This most famous verse in English literature penned by Shakespeare is chanted by the three witches who, through confusing predictions of the future, exploit Macbeth’s inherent weaknesses and lead him into mindless actions that lead him to his tragic end.

The above verse serves as an apt introduction to today’s Petro Intelligence column. India faces massive energy challenges for delivering the aspirational goals repeatedly and rightly articulated by India’s Prime Minister. The Economic Survey of India 2018-19 correctly estimates that India must raise her per capita energy consumption by two and a half times to become an upper middle-income country and must quadruple per capita energy consumption to achieve an acceptable HDI of 0.8. Current Indian per capita energy consumption stands at about 30% of the global average. This level of energy consumption is commensurate with India’s position at around the median of the low middle-income countries with an HDI rank of 130 among 189 countries and a Hunger Index rank of 102 among 117 countries. Importantly, some evil force (much like Macbeth’s three witches) seems to be guiding confused pronouncements and ad-hoc actions covering the energy sector that simply do not add up to a coherent and well-articulated policy aimed at growing India’s energy access to required levels noted in the latest Economic Survey. Surely no one desires a Shakespearean tragedy for 18% of the World’s population! And hence, the question in the title of this piece.

EIA has come out this month with its 2019 International Energy Outlook with projections up to 2050. The report forecasts a 47% increase in the 2018 energy demand by 2050 with an average annual growth of 1.2%. This demand is forecast to be met by growth in the consumption of every primary energy source, including every fossil fuel – clearly an outlook that is totally incompatible with the Paris Accord and the high-pitched global concern with Climate Change as well as the much-touted Sustainable Development Goals. Renewables are projected to grow at the highest annual growth rate of 3.1%; but despite emerging as the single largest energy resource by 2050 renewables meet only 27.7% of the 2050 energy demand compared to 15.3% in 2018. The share of coal declines the most but total coal usage continues to grow till 2050. The table below summarises EIA’s projections

EIA Energy Outlook 2050: Energy Consumption in Quadrillion BTUs

EIA’s energy outlook flies in the face of any hope of limiting warming to below 20C by weaning away from dependence on fossil fuels. Suffice it to say that the EIA energy forecast is consistent with the current global emissions trajectory driven by policy failure across countries. Most forecasts are predicting a warming of around 3.50C leading to the gravest and irreversible calamities foreseen by IPCC with unpredictable outcomes. The world is simply not doing enough to address climate change. What is needed is a 70% reduction in the consumption of the richest 20% by 2030 but the global growth model is based on raising the consumption of this affluent group even beyond their current unsustainable levels. In fact, EIA’s low oil price scenario is driven not by availability of alternative energy but by a deep and prolonged global recession.

Some have argued that given the massive gap between the actual policies on the ground and the towering ambition to address climate change, EIA and others may be underestimating the likely speed and the scale of the energy transition. Given the extreme consequences of climate change, it is argued, countries will come together in time to avert disaster. This is a valid argument but one based on moral suasion instead of the hard reality of nations driven by narrow national priorities even as their leaders pay lip service to multilateral niceties. To be absolutely fair, there are a few estimates that project peak oil demand occurring as early as 2030. However, these estimates reflect a blinkered vision driven singularly by climate concerns. They overlook the destabilizing impact of such a rapid transition on the current oil exporters whose economies remain afloat because of oil revenues. The economic and geo-political consequences of such a rapid transition will not be limited to the already unstable and highly volatile middle east.

Though the hope that de-carbonization would reduce the geo-political importance of fossil energy remains valid; it is clear from above that the path to such a transition remains full of uncertainties and massive hurdles that exacerbate energy security concerns. Renewable energy may be more abundantly and evenly distributed but its deployment will not reduce the dominance of fossil fuels at least till 2050. The world would remain dependent upon international supply chains of oil, gas and coal on a planet suffering from global warming. These supply chains will need to be robust to withstand multiple new challenges of land submersion and degradation, water and food supply stresses, population movements, vector disease outbreaks, loss of habitat and species, and catastrophic weather events and natural calamities.

To top it all, the established world order is increasingly coming apart. US policy (if there is any left) under the current Presidency has broken all norms and has become totally unpredictable. European unity is under threat with Brexit and the floundering NATO alliance. The rule-based world trade order is under threat and the US-China trade war is undermining the nascent global growth. The UN institutions are increasingly becoming redundant. Emergence of China, that consumes a quarter of the world’s primary energy and accounts for 27% of the global greenhouse gas emissions is seen as a destabilizing development. The US has become energy independent. Benefits of globalization are being questioned. None of these realities bode well for harmonizing policies under multilateral initiatives to address common global concerns of warming and the consequent threat to mother earth’s ecological balance, or more mundane issues such as poverty, hunger and access to basics.

India must tackle her energy poverty within the above context. Importantly, growing per capita energy consumption by the stated 2.5 to 4 times is the only mean to deliver the required adaptive capacity to the bottom 1.2 billion Indians for dealing with climate change. Without such a level of access, these unfortunate Indians will suffer the worst consequences of climate change (that, ironically, they had no role in causing) and a large number will simply perish. Farmer suicides, deaths related to extreme weather events and vector diseases are just the beginning. With 18% of the global population India consumes just 5.8% of the global energy supply. What is worse is that our access parameters are worsening as until 2018 we have consistently failed in garnering a share of the global growth in energy consumption commensurate with our share of the global population in that year. As an example, in 2018 India garnered only 15% of the growth in global primary energy consumption – the best achievement ever but still well below our share of the global population.

Almost all global projections incorporate huge growth in India’s energy consumption. However, past projections for India have fallen well short; understandably so, because there is no defensible policy, at least in public domain, that addresses India’s energy poverty within the context detailed above. Sale of HPCL to ONGC, the proposed sale of BPCL to a foreign investor, the proposed greenfield mega refinery in a world awash with refining capacity, India’s largest export being petroleum products even as it remains over 80% dependent on imported crude, the investment of Saudi Aramco in an Indian company, allowing a global giant to sell its overpriced Australian gas in India are some recent examples of policy initiatives that do little to address India’s real energy issues. Again, while recent global trends show that half the growth in global energy demand is coming from a rise in the demand for electricity, India has declared herself electricity surplus with a per capita electricity consumption well under 30% of the global average. And while all global projections clearly demonstrate the limitations of renewable energy India, at least publicly, seem to have put all her eggs in the renewable basket that can only partially meet India’s stated energy needs, at least till 2050.

India is even failing in correctly articulating and communicating its real energy challenges. This is best illustrated by coal. First, Indian coal consumption is overstated because the tonnage is converted to MTOE using a calorific value well above the current average. Despite this error, India’s share of global coal consumption is 12% compared to China’s 51% share. However, all global projections show India as the big bad boy as far as coal consumption is concerned. Truth is that despite the massive reductions in coal consumption in the US and EU; the 2018 per capita coal consumption in OECD, USA and EU was 2-3 times that of India.

Again, the entire world recognizes that the last big energy market that remains grossly under supplied is India and hence every energy major wants a piece of the action. But here too India is playing her hand rather badly and not leveraging her position of strength. Two of the top most priorities for India should be to acquire interests in the underlying energy resources (not downstream assets) to secure her stated energy needs competitively on a long-term basis; and second require all those interested in the Indian energy market to make India a hub for some of their stock storage. Global inventories as a percentage of the hydrocarbon trade are at an all time high. And it is this stock pile that has helped markets to absorb the recent attacks on Saudi and Iranian assets and market volatility due to geo political tensions. Both these objectives are being underserved, if one is to go by information available in the public domain. To be fair, two initiatives started during the UPA regime namely: (i) the acquisition of a 30% share in the Mozambique gas field; and (ii) acquisition of coal reserves in Australia by Adani were excellent strategic moves. After 9 years of effort the Adani project has taken off but details on the Mozambique project remain unclear even though a final investment decision to monetize the gas reserves was reportedly taken in June 2019.

Clearly much remains to be done if the energy imperative identified in the 2018-19 Economic Survey is to be delivered. What is clearly missing is a coherent and defensible policy framework and the capacity to craft and implement the same in a timely fashion. At stake are the legitimate aspirations of Prime Minister Modi for India and the lives of the bottom 1.2 billion fellow Indians.