India’s Energy Diplomacy: Key initiates, efforts done so far, way forward

Recently, Sri Lanka has invited India’s Petronet LNG to establish a liquid gas import terminal on the west coast of Sri Lanka in close vicinity of Colombo. This invitation is hailed as one of India’s major success in energy diplomacy as it signals India’s emergence as a gas bridge for South Asia.

In this article, we shall discuss in detail about India’s energy diplomacy in the recent years and analyze its future prospects.

India’s energy Diplomacy

India in recent years has started to recognise energy as a crucial tool for bolstering its relationship with its neighbours. Quietly, India is setting up a web of energy relationships in the extended neighbourhood covering Myanmar in the east to the Gulf in the west. India has started to move beyond just physical connectivity and started to recognise energy as a tool of connectivity. India is accomplishing this by leveraging its position both as a large consumption centre and a major source of petro-products and expertise.

Mauritius

Mauritius is India’s one of the closest allies in the Indian Ocean region. Mauritius has the potential to become a hub for petroleum storage and bunkering. To tap this potential, India has already started building infrastructure in Mauritius. Also, India is already supplying petroleum products to Mauritius from refineries of Mangalore. India can use the storage facilities developed in Mauritius to market petroleum products to other parts of Africa.

Indonesia

Indonesia is one of the largest sources of hydrocarbons in the world. In April, India has restarted an energy dialogue with Indonesia. India has started to build floating storage and regasification units (FSRU) in Indonesia to enable that country to supply energy hassle free to thousands of its islands. In return for the project, India is asking Indonesia to provide LNG kits to be used in Indian transport vehicles. In addition, India and Indonesia have agreed to cooperate in a number of fields such as upgradation of refineries in Indonesia, relocation of Indian gas based plants to Indonesia, sharing experience in the use of LEDs and renewable energy in India,  exploration of oil, gas and coal fields etc.

Myanmar

Myanmar is rich in its own energy sources. However, Myanmar is supplying almost 80% of its gas to China through a pipeline deal. Once the Kaladan multi-modal transport project is complete, it can be used to supply LNG to Aizawl.

India is supplying diesel to Myanmar from its Numaligarh refinery in Assam. India is considering the option of setting up an LNG terminal in Sittwe that can be used to supply energy products to Myanmar. India is also seriously considering to get into LPG storage and distribution in Myanmar. But, recently, the Myanmar government had cancelled a tender won by India.

Nepal & Bhutan

For a very long time, India has been engaged in energy cooperation with Nepal and Bhutan. India helps Bhutan and Nepal to harness their vast untapped hydro-power reserves. Energy infrastructures provided by India have helped these two countries to become self-sufficient in electricity needs.

As a part of recent initiative, India, Bhutan, Nepal and Bangladesh are exploring ways to share electricity under a multi-lateral agreement.

Sri Lanka

India is a major player in the fuel retail business of Sri Lanka through Lanka IOC, which is a subsidiary of Indian Oil. Sri Lanka’s invitation of Petronet LNG to establish an LNG terminal will help it to become the dominant fuel for that country’s future economic growth.

Central Asia

For India, Central Asia has emerged as an important priority because of its huge economic, security and energy advantages. Central Asia is a region where China has unchallenged geopolitical presence. This in addition to lack of direct connectivity between India and Central Asia has made Central Asia to remain low on India’s foreign policy priorities.

The recent visits of Prime Minister Modi to Central Asia and Iran as well as India’s accession to the Shanghai Cooperation Organization (SCO) highlights India’s paradigm shift in the India-Central Asia relationship.

In a significant boost for energy diplomacy, Kazakhstan has offered ONGC Videsh Ltd (OVL), a stake in a medium-sized Abai oil block in the Caspian Sea. The scope for expansion of the economic interests in Central Asia is likely to grow significantly as India enjoys enormous goodwill in the region.

US

In a major win to India’s energy diplomacy, in this year August, India has bought US crude for the first time ever. This deal is stated to have far reaching economic and strategic importance. This deal marks the start of energy relationship with a competitive and dependable energy player in the world. Indian companies have also invested around $5 billion in the US’s shale assets.

Why India is extensively focussing on its neighbourhood?

India’s neighbourhood has a fair amount of India’s influence. Also it has emerged as a crucial domain due to increasing Chinese presence. The nature of competition between India and China is also multi-faceted as it does not limit itself only to strategic and military angles but also encompasses economic dimension as well.

The availability of underutilized energy resources and underdeveloped energy infrastructure has increased the potential of India’s neighbourhood in the energy sector.

India’s neighbourhood is also gaining prominence as they are geographically located at the crown of the Indo-Pacific region. This region has strategic importance. China has emerged as a key player in the region under the aegis of its One Belt One Road initiative. While China is viewing this region as a solution to its Malacca problem, India and Japan are trying to counter the ever growing influence of China in this region.

Lastly, the stability in India’s neighbourhood is inevitable for India’s own security interests as well as for shaping up the regional dynamics.

Discussion / Analysis

The first aspect of India’s energy diplomacy is reaching out to its immediate neighbours. India is trying to engage with its immediate neighbours through bilateral and regional mechanisms. At the regional level, signing of the SAARC energy agreement on electricity cooperation in 2014 marks a significant step. This cooperation will place the South Asian countries under a common regional energy framework and will help out the smaller countries to tackle with their energy crisis.

The second aspect is renewing older relationships. India has started to renew ties with countries like France and Canada. While Canada has agreed to supply 3,000 metric tonnes of Uranium, France is helping India to build nuclear reactors.

The third aspect is to develop new relationships with willing partners. This strategy will help India to expand and diversify the base of energy sources. On nuclear energy front, India has started to engage with China, Kazakhstan and Australia. In the renewable energy front, India has begun to engage with United States and China. India is seeking Japan’s cooperation for making its coal fired power plants efficient.

In sum, India’s energy diplomacy revolves around developing inter-dependencies, rather than making the relationships extractive.

Way forward

It is imperative for India and Japan to collaborate effectively and evolve a mutually beneficial relationship in the neighbourhood. Both these countries share a common competitor in China. Japan being a world leader in new and renewable energy, India can make use of Japanese technology to cater to its energy requirements in the new and renewable energy sector. Indian and Japanese joint ventures in neighbouring countries will also help nations like Bangladesh, Myanmar and Sri Lanka to stay away from the Chinese pressure. Many nations in the neighbourhood are ensnared in Chinese debt.

Also as a longer term strategy, India should invest in building in its own capacities and technologies to achieve cleaner and efficient ways of fulfilling its energy requirements.

India should also invest to develop its domestic capacity by enhancing oil terminals and storage facilities on the sea fronts of India. For example, the Mangalore refinery can be enhanced and used as a node for supply of oil to Sri Lanka.

Conclusion

It would be pertinent for India to maintain the momentum it has infused in its energy diplomacy in the recent years. In addition to consolidating the gains it has made with the new energy partners, the country should make sure that it also focuses in strengthening its relationships with its traditional suppliers in West Asia and the Gulf States.