Gabdullin K. – PhD, Oriental Studies Department,
Al-Farabi Kazakh National University (Kazakhstan)
Zhunis K. – PhD, Associate Professor,
Al-Farabi Kazakh National University (Kazakhstan)
Dosova S. – PhD, Associate Professor, Oriental Studies Department
Al-Farabi Kazakh National University (Kazakhstan)
Kozhahmetova A. – Researcher, Law and Business School,
Al-Farabi Kazakh National University (Kazakhstan)
Oil Prices Impact on Energy Policy of India in Central Asia
Аbstract. India is the most dynamically developing economy of the world. Growth rates of Gross Domestic Product (GDP) in the 2000 made 6-7%. With GDP growth the need for energy also grows. Own resources of oil and gas in India is not sufficient therefore New Delhi pursues active policy in search of energy resources outside the country. Under the influence of the complex factors (growth of consumption of oil in China and India, natural disasters, the conflicts in the Middle East region) prices of oil considerably grew. The rise in prices for oil in 2001-2008 affected to the rise in prices for other energy resources – natural gas, uranium, the electric power, thereby increased costs of oil import in India. Under the influence of high prices of oil and increase in demand for energy resources in India new energy strategy which is issued in "India Hydrocarbon Vision 2025", "India Energy Vision 2020". According to them India diversifies power policy, paying priority attention to the development of alternative energy (a nuclear and renewable energy), implementation of the NELP program (search and development of oil and gas fields in the territory of India), and also expansion of a geographical area of hydrocarbon supply sources in the regions of Africa, Latin America, South East Asia, Russia, and Central Asia.
Key words: diversification, oil prices, India-Central Asia energy cooperation, energy policy of India in Central Asia
Introduction
In 2000-2008 oil prices grows sharply. Different factors influence on oil prices. It impacts on Indian economy and energy sector. After the beginning of economic reforms in India the increase in energy consumption grows more rapidly than production. It stimulates energy quest activity not only in domestic sector but in external policy. According Ministry of oil and gas in India in 2010 New Delhi imported 163.4 million tons [1]. IEA predicts the growth of oil imports to 378 million tones [2]. The threat of oil supply disruption in Middle East promotes diversification in Energy guest to other regions including Central Asia.
Central Asia has significant reserves of oil and gas. According to BP Statistical Review oil and gas reserves estimate 5.7 billion tons and 11.4 BCM [3]. The little quantity consumption and rapid growth of production stimulate exports increase. Central Asia states diversifies its exports to different vectors as well as to the North via Russia, West via Georgia and Azerbaijan to the Europe market, East to the China and South Asia via Iran and Af-Pak region.
The paper explores oil prices change impact on Foreign Policy of India and the prospects of India-Central Energy Cooperation. The research aims to study influence of oil prices to diversification of energy supply in India and its impact to India-Central Asia Energy Cooperation. How do population and economic growth influence to energy consumption in India? How do oil prices impact on energy diversification and India quest for energy? What is the significance of hydrocarbon resources in Central Asia for India? How can hydrocarbon exports growth in Central Asia influence to India-Central Asia Energy Cooperation?
1. Main factors of the growth in consumption of energy resources
The main factors which influence to the growth of energy resources consumption are the growth of population and economic dynamic. In India population is growing fast. The population growth was 1.7% in 1990-2006. According to IEA the population in India grew from 839 million people in 1990 to 1.1 billion in 2011 and in spite of trends of decreasing birth rate to 1.1% may be reach to 1.48 billion in 2030.
Economic growth in India is being growing faster than population. In India GDP growth rates were in 5.8% in 1980-1990 with trends of increase in 6.1% in 1990-2006. IEA predicts Indian economy rates to be growing to 6.8% in 2010-2030 [4].
Table 1. Rates of population and GDP growth in India в %
1980-1990 / 1990-2006 / 2006-2015 / 2006-2030Population / 2,1 / 1,7 / 1,4 / 1,1
GDP / 5,8 / 6,1 / 7,8 / 6,4
Source: World Energy Outlook. IEA, 2008. P. 64-66.
Energy consumption growth in India was from 186 million toe in 1990 to 537 million toe in 2005. It is expected to be growing energy consumption to 1.082 billion toe by 2030. In the structure of energy consumption coal annual growth was 2.8% from 106 million toe in 1990 to 208 million toe in 2005 with prospect of increase till 411 million toe. in 2030. Oil and natural gas consumption was more dynamic than that of coal. It was 3% for oil and 4.6% for natural gas in that time. The highest growth rates were noticed in hydro energy (5.3%), nuclear (9.9%) and other types of renewable energy as solar, geothermal, and hydrogen 15.8%. While the lowest one is being observed in bio energy only 2.1% [5].
Table 2. Energy consumption growth in India in million toe
Type of energy / 1990 / 2000 / 2005 / 2015 / 2030 / Annual energy consumption rates in2005-2030
Coal / 106 / 164 / 208 / 289 / 411 / 2.8%
Oil / 63 / 114 / 129 / 173 / 272 / 3%
Natural gas / 10 / 21 / 29 / 47 / 89 / 4.6%
Nuclear energy / 2 / 4 / 5 / 19 / 47 / 9.9%
Hydroenergy / 6 / 6 / 9 / 17 / 32 / 5.3%
Bioenergy / 133 / 149 / 158 / 168 / 211 / 2.1%
Other types of energy / - / - / 1 / 6 / 21 / 15.8%
Totally / 186 / 311 / 537 / 719 / 1082 / 2.8%
Source: World Energy Outlook. 2007. China and India. Insights. International Energy Agency
2. Oil prices impact on energy diversification in India
Since 2001 “period of high oil prices” has been started when oil price grew from 24 dollars for barrel in 2001 to 147 dollars in 2008. Average annual price reached to 97.26 dollars exceeding history maximum of 96.26 dollars in 1980 in conversions of dollars in 2008 [6]. Oil prices have been demonstrating high growth dynamics since 2001. Oil prices growth are related with the factors as follows:
- Political conflicts in oil-produce states;
- Exhaustion of old oil-fields and technology difficulty of new oil-fields development;
- Limitation of exports;
- Growing consumption in the new industrial states such as China and India;
- Terrorist activity and social tensions in oil-produces states;
- Convulsions of nature.
Oil prices impact on imports increase in dollars and the prices in the other energy resources coal, natural gas, and uranium. From 1999 to 2008 the price of natural gas grew from 3.14 dollars for one million BTE to 12.55 dollars for one million BTE [7]. Coal from 1999 to 2008 increased in the price from 28.79 dollars for ton to 147.67 dollars [8].
Under the influence of a rise in prices for oil and increase in demand oil import in India in terms of money increased. If in 2002 the price oil made 25.02 dollars for barrel (183 dollars for ton), in 2008 it grew to 97.26 dollars for barrel (713 dollars for ton). Respectively import of oil grew in the same period from 82 million tons to 132.8 million tons, and in terms of money import increased from 16.9 to 77.4 billion dollars. In the general imports the share of oil in 2010 made 28.5%. To reduce expenses from oil imports India is pursuing diversification policy. In 2003 new strategy was accepted which was issued in India Energy Vision 2020. According it India is pursuing policy of stimulation of alternative energy development which includes nuclear, solar, wind and hydropower. By 2011 the capacity of nuclear power plants increased to 4,385 GW. By 2023 New Delhi plans to increase its capacity to 44 GW. In 2007 the power of the developed electric power on solar power stations grew to 5 MW. By 2022 India plans to increase the capacity of solar power stations to 20 GW. Power of wind power stations increased from 7.8 in 2007 to 12 GW in 2012. As to hydroelectric power stations since 2003 India has put emphasis on the construction of small hydroelectric power stations. Small hydroelectric power stations made 2-2.5 MW. New Delhi plans to increase their capacity to 6.5 GW by 2022. NELP program includes search and development of new oil and gas fields in India and intensification production in existing fields. As a result of NELP program implementation oil stocks in India grew slightly from 740 in 2002 to 757 million tons in 2010. Gas reserves increased from 751 BCM in 2002 to 1.241 TCM in 2011. However found reserves of oil and gas are located in hard-to-reach places and its production demands great investments. Experts of IEA predict decrease in oil production from 32.4 in 2000 to 25.9 million tons in 2030 that reasons with exhaustion of the main fields. Though demand for oil and gas dynamically grows in India. Oil consumption in India grew from 106 in 2000 to 1555 million tons in 2010. Experts of EIA predict consumption growth in India to 339 million tons in 2030 [9].
The main exporter of oil to India is Middle East region (72.08%) [10]. However the further increase in import of oil from this region is limited with instability growth in the region that reasons with a number of factors:
- After occupation of Iraq in 2003 the terrorist acts, both in the Iraq, and in other oil-producing countries of the region increased;
- Political shocks in Libya, Egypt, and Syria in 2011-2013 negatively affect on internal political stability in the region countries that reasons with a political system of the oil-extracting states;
- After 2003 US-Iran tension that reasons with realization nuclear program were fueled by Tehran. In 2005 Iran threatened to block the Strait of Ormuz for oil tankers that will negatively be reflected on supply of hydrocarbons to India and to rates of development of economic growth.
To provide uninterrupted operation of supply of oil India pursues policy of diversification of import that includes expansion of geography of supply of oil-and-gas on other regions, and also participation of the Indian oil and gas companies in development of oil and gas fields in Africa, Latin America, South East Asia, Russia and Central Asia. The number of investment projects with participation of the Indian oil and gas companies increased from 1 project in 2002 to 26 projects in 2008. Investments into oil and gas fields grew from 4.7 in 2007 to 7.6 billion dollars in 2012 [11]. One of regions where the Indian oil companies intend to invest is Central Asia.
3. India-Central Asia Energy Cooperation
Central Asia countries concentrate great reserves of hydrocarbons and there are prospect markets for import of hydrocarbon to India. The share of the region in world oil-and-gas reserves is 3.4% and 6.1%. The share of oil and gas production is 0.5% and 1.1%. 70% of hydrocarbon they export. Production of oil-and-gas grows in Central Asia in fast rates. Oil production in Kazakhstan grew from 40 to 81 million tons. Astana plans to reach in oil production to 132 million tons in the prospect. Gas production during the same period grew from 10.5 to 33.6 BCM [12]. In Turkmenistan growth of production made 22%, and gas decreased by 10%.
Table 3. Oil and gas reserves in Central Asia
Oil (billion barrels) / Gas (TCM)Kazakhstan / 39.8 / 1.8
Тurkmenistan / 0.6 / 8
Uzbekistan / 0.6 / 1.6
Totally / 41 / 11.4
Source: BP Statistical Review of World Energy. – 2011.
Table 4. Production growth in Central Asia
Oil in million tons2000 / 2005 / 2010
Kazakhstan / 35.3 / 62.6 / 81.6
Тurkmenistan / 7.2 / 9.5 / 10.7
Uzbekistan / 7.5 / 5.4 / 3.7
Totally / 50 / 77.5 / 96
Gas in BCM
Kazakhstan / 10.4 / 22.6 / 33.6
Тurkmenistan / 42.5 / 57 / 42.4
Uzbekistan / 51.1 / 54 / 59.1
Totally / 104 / 133.6 / 135.1
Source: BP Statistical Review of World Energy. – 2011
Oil and gas exports realizes from Central Asia now through Russia (CTC, Atyrau-Samara, Central Asia Center) to China by Central Asia-China oil and gas pipeline, and also to Europe through Georgia and Turkey (Baku-Tbilisi-Ceyhan).
Moreover Central Asia states are rich with uranium and hydro power. 19% of world reserves of uranium are concentrated in Kazakhstan. Uranium reserves in Uzbekistan are 55200 tons [13]. 4% and 2% of a world hydro energy potential are situated in Tajikistan and Kyrgyzstan [14].
Importance of the region is defined also by other factors:
- Favorable geostrategic position. Central Asia is located in the center of the Eurasia continent at the intersection of overland West-East and North-South communications and as Indian experts consider the region is in the “strategic neighborhood” from economically important centers of northern part of India;
- Rich resources of mineral raw materials (copper, gold, etc.);
- Growth of India geopolitical competitors influence – the People's Republic of China and Pakistan.
The energy policy of India in Central Asia includes:
- Investments into oil and gas sector in Central Asia states (participation in the development oil and gas fields in Kazakhstan, Uzbekistan and Turkmenistan);
- Development of India-Kazakhstan and India-Uzbekistan Nuclear Cooperation;
- Investments into the development of Tajikistan hydro energy sector.
India and Kazakhstan. India and Kazakhstan Oil and Gas Cooperation began to develop in February 22, 2001. During Minister of Foreign Affairs of Kazakhstan Erlan Idrisov`s visit to New Delhi it has been negotiated between him and Minister of Foreign Affairs Jaswant Singh and the Oil and Gas Minister of India Nike. The Indian company OVL expressed interest in development of oil and gas fields on a shelf of the Kazakhstan sector of the Caspian Sea. During President of Kazakhstan N. A. Nazarbayev`s visit to India President of Kazakhstan and the prime minister of India Atal Vajpayee signed the Joint declaration in which oil and gas were defined as the priority direction of bilateral cooperation. In 2002 Indian oil company OVL began to negotiate for taking shares in Alibekmola (15%) and "Kurmangazi" (10%) fields. In 2004 Government of Kazakhstan suggested to India to develop two oil deposits in Caspian Sea – "Makhambet" and "Satpayev". In February 2005 during the Fifth meeting of the Kazakhstan-Indian intergovernmental commission on trade and economic, scientific and technical, industrial and cultural cooperation KazMunaiGas and OVL signed Memorandum of understanding. According to the Memorandum a deposit area "Satpayev" was defined as the most perspective for further joint development. Negotiations were complete only in January 2009 as a result "KazMunayGas" and "ONGC Mittal Energy Limited" (OMEL) signed the agreement on the principles of work concerning the deposit area "Satpayev". Indian side has gotten 25% of a share in joint venture. The Indian side declared that New Delhi attaches great value to cooperation with Kazakhstan in ensuring the energy security, and hoped that signing of this Agreement will become the basis to long-term mutually beneficial cooperation in oil and gas field. During the prime minister of India Manmohan Singh`s visit to Kazakhstan in April 2011 OMEL and "KazMunayGas" signed the agreement on joint development “Satpayev” oil field which is located in the northern part of the Kazakhstan`s Caspian Sea. The area of the block is estimated in area 1,482 sq. km with oil reserves in 256 million tons [15].