LNG deal towards energy security
The significance of Indian LNG major Petronet’s decision to invest $2.5 billion in US company Tellurian’s Driftwood LNG terminal earlier this week cannot be missed. The two companies sealed the deal during the ongoing US visit of Prime Minister Narendra Modi, and it is timely, even if the markets gave it a thumbs down. Securing supply of five million tonnes of liquefied natural gas (LNG) annually for the next 40 years at a predetermined price is likely to prove advantageous in terms of both price and assured supply. This Indo-US tango for LNG and shale gas trading is akin to a huge deal that China struck for gas from Russia after a decade-long negotiation. Of course, that deal between Beijing and Moscow was valued at a whopping $600 billion over a 20-year period. In contrast, the India-US agreement may look small. Yet, it seems India has continued its campaign to secure energy supplies for itself stoically after an umbrella agreement was signed early last year with Washington DC that includes oil and gas, nuclear power and renewable energy.
India’s energy security campaign has many parts, including buying strategic oil and gas assets abroad to fuel the economy. The Petronet-Tellurian deal has come in the wake of the drone attacks on Saudi Arabia’s largest oil refinery, which outputs over 5.7 million barrels each day. Further disruptions in Saudi oil supply cannot be ruled out, though Riyadh has said that all commitments to its partners would be met in tandem with the 15-member OPEC. Over 84% of India’s energy requirements are met through imports, and the LNG and shale gas deal with the US will enable New Delhi to move away from highly polluting energy sources like coal and naphtha, cut carbon emissions and switch over to safer and smoke-free cooking once the deal takes off in March 2020.
India’s energy interests include stacking up strategic crude oil reserves in underground caverns in Mangaluru, Padur near Udupi and in Vishakhapatnam as part of a plan to store about 100 days’ worth of energy needs. Chaudikhole in Odisha, Bikaner in Rajasthan and Rajkot in Gujarat are new areas that have been identified to store strategic crude reserves on both coasts. India’s energy security campaign began over a decade ago under the UPA government when it first acquired a 20% stake in Russia’s Sakhalin-1 oil fields, quickly followed by stakes in the second and third projects. Prime Minister Modi’s recent visit to Russia has extended that quest to energy sources in the Russian Far East and the Arctic. New Delhi needs all of these options and more to secure India’s energy future.