Dream to Reality : Towards a Cleaner and Secure Energy

Future
Dr.Neelam Tikkha
MMV, RTMNU Nagpur India
internationalmultijournal@gmail.com,
neelam.tikkha@gmail.com
Abstract
Indias population clock is a quarter-past-billion. Half of it does not have
electricity. Long-term energy security is needed for economic advancement and
a greener future. Natural gas is ideal for electricity generation. The potential of
yield from Indias east coast and unconventional gases is not certain.
This paper will focus on Indias dream of bolstering energy security through
transnational pipelines. The issues affecting the M-I, T-A-P-I and the I-P-I
pipelines will be analysed in the backdrop of current world events and the
political situations that may unfold in the next two years. The authors also
attempt to compare the advantages of transnational pipelines against LNG
imports.
Key Words :

Introduction:
Fuelling the new generation
India, spoken of and categorised as an emerging economy, has started coming
out of its own shadow. After the collapse of the global markets, it was for
everyone to seethat India had a sound financial structure. Any downturn was
only due to a worldwide depressing sentiment.

However, as we blow our own trumpet, the reality of a fast-ticking population

clock already nearing 1.25 billion too cannot be ignored.Census estimates predict
an effective increase of 100m in the working age population every decade until
2030.In order to generate jobs for this demographic and keep it moving from
home to workplace, it becomes imperative to focus on cheaper modes of
energy.Energy consumption data across the world indicates that a major portion
is spent on vehicular traffic. In Asia, there is a particular dearth of electricity.
Only half of the population has access to electricity while the other half suffers
power-cuts. India has in the recent years, invested heavily to bolster its power
generation capacity. In order to keep the turbines spinning, the energy guzzling
power plants need to be constantly supplied with fuel.
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While a reliable supply is essential to sustained growth, post-Kyoto concerns too

need to be respected. The answer lies in delicately balancing the 3Es,which have
a bootstrapping relationship pull one end, the other automatically shortens:
1. Economic progress
2. Energy security
3. Environment protection
Energy Mix
Nuclear: Nuclear power,billed as a non-GHG emitter, suffered another major jolt
with the Fukushima disaster. Anti-nuclear protests will probably never die down
because of fatal health risk concerns and horrendous industry disasters.
Hydro-electric:Hydro-electric power projects,once put into operation, emit the
least CO2. Control over their output too is possible. But damming rivers comes
with its attendant ecological costs and displacement of people. Environmental
protests result in long implementation times and resultant cost overruns.
Coal: Coal continues to be at the forefront in meeting the rising energy need. In
India, electricity is generated primarily by coal (60%) and nearly a fifth of the
annual requirement is met through imports. Although India has one of the largest
deposits of coal in the world, the production costs are amongst the highest. Much
of the coal has high ash content and low calorific value. Coal fired plants also
suffer from the reputation of being the worst polluters even with all the latest
emission control equipment. Looking at the present rate of extraction, domestic
coal will run out in40 years.
Oil: India depends on crude oil from abroad to the extent of 75%. The foreign
exchange requirement, varying price and energy efficiency severely limits its use
for power generation. The refined products are mostly used for transport.
Natural Gas: This brings us to the last major source natural gas. This is an
important source of energy because from extraction to consumption by the enduser, it utilises less than 10% of its calorific value. Due to the higher burning
efficiency and relatively lower polluting capability compared to other
hydrocarbons, demand for it grows phenomenally across the world. The total
demand for gas in India is slated to grow from 166 mmscmd to 466 mmscmd by
2017.
Alternate forms of energy like solar and wind currently contribute only
marginally.
Solar: With ample sunshine all year round, solar power projects took off to a
great start. It is the current poster boy of renewable energy. The current installed
capacity is 1,400 MW including PV and C-Si. The Jawaharlal Nehru National
Solar Mission has set a target, amongst others, for deployment of grid connected
solar power capacity of 20,000 MW by 2022. 1Until then one has to wait.
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Wind: Before the dawn of solar power, heavy investments and bets were placed
on wind power. However with old equipment, efficiency is low. Even when
cyclone Mahasen, in May 2013, brought strong winds to coastal Tamil Nadu,
output peaked at 3000 MW against an installed capacity of 7000 MW. The fact
that wind power is seasonal also affects its reliability.
A crisis of sorts
A sudden change of prices and supply terms has made imported coal costly and
certain varieties not available at all. This has brought private power plants
dependent on them to the brink.Summer is the time when demand for electricity
is at the highest. However, this time load shedding is happening for a very
different reason - distribution companies are not willing to buy high cost
electricity. The average PLF was 69% for coal based ones and most were not
even able to recover opex. There is an acute shortageof gas too. Gas based plants
are operating at one-third their capacity because imported LNG is very costly.
However, a recent policy shift will allow a pass through mechanism for the
power sector that will allow producers to pass on the higher cost of imported
coal to consumers. Mr. KVB Reddy, Executive Director, Essar Energy says, In
terms of costs, against 9-10 cents per kwh of power produced through LNG, it
will cost only 4 cents per kwh if produced through coal. 2
Hydrocarbon policy 2025
India meets 79% of its oil needs through imports and bought 183 million tonnes
last year. The Hydrocarbons Vision - 2025 laid down by the Government of
India provides guidance to the policies relating to the hydrocarbons until 2025.It
focuses on energy security, alternative fuels, ensuring that the mix of energy
sources used in the economy is sustainable and that adequate quantities of
economical and green fuels are made available to the Indian consumers.
Emphasis is also laid on the use of natural gas in view of it being an
environmental friendly economically attractive fuel and also a desirable
feedstock. The medium term policy outlined envisages pursuing diplomatic and
political initiatives for import of gas from neighbouring and other countries with
emphasis on transnational gas pipelines. It also aims at importing LNG to
supplement the domestic gas availability and encourage domestic companies to
participate in the LNG chain.3
On the topic of energy efficiency the Planning Commission of India reports, An
Expert Group on Low Carbon Strategies for Inclusive Growth, in its Interim
Report, has estimated that emissions intensity of our GDP could go down by 23.0
to 33.0 per cent over 2005 levels by 2020, depending upon the intensity of the
mitigation effort, while achieving the target 9.0 per cent GDP growth.4The total
cost of mitigating its emissions intensity by 2020 will run into several thousand

million dollars. Securing the energy future thus, becomes imperative in view of
the current situation prevailing in India.
Getting Gas to Surface
Given the efficiency of gas-fired power plants and a much lower carbon
footprint, much action is being taken in India to build up adequate supply
sources. Indian cities are also taking piped gas to retail consumers in a big
way.Sourcing is done from imported LNG, gas associated with oil and
unconventional sources.
Hydro-fracturing has turned the US into an exporter of natural gasdue to a
sudden abundant supply of unconventional shale gas. Fracking has led to a
drop in gas prices because advances in this new technology has made extraction
now cost between $ 3-6 per mmBtu. India too holds promise of large deposits of
shale gas.Mr. SudhirVasudeva, CMD, ONGC,has spoken about thepotentialand
challenges of shale gas.5In the Indian context, it has to be seen whether
commercial extraction will be profitable because the technology is limited to a
few service providers and the rates quoted by them for this will be a major
factor.
Shale gas fields have a very short lifespan and utilities cannot hope to be
dependent on a single source for long. Effects on the environment too are
beginning to sink in. Although oil companies deny it, fracking chemicals have
polluted aquifers. Mini earthquakes hit a small town in North England after
drilling for fracking started there. France has the largest shale gas deposits in
Europe but despite a shortage of energy, it has banned fracking. A team of
scholars has come up with technology to make water used in fracking potable.
Pending large scale use of this, companies are exploringwaterless fracking.
India has huge deposits of coal and reserves of coal bed methane
(CBM).Recently, Gas Authority of India Limited has shown interest in a coal
regasification plant that will generate electricity to feed a fertiliser plant
alongwith its captive power plant. The captive power plant would also supply
surplus to the grid.
An order by the Government in July 2013 has changed the rules for sale of gas
from isolated marginal fields. Under the earlier Administered Price
Mechanism(APM), the price of domestic gas was fixed and allocation was based
on the priority of the sector. Now the supplies will go to the highest bidder and
sector will not matter.
The KG basin on the east cost of India has high potential. One of the Indian
energy majors announced discovery of a huge reserve of gas in its KG-D6 block.
But during three years of operations, productionstarted dwindling from 2010-11
and has come down to 20% which is beingattributed to geological complexities
in the deep sea region.
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Recently, ONGC Videsh acquired a stake in the Rovuma-I field in Mozambique

which is expected to hold 65 tcf of gas.
Acting pricey
Gas prices in India under the APMwere until recently $4.2 per mmBtu.Power
plants that were built on the assumption of this cheap and proximal supply were
left in the lurch because of virtual nil availability after allotment to fertiliser
plants.
Imported LNG is costly and makes per unit of electricity very costly.
Distribution companies shy away from these plants. Using coal turns out to be
about 50% cheaper than imported LNG. Power plant owners are now actively
considering converting their gas plants to coal fired ones."These plants were
commissioned on APM gas, but as there is no availability of either APM gas or
allocation from KG-D6, we have been using costly LNG at an average rate of
$12-18 for the past 2-3 years, which is becoming uneconomical. So, we will be
switching to coal. The full conversion will take three years," said NareshNayyar,
CEO, Essar Energy, at a conference call.6
A unique aspect of gas rates is that unlike crude oil there is no single
international benchmark for price. Pricing of gas in India is a challenge because
of priority allotment to the fertiliser sector which has controlled prices for its
finished product. This resulted in a higher subsidy burden.
A recent pricing decision that willtakeeffect from the April of 2014 is aimed at
boosting domestic E&P efforts and investments.The approved formula will be an
average of the weighted average of gas prices in Europe, US and Japan and the
price of LNG imported into India excluding transportation. Spot rates will not be
taken into consideration. Only long term contract prices will be taken into
account. At current rates, the price should be about $6.2. The contract with
Gorgon, Australia, is at a higher price than the RasGas contract. Supplies from
this source beginning 2015will further increase the price of domestic gas.
A major thought behind is being read as a long term view to encourage
investment within India more than in overseas acquisitions. It is not always
economical to send home hydrocarbons from overseas properties.There is a large
unexplored reserve of gas in India. It is estimated that India has 1 tcm of gas to
last for decades. There was no comparable interest in domestic E&P owing to the
low price of gas which made it unviable to produce commercially. Most gas
reserves in India are in the deep sea which makes extraction challenging and
extremely costly getting the gas onshore. The Finance Minister was quoted as
saying that even by 2025, India will be only 30% self-sufficient in natural gas
and India simply does not have the money to import 300 mmscmd and hence,
domestic production has to increase.7
Another reason looks to be the example of gas pricing in the US. Gas prices used
to be very high in the US. This encouraged investment in extraction of gas so
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much so that there was a sort of gold rush and now the demand-supply forces
have brought down the prices to $2-3.
Piped Dreams
India has long cherished a dream of a transnational pipeline to secure its gas
supplies. However, its interests have not gone beyond a slow simmer. Three
pipelines are on the wish list the Iran-Pakistan-India (I-P-I), TurkmenistanAfghanistan-Pakistan-India (T-A-P-I) and Myanmar-India (M-I). The main
hurdles have been political related security issues.
M-I pipeline
The Myanmar-India pipeline is discussed first in this paper because of three
reasons. First and most important, it does not pass through any region of volatile
political stability. Second, a pipeline passing entirely over land is possible. Third,
estimates put the untapped reserves at some 20 tcf. When major investment is
made in infrastructure which can simply not be moved, one has to have an
assurance of long term supplies.
In April 2013, the US lifted sanctions against Myanmar.For the last three years,
the Myanmar government too has been displaying certain confidence building
measures likeco-operating with India in asking insurgents in hiding to leave its
soil and even handing over some to India. Indias ties with Myanmar go back to
ancient times. India needs to use its best diplomatic skills to gain a foothold
which is long being denied to it by the Chinese petroleum companies. There is a
need to move fast.
Chinese petroleum companies rely on state funds. Decision making is fast since
it looks more of a state investment and competition is easily outbid. Even in the
Shwe oilfield where India has a large stake, China ended up taking the gas
leaving nothing but dollars in revenue for India. Earlier, the motive in Indian
overseas investments was either supplies of hydrocarbon or profits where they
could not be transported back economically. The dollars would go back into
buying oil. Recent moves seem to suggest that assured supplies are becoming
more important to sustain economic progress targets.
A broad strategy that would aid India in all its overseas hydrocarbon projects
would be a public-private-partnership. State owned and private companies
should compete as one entity instead of against each other internationally. Such
joint ventures afford the advantages of State backing as well as freedom of fast
decision making.
There are two ways in which India can access Myanmars gas. The M-I pipeline
and the LNG sea transportation route.
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The shorter route is less than 1000 km transiting through Bangladeshand will
cost $1 billion. The past government in Bangladesh wanted to bargain for much
more than was linked to this project. The recent change in power has brought a
government in Bangladesh sympathetic to India. This again brings a sense of
urgency in decision making.
Governments change in any democracy. Should India decide not to take any
chances with long term implications and go it alone without involving a transit
state, the alternate direct route leads to its North-East (N-E). This would mean a
route longer by some 600 km and double the cost at $2billion. The terrain is
difficult in the N-E but Indian companies havea lot of experience in pipelines
E&C and land acquisition. The extra expenditure incurred will be offset by the
lasting development benefits that will land in North-Easts kitty.
The N-E is electricity starved. There is a chicken and egg situation for
industrialisation & power generation. Abundance of electricity will bring
industrial development to it. An important issue to be taken care of is to
simultaneously plan for the evacuation of the generated electricity.
The ONGC Tripura Gas Project commissioned last year utilises gas from the
local fields to generate electricity. The power project was combined with a
transmission project so that the local grid was not found wanting in capacity.
Elsewhere too, the local grid will have to be expanded and linked to the national
grid and industries setup to utilise it. There are many examples across the world
where even transit states have benefited economically not to speak of sources
and destinations of pipelines.Pipelines in the north-east will have to be
safeguarded from insurgents initially. History has shown that economic
development and progress of the local population have served to curb disruptive
activities.
In any case, an LNG terminal and a pipeline through the N-E will cost about the
same to build. However LNG terminals require assurance of supply for a long
term. With pipelines, the source country is committedneck-deep to supply since
its production facility is directly connected to the pipeline. The extra expenditure
incurred will be more than offset by the socio-economic development.
T-A-P-I project
The Turkmenistan-Afghanistan-Pakistan-India (T-A-P-I)project is of
significance to India because it will provide access to the huge reserves of
Central Asia. The estimated cost of this 1,680-kmpipeline project is $7.6 billion.
The concept interested India from the last century but the continuous Afghan
instability meant that it remained only a dream. A go-slow also happened
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because of the surge in gas discoveries reported on the east coast of India.
However, the actual production has steadily and rapidly fallen. This situation has
revived Indias interest in pipeline projects.
President of India, Mr. Pranab Mukherjee said India is fully committed to
implement the TAPI gas pipeline project by August 2017when Mr. Rashid
Meredov, Deputy Prime Minister and foreign minister of Turkmenistan, called
on him.8
TAPI will wind its way through 150 km in Turkmenistan, 730 km in Afghanistan
and 800 km in Pakistan to reach India. India and Pakistan are slated to receive 90
mmscmd for 30 years. Afghanistan will receive 14 mmscmd.
Turkmenistan wishes to diversify its exports to regions other than Russia and
Europe. In Europe there is already a glut of cheap imported LNG from
unconventional US sources. A connection to South-East Asia would help it
future expansion plans.
The Obama Administration has committed to withdrawing its forces from
Afghanistan by 2014 and it would want to bring about stability there. The US is
looking for prosperity in Afghanistan resulting from the construction activity
itself besides the energy required for the reconstruction of the country. As
mentioned earlier in the paper, even transiting states benefit from pipeline
projects. Providing security to the pipeline itself alongside its maintenance
andoperation would generate several thousands of jobs. The US has leverage
with both Afghanistan and Pakistan being a provider of aid worth hundreds of
million dollars and should actively push this through.
India-Pakistan relations blow hot and cold.According to the US Energy
Information Administration,Pakistan has shale oil resources equalling those of
Canada.9 The report adds that upto 105 tcf is technically recoverable with current
technology. However, the technology as stated earlier is exclusive and may be
too expensive for Pakistan. Pakistanseconomy still suffers as a result of a huge
hydrocarbon deficiency and depends largely on imports. The percentage of gas in
Pakistans energy mix is very high and it stands to benefit a great deal.In
Pakistan, recently a Government which is less hostile to India has been elected
thus providing a window of opportunity to go ahead with pipeline projects.
The Asian Development Bank too, is very interested in expediting the cause of
this project in order to emerge as a dominant lending entity in the region.
In 2012, Gas Authority of India inked a deal with Turkmen Gas for purchasing
gas indicating the resolve of Indias participation. This February GAIL was
permitted to invest $5million in a special purpose vehicle, TAPI Ltd, formed to
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scout for a leader of consortium and study the feasibility. The best bet for India
to ensure continuity of supplies through this pipeline would be to form a
partnership with one of the major international & respected oil majors. This
would have to be acceptable to Turkmenistan too, since these companies arenot
interested in the pipeline only. They are said to be looking for a foothold in the
production itself with a stake in the wells. Turkmenistan passed a law after a
Chinese company was given a stake in the Turkmenistan fields not to allow any
further stakes to foreign companies. Turkmenistan is also working subtly, it is
said, to bring an international oil major onboard.
China is trying to tap this region too in order to fuel its fast rolling juggernaut of
an economy and a big population. India has lost atleast $12.5 billion of oil deals
to Chinese oil companies. For instance, ONGC lost the giant Kashagan oilfield
to the Chinese after Kazakhstan blocked its $5 billion deal to buy Conoco
Phillips stake in the Caspian Sea oilfield.10
India has long been concerned about the security of the TAPI pipeline because it
passes through regions of volatile political stability. If India is to share the $8
billion for building this infrastructure, it must have reasonable assurance about
its safety.

I-P-I Pipeline
The Iran-Pakistan-India pipeline, also referred to as the "Peace Pipeline", has
been on the anvil for long. In fact, in March 2013 the final construction of the
Iran-Pakistan gas pipeline that would end on the Iran-Pakistan border was
kicked-off.The capacity would be some60 mmscmd.The pipeline in Iran will
start in Assaluyeh, run up to the Pakistan andtransit Balochistan coastline before
reachingthe Pakistan-India border. Should India decide to participate, Pakistan
willconstruct another 240 kilometres fromNawab Shah to the Indian border.Iran
will construct1,157 kilometres amounting to$3 billion, Pakistan a length of 1,035
kilometres costing $2.2 billion and India 300kilometres billed at $0.65 billion.
India has long resisted worldwide efforts by the US to freeze sourcing of oil
from Iran. Although India has recently reduced its procurement of Iranian crude
by 26% in the previous year, it has made clear that it will stand by Iran which is
a traditional ally. It may not be ready to compromise its energy security given
that US has still not cleared the proposal for export of its LNG to India. Also, the
IPI pipeline has the most long term viability because Iran has proven huge
reserves the second largest in the world. This cannot be said about Myanmar
the reserves of which have not been verified or Turkmenistan which already has
large commitments to others.

For the US, India and Pakistan are two dominant powers in the area. Any
squeeze on the Iranian hydrocarbons would deprive these two countries of
essential low cost energy which is a sensitive political topic. The other fallout
would be that China would gladly step into the picture to divert the oil. This
would weigh heavily on the US mind. When Indias External Affairs Minister
visited Iran in May this year, he discussed an investment of $100 million for
developing Irans Chahbar port.
There are many reasons that the IPI project has not been able to take off for India
-- the cost of gas demanded by Iran and the safety of the pipeline transiting
through Pakistan. This project may have a life of three decades and all three
stakeholders would like to drive a hard bargain. Iran has been demanding an
initial cost of 80% of crude oil and then later $12. Pakistan and India would like
it to be $2-4.
Unlike the TAPI project,western oil majors would not even touch the IPI with a
barge pole for fear of falling foul of the US OFAC sanctions. Without any
powerful international backing for this project, India fears for the safety of the
pipelines and hence the supplies because the route follows highly troubled areas
of Pakistan.
Iran has been seriously trying to woo India with offers of an undersea pipeline
totally excluding Pakistan. For the first time, it has also offered Indian
companies a direct stake in its fields. India currently has only a service contract
in the Farsi block. A production sharing contract would give it ownership of the
oil as well as freedom to choose the destination.
M-I or T-A-P-I or I-P-I

India might ignore US threats to sanction its financial institutions linked to

importing Iranian oil. As a traditional ally of Iran, India only accepts United
Nations imposed sanctions. It is being said the IPI pipeline would supply four
times cheaper energy than TAPI. Without assurance of safety during its transit,
the pipeline is in a limbo.
Which pipeline will India invest in?Simultaneous risky investment may not be
possible looking at the amount of resources required. However, considering the
situation prevalent in south-east Asia and the attitude of disruptive forces
towards India which is one of the biggest democracies, the best bet would be
getting M-I off the block first.
Through LNG or Pipelines, that is the question
There are only two modes of transportation of natural gas pipelines and tankers.
The distance from the source to the receiving terminal plays an important role in
choosing between the two.

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LNG terminals cost about $2-3 billion to setup including facilities for
liquefaction and regasification. Transport is another element. This necessitates
long term contracts. India has two LNG terminals at Hazira and Dahej on the
west coast. Another terminal is on the anvil on the east coast Kochi. It is slated to
cost about $630 million and another $700 million for the 900 km pipeline
emanating from it which will supply LNG to south India. Advances in plant
technology and construction of very large carriers have enabled significant cost
reductions.
PETRONET LNG, an Indian firm with NOC backing, currently imports 7.5
million tonnes of LNG from RasGas at its Dahej terminal. It has also recently
signed a pact to import gas from the US. India does not have an FTA with the
US as a result of which any deal for export of LNG requires approval of the US
Department of Energy. When operationalized, it would allow import of 4 mmta
for 20 years beginning 2018. GAIL too has a contract with supplies commencing
2017 for about 6 mmta from the US. Though there is opposition to the export of
gas, oil and gas majors have applied to the Department of Energy to relieve the
overabundance of gas.
Transnational pipelines too involve super large scale capital investment in
infrastructure that will stand its ground for years. Studies have suggested that any
pipeline less than 4,500 km will prove cheaper than transporting LNG through
tankers. There has been a cost reduction in pipeline projects too through
experiences gained in laying several thousands of kilometres across the world.
Oil pipelines carry the risk of spills andsubsequent immediate cleaning
strategies. The Macondo disaster has led to almost open-cheque book
implications for BP. The recent Thai pipeline spill at Koh Samet is yet another
example. Gas pipelines, however,carry the least threat of environmental damage.
However, any breach in safety or sabotage resulting in explosions carries the
potential of collateral damage. In a freak accident in 1989, a gas pipeline
explodedbetween the Russian cities of Ufa and Asha just as two trains passed it
killing about 500.This was attributed to operator error. Gas pipelines have a life
of around 40 years during which regular safety checks have to be built in as a
standard operating procedure. Security has to be planned as well.It becomes
imperative for all the participating countries to insulate these lifelines from their
political agenda. One has to adhere to the basic principle that the messenger must
not be killed.
Sustainable construction of both pipelines as well as LNG terminals remains a
challenge. Yet the benefits far outweigh the costs.
References
1.
2.

http://www.mnre.gov.in/file-manager/UserFiles/mission_document_
JNNSM.pdf
http://indianpowersector.com/home/tag/essar-energy/article Essar Energy
planning to convert two gas-fired plants into coal-based units
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3.
4.

India Hydrocarbon Vision -2025, Government of India

Government of India, Planning Commission, October 2011, Faster,
Sustainableand More Inclusive Growth - An Approach to the Twelfth Five
Year Plan(2012-17).
5. Vasudeva, Mr.Sudhir, CMD, ONGC, keynote address at a discussion forum
on Shale gas: a game changer in energy organised by the Bengal
Chamber of Commerce and Industry, May 17, 2013.
6. The Economic Times, Jun 25, 2013
7. The Economic Times, Jun 29,2013
8. Press Release, Jan 22, 2013, Deputy Prime Minister and Foreign Minister
of Turkmenistan calls on President, http://presidentofindia.gov.in/
pr210113.html
9. http://www.eia.gov/analysis/studies/worldshalegas,Technically
Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137
Shale Formations in 41 Countries Outside the United States, Release date:
June 10, 2013 Updated: June 13, 2013
10. Press Trust of India, July 03, 2013

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