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Research Bodies To Develop Next Generation Fuel Resources
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Companies
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Press Release [FREE Access]
Petro Intelligence » Gas Lobby Clouds Pipeline Option

by R. Sasankan.

Narendra ModiThe word “lobby” has a hugely negative connotation in India, unlike the US where it is an entrenched part of the system to encourage public discourse on a variety of complex, and sometime contentious, topics.

Lobbies have no substantive place in the Indian and they usually work within the dark corners of the vast labyrinth of India’s governance system, often working at odds with the wider interests of the country.

Until recently, India’s petroleum sector had a very powerful truck lobby that stymied the growth of a robust pipeline network to transport petroleum products within the country. Transportation by road resulted in huge transportation losses including theft. Nevertheless, the oil companies preferred to go slow in laying pipelines obviously under the influence of the truck lobby which has the backing of some very powerful people. What the oil companies have accomplished now could have been achieved 30-40 years ago. The only thing that was lacking was the political will.

Dhramendra PradhanThe Indian government has been subsidising kerosene as it is the fuel of the poor people. But there was a terrible flip side: it fostered a massive racket, resulting from the diversion of a significant portion of subsidised kerosene supplies to petroleum retail outlets where it was used to adulterate diesel. A sizeable number of retail petroleum outlets are owned and operated by politicians who always speak about the need to champion the cause of the weaker sections of the society and the need to subsidise the fuel they consume. It took decades for the government to devise a mechanism to reach the subsidy directly to the beneficiaries.

I pointed out these instances to substantiate my argument that India is a highly fertile place for lobbies to operate. It takes time for the government machinery and the political leadership to wake up and act. By the time they do so, a colossal damage has already been done. Obviously, these are international players who operate through Indian agents, some of whom have always been a part of India’s powerful bureaucracy and the top managements of the state-owned companies.

Vladimir PutinIndia has gas-rich neighbours but no transnational gas pipeline to access the gas. In comparison, China gets huge quantities of gas through such pipelines. The whole of Europe does so as well. India has always been tantalized by such offers but nothing has ever materialised. Who could have scuttled such an eminently sensible idea? Could this be the handiwork of lobbies working within or outside the country?

The first such offer came from Iran, India’s neighbour which is reckoned to have the second-largest gas reserves in the world after Qatar. The offer came in the 1990s well before India opted to source LNG from Qatar under a deal signed in 1998. True, Iran had tilted in favour of Pakistan during the wars that India had fought with that country in 1965 and 1971. So did almost all Islamic countries except Iraq. Did India seriously examine the Iranian offer or simply dismiss it out of hand? Later, there was another proposal for an Iran-Pakistan-India (IPI) pipeline. Pakistan cannot be a dependable market for Iran as its ability to pay for the gas is in the realm of speculation. India, however, is a huge market that any gas supplier would love to have access to.

Hassan RouhaniThe IPI pipeline has not yet been formally dismissed by the Indian authorities but has been in cold storage on security concerns. Some of these concerns are genuine: India cannot be expected to readily agree to a pipeline traversing a terrorist-infested state like Pakistan. But why not examine the option of Iran, the supplier, taking the full responsibility of delivering gas to India’s borders? There could be other options as well.

So, a legitimate question arises: how could India readily agree to the ADB-sponsored Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline? This pipeline too has to reach India through Pakistan. It is obvious that some forces within and outside the country are opposed to Iranian gas reaching India. The Indian authorities did not raise the same security concerns when Reliance Industries and Essar decided to set up 80 million tonnes per annum of crude refining capacity at locations close to the India-Pak border in the state of Gujarat. The investment in these refineries is huge and any damage to these facilities could have been a far greater security threat to the country’s energy security.

The United States obviously will not be happy with a pipeline emanating from Iran and that is perfectly understandable. But is the US the main stumbling block or is it the LNG lobby operating within the country? The LNG lobby had penetrated the Indian bureaucracy long ago and the subversion of certain provisions in the contract with RasGas of Qatar for the supply of 7.5 million ton per annum of LNG happened with its full knowledge. Remember, the energy wing of the erstwhile Planning Commission circulated a questionnaire to find out the steps taken by various ministries to promote the use of LNG. But there was not a single query on measures to increase domestic gas production.

Gas through transnational pipelines should work out cheap. This is precisely the benefit that Indian consumers are being denied. At a time when the world is facing an LNG glut, it is a little perverse that India buys LNG at a price that is $ 1-1.5 /mmbtu above the spot rate. Now that a few regasification terminals are coming up both on the west and east coasts of the country, a new LNG terminal lobby will emerge and it will seek to run down the idea of transnational pipelines. They could emerge as a powerful force in the energy market.

A considerable study has already been made on an offshore pipeline to bring gas from the Middle East. This is considered an eminently sensible project. Russia is swapping gas with Iran to minimise transportation costs. Russia is desperate to penetrate the Indian market. The Essar refinery, which is being acquired by Rosneft, may not only double the refining capacity but also set up a petrochemical complex for which it will need gas. The swapped Iran gas can reach the complex provided there is a pipeline. If the Indian gas consumer is going to benefit from cheaply-priced gas in the not-too-distant a future, it should be on account of Vladimir Putin’s aggressive marketing strategy.

The gas producers are targeting the Indian market. Those who are already in do not want to let others enter the country. There is nothing unusual about this. India’s energy pundits, the ministry of petroleum and natural gas, and the gas consumers should jointly work out a strategy to derive the maximum benefit out of the unprecedented competition among gas producers. This is the right time for India to obtain gas at a competitive rate. The scope of domestic gas production going up significantly looks dim. The LNG lobby should not be allowed to swallow the energy market. It should be countered with competition from transnational pipelines. The country needs a mix of both.



To download the latest issue 'Volume 24 Issue 7 - July 10th 2017', click here
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Data Section
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Monthly Downstream Data
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Special Database
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Contribution of petroleum sector to exchequer
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Revised Hydrocarbon Reserves in India
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Variations In Crude & Products Import In April 2017
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Export of Petroleum Products
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