita energy consumption in the world. Mr. Ebinger noted that 300 MM Indians do not have access to electricity, and another 150 MM–200 MM are underserved with electricity. India is also confronting skyrocketing demand in almost every sector, including oil, coal, gas and renewables.

The country has proposed several new gas pipelines to help expand the natural gas grid and make it ready to accept new gas discoveries. However, it remains to be seen as to whether these projects will actually be built, Mr. Ebinger noted.

The government has an initiative to increase coal production from 600 metric Mt to 1.5 metric MMt. With an economy that remains heavily dependent on coal (40%–43% of primary energy consumption and 70% of power generation use), pollution from coal emissions will increase. At present, India holds 17% of the world’s population but contributes just 3% of global emissions.

Both coal and renewables will be needed to achieve India’s energy goals, Mr. Ebinger said. However, problems persist—including the insolvency of Indian electricity boards, inadequate billings and collections methods, rival bureaucracies at the state and federal levels, power theft in the utilities sector of approximately 25%–40%, and corruption in the utilities sector. Approximately $2.3 T will be needed to get the power sector back on track.

Transportation bottlenecks also exist at roads and ports—issues that must be addressed with the expansion of LNG and petroleum imports, if India is to successfully expand its energy presence in the global market, Mr. Ebinger stated.

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