One has heard of the great depression that has struck the world on at least two occasions, once in the early 20th century, and the other one we are going through, currently. While the current crisis took everyone by surprise and unprepared, countries world over, are anticipating and bracing for the ‘Great Oil Shortage’ that is going to hit the world, sometime in the middle of the century.
Those who are forewarned and forearmed will tide the crisis, those who do not will collapse and almost, certainly, vanish from the map of the earth, at least as a sovereign entity. Countries may survive, either through accessing and conserving oil or may resort to alternative means of energy.
It is safe to predict that the current and future geopolitics will figure in the energy great game, currently being played out in the Central Asia Region, Caucasus and the Middle East the US led GWOT in Afghanistan arguably, being an intrinsic part of an endeavour to be at a place that is going to matter in the decades to come and, that place is the Central Asian Region and Afghanistan, with Russia and China, in and around it.
Where is the Oil?
60 percent of the world’s oil reserves lie in the Gulf with Saudi Arabia holding reserves of around 260 billion barrels. Iraq at 112 billion barrels is second, and Iran has the third largest reserves. These three, together, account for one fourth of the world’s oil. The recently formed Central Asian Republics of Kazakhstan, Azerbaijan, Turkmenistan and Kyrgyzstan, account for 1540 billion barrels of oil and 6-9 trillion cubic meters of natural gas. The United States is cleverly conserving its oil reserves, well under ground, locked within resource rich Alaska, bracing for the looming crisis. Russia has considerable reserves of oil which has majorly contributed to its current economic resurgence. Other sources will be Africa, South America and Canada.
“¦the “˜Great Oil Shortage that is going to hit the world, sometime in the middle of the century. Those who are forewarned and forearmed will tide the crisis, those who do not will collapse and almost, certainly, vanish from the map of the earth “¦
Consumption and Dwindling Supply
The supply of oil has gradually dwindled and is now at a stage where it is unable to keep pace with world demand. The world, today, consumes six barrels of oil for each new barrel that is discovered. The proven oil reserves are approximately one trillion barrels. New discoveries are far and few in between. Expectation of oil reserves under the Arctic and Atlantic shelf, melting under the onslaught of global warming, will lend to a race among countries to stake their claims.
The world consumption of oil is 76 million barrels a day, likely to spiral to 119 million barrels per day. As against this demand, world oil production will peak at 80 million barrels per day by 2020 and then gradually decline to 40-60 million barrels per day by 2040-2050. In 2004 India’s oil imports went up by 11 percent and that of China by 33 percent, exacting its toll on production operators, pipelines, refineries and shipping lines. Both these countries are expected to consume more than one-fifth of the global demand.
At present India’s requirement is two million barrels per day, but by 2025 this will quadruple, compounded by the fact that it has less then one percent of the world’s reserves. 70 percent of India’s crude is imported and all of it comes by sea. It is expected to be the largest importer of oil by 2050 and its oil consumption is expected to rise to 150 million tons by 2020. India’s gas requirement by 2024 is said to be 125 billion cubic meters. Of this 52 BCM will be available locally and balance 75 BCM will be imported.
Oil as Source of Present Veiled and Future Conflict
The 1991 Gulf war was dictated more by considerations of protecting the oil resources of Kuwait and Saudi Arabia rather than any other concerns. US led invasion of Iraq in 2003 too had the same aim, as Iraq, besides having huge oil reserves, also, dominated the oil routes in this region. Among other reasons, the US intervention in Afghanistan is with an eye to gaining access to the new sources of oil in the Central Asian Region.
Search for WMD in Iraq was just a ruse, and the witch hunt for Osama Bin Laden in Afghanistan, has only led to the creation of more jihadis and has divided the world on religious lines as never before. Apart from ‘war against terror’, it is quite obvious that the US presence in Afghanistan has as much to do with securing the country so that safe transit routes for the oil and gas supplies of the region, can be established. Also, the US is attempting to carve a geopolitical role in an area where China and Russia exercise great infulence.
Analysts have proposed that Indian strategic petroleum reserve should also encompass a regional facility in cooperation with Nepal, Bhutan, Pakistan and Bangladesh. This would not only tie the economies of these smaller countries with India but also confirm Indian centrality in South Asia.
War and Oil
Availability, holding and transportation of oil has proved to be a decisive factor in the outcome of all wars. Rommel’s Africa Korps was grounded because the much needed oil could not be transported across the Mediterranean to reach him in time. Patton’s decisive thrust in the winter of 1944 cold not see the light of day because of shortage of oil. Gulf War I did not start till adequate reserves of oil were built up. In 2003, the US Army thrust on Iraq was held up for three days on the outskirts of Baghdad. India, painstakingly built up its oil reserves before embarking on the liberation of Bangladesh.
Oil fields as War Target
Oil moves the Army. But the oil fields are the target of those armies which are not in possession of one. Strategic Forces/Special Forces aim to capture oil depots and fields in fact for subsequent use by its armies. The Caucasian oil fields were a prime strategic target for German invasion of Russia during the Second World War. The terrorists in Iraq, Chechnya and Afghanistan target the pipelines and depots in a sustained manner.
translate into higher prices everywhere. ThereforeEnergy Security in the Indian Context
India faces daunting challenges in meeting its energy needs. The key challenges are:-
- Exploration. Search and tap domestic coal, gas and oil reserves. No major oil fields have been discovered in the country since the Bombay High fields in the late 1960s. Gas discoveries are more promising with the discovery of gas fields in the Krishna–Godavri basin and the Bay of Bengal.
- Uranium. Low concentration of uranium in India and the poor quality of uranium ores, imply that India will be dependent on imported uranium in the medium term before its three stage nuclear program fructifies and the country is able to tap its vast thorium reserves.
- Alternative Sources of Energy. R&D in alternate sources of energy like ground and solar energy to make it commercially viable and in a position to replace hydrocarbons to a significant level.
India’s Energy Security Strategy
To meet the energy security challenges facing the country India has adopted a multi-pronged approach.
- Diversification of imported oil. India depends on Saudi Arabia, Nigeria, Iran and Kuwait for 60 percent of its oil imports. It is dependent on the Middle East for almost two-thirds of its oil imports for reasons of geography and cost.
- Purchase of Exploration Blocks. Indian oil companies have purchased exploration blocks in oilfields in a range of countries from Libya, Sudan, Iran to Myanmar and Russia.
- Strategic Reserve. The 2004 Government decision to establish petroleum reserve of 15 days consumption has been recommended to be increased to 90 days.
- Refining Capacity. The investments in oil refineries in Jamnagar have resulted in India emerging as the energy outsourcing hub. Jamnagar already boasts of the world’s third largest oil refinery and is set to emerge as the largest when Reliance Petroleum Ltd begins its operations.
- Natural Gas Pipelines under consideration. Consumption of natural gas is set to increase exponentially. India has the option to import gas through pipelines from neighbouring states or import liquefied natural gas through long term contracts. A pipeline traversing through several countries entails complex contractual framework and has an important bearing on geopolitics. India is keen to acquire gas from Iran, Bangladesh and Myanmar. The following pipeline proposals have been mooted :
- Oman–India deep water Pipeline (PPL).
- Iran–Pakistan–India (IPI) PPL.
- Turkmenistan–Afghanistan–Pakistan–India (TAPI) PPL.
- Qatar–Pakistan–India PPL.
- Myanmar–Bangladesh–India (MBI) PPL.
Politics in above Pipe Lines
Gas/Oil pipelines on the land route from the Persian Gulf region or Central Asian region need to traverse Pakistani territory before reaching India. It is believed that energy pipelines such as IPI and TAPI can effectively end the economic partition of the subcontinent, and give each country a stake in the other’s economy. A pipeline to India through Pakistan will lower the cost of gas for Pakistan, as well as provide it transit fee. However, the current tensions between US–Iran, and Pakistan–India, have complicated the IPI pipeline.
TAPI Pipeline which has the US backing is held up for improvement in the Afghan situation. Due to Dhaka’s unwillingness to provide passage for Myanmar’s gas to India, feasibility studies are on for a longer and more expensive pipeline that bypasses Bangladesh, altogether. However, with a new Government in place in Bangladesh, it is well nigh possible that the MBI pipeline may still fructify. The IPI may well turn into Iran–Pakistan–China pipeline due to ongoing tensions, and Chinese pressure and interest in making it a Iran–Pak–China pipeline. Also, Iran’s policy for seeking a uniform price for its gas imports represents a reversion from past policies.
This linkage is expected to increase the cost of Iranian gas by 80–90 percent offering India a consolidated price at Pak–India border. It is also insisting on negotiation of gas price one year prior to actual supply of gas. Keeping the above factors, and geopolitical tensions in mind India could also turn to :
- Baku–Ceyhan pipeline linking Azerbaijan and Turkey via Georgia.
- Baku–Supsa pipeline through Georgia and terminating at the Black Sea port of Supsa.
- Tengiz oil field to Novorossiysk port passing through Russia.
- Proposed Iran’s Caspian pipeline which envisages laying a pipeline along the Caspian sea bed.
- Kazakhstan–China oil pipeline could be extended to India.
- Siberia–China pipeline could be extended to India.
- Central Asia–Afghanistan (newly constructed Zarang–Delaram) route to Chabahar port of Iran–Persian Gulf.
It is important, here, to dwell on, at least, two of the above feasible pipelines, i.e. the Baku–Ceyhan and the Kazakh–China pipeline.
The oil first pumped from Baku on 10 May 2005 reached Ceyhan on May 28, 2006. The Caspian Sea lies above one of the world’s largest groups of oil and gas fields. As the Caspian Sea is landlocked, transporting oil to western markets is complicated. During the Soviet era, all PPLs transportation routes from the Caspian went through Russia. The collapse of the USSR initiated a search for new routes. Route as above proposed by Turkey, and accepted by Georgia and Azerbaijan, was found to be a viable one bypassing the dominating influence of Russia in the North and Iran in the South. It even bypassed Armenia which was a shorter route. Armenia and Azerbaijan have strained relations.
- The Politics. The south Caucasus – a Russian backyard is being exploited by the USA to leverage a control over its oil potential, and thus, implicitly encouraging the countries that form the region to break from Russian influence. Therein lies the significance of the BTC pipeline – a symbol of independence from Russia in the north and Iran in the South. The US browbeating Iran on its proposed nuclearization is albeit with an eye towards the Caucasian oil fields. The PPL independent of Russia, encouraged Georgian enclave of south Ossetia to break free of Russian control, riding as it were, a false sense of security imbibed from US interests. That Russia reacted decisively in physically quelling the rebellion signaled Russian’s correct assessment of the US interventions in this regard.
- The Economics. The US and European nations believe that the BTC will ease its dependence on the Middle East. But skeptics opine that the BTC will meet only one percent of global demand in the first phase. Be that as it may, it still is a protection of some assured supply from an alternative source, free of Middle Eastern and Russian threats of breaking off supply and its hegemony. One-third of European energy needs is met by Russia. The PPL has given a tremendous boost to Azerbaijan’s economy (its GDP hitting a record of 35%). Substantial transit fees accruing to Georgia and Turkey will give a huge stimulus to their economies, too. Apart from the cost India, by choosing this PPL can steer clear of troubled waters of Pakistan and Iran.
The Kazakh–China Oil PPL
There is a massive three stage PPL project linking Kazakhstan to western China. By doing so, it became the first major export pipeline (ahead of BTC) from land locked CAR, not to transit through Russia. In 2008 China received six million tonnes of oil through this PPL which was a 26 percent increase over the previous year. Once all the stages of the project are complete, China is expected to receive 20 million tonnes, i.e. 2020.
China’s booming economy stands to get a great stimulus from this pipeline. Another pipeline will link this with the one from Caspian sea transiting through west Kazakhstan. Development in Xinjiang province of west China is set to see a dramatic change. The significance of the Kazakhstan strides in its oil pipeline is lost on no one, particularly Russia, as it sees its hand grip over the oil tap and its interest loosen considerably. Kazakhstan is also in talks to tap the BTC PPL for a Mediterranean route. If India latches on to this PPL, or the one through Kazakhstan–Western China it will be a great boon. However, it has to contend with US seeing its leverage over India vis-a-vis China and Russia, loosen.
A disruption of supplies anywhere would translate into higher prices everywhere. Therefore, every consuming state is equally vulnerable to the effect of such shocks.
Strategic Course for India for the Energy Great Game
Building strategic relations with the Central Asian countries and the Caucasus along with the West Asian states to include Iran, Iraq, Kazakhstan and Turkmenistan is of critical importance. Myanmar, too, will be a key energy ally of the country. While focus has also been in obtaining oil rights in Syria (50 : 50) partnership between ONGC and Chinese company, Sudan, Sakhalin and Vietnam, these will require greater naval strategic reach and ability to secure these sea routes. Thus, the SAARC and Central Asian regions (along with support from Iran and Afghanistan) are of great importance to the country for oil security, and should dictate our strategic and diplomatic focus.
In case India goes in for sea routes of transit, then it must also factor in the Choke Points, en route. Choke points are narrow channels along widely used global routes. They are a critical part of global energy security due to the high volume of oil traded through their narrow straits.
- Strait of Hormuz. Connects Persian Gulf with the Gulf of Oman and Arabian Sea. Is the worlds most important oil choke point due to its daily outflow of 16.5–17 million barrels, roughly 40 percent of all seaborne traded oil.
- Strait of Malacca. Located between Indonesia–Malaysia and Singapore, links the India Ocean to the South China Sea and Pacific Ocean. Is the shortest sea route between Persian Gulf supplies to China, Japan, Indonesian and South Korea. Is the key chokepoint in Asia with an estimated 15 million bbl/ day flow.
The Way Forward
Analysts have proposed that Indian strategic petroleum reserve should also encompass a regional facility in cooperation with Nepal, Bhutan, Pakistan and Bangladesh. This would not only tie the economies of these smaller countries with India but also confirm Indian centrality in South Asia. However, in the present context with the levels of suspicion, between these countries, this is unlikely to happen. Again on Apr 06, the US had put forth the proposal for an electricity grid stretching from Central to South Asia. This power grid was to be fed by gas and oil from Kazakhstan and Turkmenistan and hydropower from Tajikistan and Kyrgyzstan to supply Afghanistan, Pakistan and India. Such a move would expand India’s influence in Central Asia.
India has also proposed the formulation of an Asian Gas Grid, which would expand the IPI gas pipeline to southern China. Such a move reduces US’s geopolitical influence in the region. This can also be seen in the light of the proposal to include China in IPI and TAPI pipelines, with or without Indian participation. Another strong proposal for consideration is to extend the Siberia–China gas pipeline to India. India could look at swap alternatives that would allow China to access India’s oil and gas in Sakhalin in eastern Russia in exchange for gas deposits at Xinjiang in to western China.
Though longer and more expensive, the Baku–Ceyhan pipeline free of geopolitical tensions, maybe a good option. The other reasonable option could be CAR–Afghan (Zaranj)–Chabahar (Iran) pipeline, under the present circumstances. However, it could run into jeopardy due to adverse changes in Afghanistan. The Indo-US Nuclear deal will be able to provide assured supply of Uranium for India’s nuclear power plants, but can also be seen as a step to wean away India from growing Russian influence through energy. The straits of Hormuz and Malacca are the strategic choke points to ensure smooth supplies of oil and gas to India. India’s maritime capability needs to be geared to meet this challenge.
In its critical phase of economic consolidation, India will have to depend on oil, notwithstanding the advantage accruing out of the recently concluded Nuclear energy deal with the US. Keeping the geopolitical dynamics in mind, India will have to seriously consider the sea transit route either or both through the Persian Gulf and Red sea for its oil pipelines. It will need to work on Myanmar and Bangladesh, and Russia and China, to allow pipelines through these corridors, as well. For the land routes through Pakistan, it may have to adopt a wait and watch policy for relations to stabilize. But with China pressurizing Iran and Pakistan, to expedite the pipeline with or without India, it may be a case of missed opportunity.
Needless to say, if India goes in for the sea routes for its pipelines, the importance of a modern blue water Navy cannot be underscored, especially in light of the recent forays by Chinese warships in the Arabian Sea. The ‘Great Energy Game’ must form a key strategic driving force in the decades to come. However, the growing competition over scarce energy resources is not necessarily destabilizing. A disruption of supplies anywhere would translate into higher prices everywhere. Therefore, every consuming state is equally vulnerable to the effect of such shocks. As such, all states have a stake in avoiding conflict.
Competition over energy resources can actually be beneficial by developing new markets and providing advanced new exploration and exploitation techniques, which ultimately contribute to increased energy supplies. Revolution in energy technologies (super conductivity, solar energy and electric energies), may profoundly change the dynamics of global energy security. Alternative energy may reduce demand on hydro–carbon fuels and minimize the risks of confrontation on this issue, considerably. The Central Asian Region has emerged as the new frontier for oil and gas exploration. China is moving aggressively to spread its influence in the region. The recent moves by the US to connect Central Asia to SE Asia through gas and electricity grids would benefit India by opening up new sources of energy and also increasing Indian influence in the region.