FMS, Delhi

India’s Oil Security

New Paradigms
Abhishek Deheriya
Contents
Executive Summary ........................................................................................................................... 3
Introduction ...................................................................................................................................... 4
Energy security for Developed World............................................................................................. 5
Energy security for Developing World ............................................................................................ 5
Principles of Energy Security .............................................................................................................. 6
Objectives of study ............................................................................................................................ 7
India: Oil History and Policies............................................................................................................. 8
Independent India’s Hydrocarbon Policy ........................................................................................ 8
Oil Crisis ........................................................................................................................................ 9
Liberalizing the Hydrocarbon Sector .............................................................................................. 9
ONGC Videsh Limited ...................................................................................................................... 11
What made ONGC so profitable ................................................................................................... 13
Rage for Oil: China and India ........................................................................................................ 13
Policy initiatives............................................................................................................................... 15
Oil and Gas Suppliers to India .......................................................................................................... 18
Oil Reserves, Production and Consumption ..................................................................................... 20
Oil-Proven Reserves..................................................................................................................... 20
Oil Production ............................................................................................................................. 21
Oil Consumption .......................................................................................................................... 22
The Mix for energy security: Fifth Principle ...................................................................................... 24
Creating a diverse energy mix ...................................................................................................... 24
Government and the energy security architecture ....................................................................... 25
Pathways to energy security and efficiency .................................................................................. 26
Conclusion....................................................................................................................................... 28
Bibliography .................................................................................................................................... 29
Articles and Books ....................................................................................................................... 29
Website ....................................................................................................................................... 29

2
Executive Summary
The days of high crude prices might be away and the bankers and
financial sector might have displaced the news from the front pages of
newspapers, but Energy Security remains at the top of the global political
and economic agenda. It was a key concern during the big swings in
energy markets of the past two years.

India is fifth largest oil consumer in the world. Oil and gas represent over
40 per cent of the total energy consumption in India. The consumption of
petroleum products in the country is on the rise and demand already far
exceeds domestic supply. Crude oil influences the Indian economy in
many ways.

The concern for developing countries like India is how changes in energy
prices affect its balance of payments. Energy security now lies in its ability
to rapidly adjust to their new dependence on global markets, which
represents a major shift away from their former commitments to self
sufficiency.

A policy framework to encourage Indian companies‟ aggressive approach

in gaining overseas fields, have an energy mix and to increase the
present efficiency in oil production.

3
Introduction
On the eve of World War I, First Lord of the Admiralty Winston Churchill
made a historic decision: to shift the power source of the British navy's
ships from coal to oil. He intended to make the fleet faster than its
German counterpart. But the switch also meant that the Royal Navy
would rely not on coal from Wales but on insecure oil supplies from what
was then Persia. Energy security thus became a question of national
strategy. Churchill‟s answer? “Safety and certainty in oil,” he said, "lie in
variety and variety alone." Since Churchill's decision, energy security has
repeatedly emerged as an issue of great importance.

But the subject now needs to be rethought, for what has been the
paradigm of energy security for the past three decades is too limited and
must be expanded to include many new factors. Moreover, it must be
recognized that energy security does not stand by itself but is lodged in
the larger relations among nations and how they interact with one
another.

The renewed focus on energy security is driven in part by an exceedingly

tight oil market and by high oil prices, which have doubled over the past
three years. But it is also fueled by the threat of terrorism, instability in
some exporting nations, a nationalist backlash, fears of a scramble for
supplies, geopolitical rivalries, and countries fundamental need for energy
to power their economic growth.

In the background renewed anxiety over whether there will be sufficient

resources to meet the world's energy requirements in the decades ahead.

Since Churchill's day, the key to energy security has been diversification.
This remains true, but a wider approach is now required that takes into
account the rapid evolution of the global energy trade, supply-chain
vulnerabilities, terrorism, and the integration of major new economies
into the world market.

4
Energy security for Developed World
Although in the developed world the usual definition of energy security is
simply the availability of sufficient supplies at affordable prices, different
countries interpret what the concept means for them differently. Energy-
exporting countries focus on maintaining the "security of demand" for
their exports, which after all generate the over whelming share of their
government revenues. For Russia, the aim is to reassert state control
over "strategic resources" and gain primacy over the main pipelines and
market channels through which it ships its hydrocarbons to international
markets.

For Japan, it means offsetting its stark scarcity of domestic resources

through diversification, trade, and investment. In Europe, the major
debate centers on how to manage dependence on imported natural gas-
and in most countries, aside from France and Finland, whether to build
new nuclear power plants and perhaps to return to (clean) coal. And the
United States must face the uncomfortable fact that its goal of "energy
independence" a phrase that has become a mantra since it was first
articulated by Richard Nixon four weeks after the 1973 embargo was put
in place-is increasingly at odds with reality.

Energy security for Developing World

The concern for developing countries is how changes in energy prices
affect their balance of payments. For China and India, energy security
now lies in their ability to rapidly adjust to their new dependence on
global markets, which represents a major shift away from their former
commitments to self sufficiency.

5
Principles of Energy Security
Several principles underpin energy security. The first is what Winston
Churchill urged and has been discussed earlier: diversification of supply.
Multiplying one‟s supply sources reduces the impact of a disruption in
supply from one source by providing alternatives, serving the interests of
both consumers and producers, for whom stable markets are a prime
concern. But diversification is not enough.

A second principle is resilience, a “security margin” in the energy supply

system that provides a buffer against shocks and facilitates recovery after
disruptions. Resilience can come from many factors, including sufficient
spare production capacity, strategic reserves, backup supplies of
equipment, adequate storage capacity along the supply chain, and the
stockpiling of critical parts for electric power production and distribution,
as well as carefully conceived plans for responding to disruptions that
may affect large regions.

Hence the third principle: recognizing the reality of integration. There is

only one oil market, a complex and worldwide system that moves and
consumes about 86 million barrels of oil every day. For all consumers,
security resides in the stability of this market. Secession is not an option.

A fourth principle is the importance of information. High-quality

information underpins well-functioning markets. On an international level,
the International Energy Agency has led the way in improving the flow of
information about world markets and energy prospects. That work is
being complemented by the new International Energy Forum, which will
seek to integrate information from producers and consumers.

Fifth: Emergence of new technologies, finding a mix, increase in

efficiency.

Information is no less crucial in a crisis, when consumer panics can be

instigated by a mixture of actual disruptions, rumours, media images, and
fear. As important as these principles are, recent years have highlighted
the need to expand the concept of energy security in two critical
dimensions:

1. The recognition of the globalization of the energy security system,

which can be achieved, and
2. The acknowledgment of the fact that the entire energy supply chain
needs to be protected.

6
Objectives of study
To find out various policy initiates by the government to ensure
India‟s oil security.
To analyze the present situation of crude supply i.e. imports and
domestic production and Indian companies working overseas.

7
India: Oil History and Policies
It all started with tea-more specifically tea from China, which Scottish
entrepreneurs successfully grew in the foothills of the Himalayas in the
North-Eastern region in 1834. In mid 1860s the British built a railway
from Calcutta to the garden region using both men and elephants. While
working near a site called Digboi, a derivative of the “Dig, boy, dig” call
that the Scottish foremen issued to their workmen- an elephant appeared
with his feet smeared in oil. That was sufficient evidence for James
Goodenough to persuade his employer to drill for petroleum. The firm
struck oil in 1857, the first successful discovery in Asia.

For more than six decades, the Digboi field was India‟s sole petroleum
source. During World War II, its oil and its proximity to the Pangsu pass
on the Indo-Burmese border made it prime target of Japanese invaders
after they had captured Burma. They came within three day‟s marching
distance of Digboi but were first halted and then repulsed by the Allied
forces at a heavy cost.

In the post-war period selling kerosene remained the main business of

the Burmah Oil Company and other foreign oil companies like Caltex
(later Esso) and Royal Dutch Shell, with their subsidiaries based in India.

Independent India’s Hydrocarbon Policy

In 1956, the Indian parliament placed oil in the public sector with the
creation of the ministry of petroleum and natural gas, which was given a
virtual monopoly in future oil and gas exploitation and production. Its
operating arm, the Oil and Natural Gas Corporation (ONGC), found
western oil corporations unwilling to help it acquire expertise to explore
and produce oil on its own. So it sought and received assistance from the
Soviet Union, including the education and training of Indians as
Geophysicsts and petroleum engineers. From the late 1950s, Soviet oil
experts began working with the ONGC and together they discovered oil in
the Assam and Tripura-Cachar basins as well as in the Cambay area of
Gujarat.

In 1961, the government of India and Burmah Oil Company (BOC)

became equal partners in Oil India Ltd (OIL), set up to engage exclusively
in exploration and production. Both OIL and ONGC made a number of oil
and gas discoveries in different regions.

In 1964-67, an Indo-Soviet exploration team discovered the Bombay High

offshore oil and gas field. The production started in 1974.

8
Oil Crisis
In 1973, OPEC hiked the oil prices for the first time. Since then the price
of the crude was regularly hiked up from $ 2.1 per barrel in 1973 to $27
in 1980. The price of crude had hovered between $50 and $60 per barrel
in the last two decades of the century.

As a consequence of this sharp increase in oil prices, the value of India‟s

oil imports raised sharply from Rs 1110 crores in 1973-74 to over
Rs 5620 crores in 1982-83 and to Rs 260000 crores in 2008-09.

This oil crisis made governments, economies, business, scientists and

innovators think. While Honda came up with the its fuel efficient cars,
India had its own policy initiates.

Stepping-up oil production: ONGC and OIL increased their

exploratory drilling operations all over the country and offshore
areas.
Control over the consumption of petroleum products.
Substitution of oil by coal.
Conservation on energy.
Focus on renewable sources.

Liberalizing the Hydrocarbon Sector

Petroleum minister in the BJP led coalition, Ram Naik, sanctioned 25 new
exploration blocks under the 1997 New Exploration Licensing Policy, with
the plan to announce 25 more before the end of year 2000. In contrast,
during the 1990s, only 23 exploration blocks were sanctioned. In Jan
2001, Naik flew to Houston to arouse interest among American oil
executives in bidding for exploring rights for oil and gas-onshore and
offshore-in the proven and promising sedimentary basins of Gujarat, Uttar
Pradesh (UP), West Bengal, Orissa and Rajasthan.

To expedite the process and encourage the entry of the private sector the
government deregulated the whole of the oil sector in April 2002-from
exploration to marketing. This allowed private and foreign companies to
undertake the marketing of petrol, diesel and ATF, provided they agreed
to invest a minimum of $50 million in oil exploration or production,
refining, pipelines, or terminals. This gave an impetus to private
companies at home, such as Reliance Industries.

Reliance industries was active in prospecting and production. In 2003, its

discovery of 14.5 billion cubic feet of natural gas in the Krishna-Godavari
(KG) basin was the highlight of the year. It not only improved the energy
security of the country by boosting possible gas production by 50 percent,
9
but also raises the prospect of Indian sedimentary basins in the
international market.

To reverse the falling output of the Bombay High oil field, the ONGC
initiated an investment of $2.6 billion in 2001 to redevelop it.

To intensify its activities abroad, ONGC set up a wholly owned subsidiary,

ONGC Videsh Ltd (OVL), to focus on overseas exploration and production
projects.

With oil prices exceeding $60 a barrel in June 2005, India, like China,
realized as never before the economic wisdom of importing oil from their
own oil fields at a cost of $10-12 a barrel after fees and royalties rather
than purchasing it on the open market. At the same time, record high
petroleum prices made the ONGC the largest Indian company by value,
with the market capitalization of nearly $42.3 billion.

10
ONGC Videsh Limited
ONGC Videsh Limited (OVL) was rechristened on 15th June 1989 from the
erstwhile Hydrocarbons India Private Limited, which was incorporated on
5th March, 1965. The objectives were:

To contribute 60 MMTPA of equity oil and gas by 2025

To support India's energy security
To build balanced portfolio of exploration, discovered and producing
assets in focus countries
To build a team that excels in performance through assimilation of
best practices and technologies
To be at par with the best international oil and gas companies
Be the strongest Indian Player in the international E&P

Over a period of time, OVL has grown to become the second-largest E&P
company in India both in terms of oil production and oil and gas reserve
holdings. The primary business of OVL is to prospect for oil and gas
acreages abroad including acquisition of oil and gas fields, exploration,
development, production, transportation and export of oil and gas. OVL is
a wholly-owned subsidiary of Oil and Natural Gas Corporation Limited
(ONGC) - the flagship national oil company of India.

Starting with the exploration and development of the Rostam and Raksh
oil fields in Iran and undertaking a service contract in Iraq, a major
breakthrough was achieved by OVL in 1992 in Vietnam with the discovery
of two major free gas fields, namely LanTay and LanDo, in partnership
with British Petroleum and Petro-Vietnam. The success carried on
thereafter. In 2001, OVL acquired 20% stake in Sakhalin-1 project in the
far east of Russia. In January 2009, OVL completed the acquisition of
Imperial Energy Corporation Plc-a UK listed company, having its
exploration and production assets in Tomsk region of Western Siberia,
Russia with an investment of over USD 2.1 billion.

The company, adopting a balanced portfolio approach, maintains a

combination of producing, discovered and exploration assets, working as
operator in 17 projects and joint operator in 5 projects. OVL produces
hydrocarbons from its 9 assets, namely, Russia (Sakhalin-I and Imperial),
Syria (Al-Furat Project), Vietnam (Block 06.1), Colombia (Mansarover
Energy Project), Sudan (Greater Nile Oil Project and Block 5A), Venezuela
(San Cristobal Project) and Brazil (BC-10); 6 projects are in development
phase and 23 are in the exploration phase. OVL has successfully
completed 741 km long pipe line project in Sudan.

11
OVL‟s international oil and gas operations produced 8.87 MMT of O+OEG
in 2009-10 as against 0.252 MMT of O+OEG in 2002-03. OVL‟s overseas
cumulative investment has crossed USD 10 billion.

While OVL participates and operates in varied environments – both

political and geographical, it is committed to the highest standards of
Occupational Health, Safety and Environment protection and compliance
to all applicable local laws and regulations. Understanding well its
Corporate Social Responsibility, OVL makes valuable contributions to the
communities and economies in which it operates by investing in education
and training, improving employment opportunities for nationals, and
providing medical, sports and/or agricultural facilities, besides payment of
tax revenues to local governments.

Some of the leading alliance partners of OVL are BP, CNPC, Ecopetrol,
ENI, Exxon, Statoil Hydro, PDVSA, Petrobras, Petronas , Petrovietnam,
Repsol, Rosneft, Shell, Sinopec, Total and TPOC.

Fig: OVL oil and gas production

12
What made ONGC so profitable
ONGC is the biggest supplier of crude in India. Around 77% of the crude
demand is fulfilled by it. OIL is also a big contributor to the crude basket.
The crude they produce receives the similar treatment as that received by
imported one. Even though the production cost of that barrel of crude had
been $2 or $10 or in extreme cases $20, they receive the same price as
that of imported one. Private companies have also gained through it.

This has made them, especially ONGC cash rich organisation ready to bid
for the overseas fields. Also the crude that ONGC sends to India, or swaps
with some other supplier, is priced at par, i.e. international rates.

But these bidding are competitive and there is huge competition, mostly
by our neighbour…

Rage for Oil: China and India

To sustain their current rapid growth, both the countries China and India
are in desperate need to secure supply of Energy. I provide the specific
examples that illustrate the ongoing skirmish.

India (ONGC) narrowly lost to China (CNPC) in a bid for Kazakhstan's

third largest oil producer. PetroKazakhstan, a Canadian-owned company
with oil fields in Central Asia, accepted a $4.2 billion takeover bid by
state-owned China National Petroleum Corp. CNPC beat a $3.6 billion
offer from India's ONGC. ONGC has said it may make a counteroffer, but
the competition has already pushed the price into the stratosphere.
CNPC's bid was a 21.1% premium on the price of PetroKazakhstan‟s
shares. And it values the company's proven reserves at $10.26 per barrel
-- 20% more than the market valuation of CNPC's own reserves,
according to United Financial Group, a Moscow investment bank.

In Angola, China Petrochemical Corp. (better known as SINOPEC) beat

ONGC in bidding for an oil exploration block being sold by Shell Oil Co.

Chinese ended up lending the Russians $6 billion in return for guaranteed

oil supplies at a bargain price from Yuganskneftegaz. India was not happy
with this bargain.

So far Chinese had an upper hand to secure energy in foreign lands. But
that is not the only case. A memorandum of understanding has been
signed between China and India (2005) that states: Cooperation in
upstream exploration and production, refining and marketing of
petroleum products and petrochemicals, oil and gas pipelines, research
and development, and promotion of environmentally friendly fuels.

13
India and China, often fierce rivals in the race for global energy supplies,
have won a joint bid to buy Petro-Canada‟s 37 percent stake in Syrian oil
fields for $573 million. There is also ongoing plan for joint bidding in
Caspian Sea region, Central Asia, Africa and Latin America. Some would
perhaps point out that any partnership would never work between India
and China, as they are economic rivals. An interesting comment from
Reuters is that: “India and China will flirt, not wed, in foreign oil push”.
This is true in the area of energy resources, but when it comes to their
economies, the two are very different. China is concentrating on
manufacturing where as India moving ahead to high-tech software area
and providing advances services, such in the financial industry.

But this is one of the instances when the giants worked together for
common good. But the war is going to be intense.

14
Policy initiatives
The gap between supply and availability of crude oil, petroleum products
as well as gas from indigenous sources is likely to increase over the
years. The growing demand and supply gap would require increasing
emphasis to be given to the exploration and production sector.

The objectives of the exploration policy would be as follows:-

To undertake a total appraisal of Indian sedimentary basins for

tapping the hydrocarbon potential and to optimize production of
crude oil and natural gas in the most efficient manner so as to have
Reserve Replacement Ratio of more than.
To keep pace with technological advancement and application and
be at the technological forefront in the global exploration and
production industry.
To achieve as near as zero impact, as possible, on environment.

To achieve the above objectives the following actions are required to be

taken.

Medium term

Continue exploration in producing basins.

Aggressively pursue extensive exploration in non-producing and
frontier basins for knowledge building' and new discoveries,
including in deep-sea offshore areas.
Finalise a programme for appraisal of the Indian sedimentary basins
to the extent of 25% by 2005, 50% by 2010, 75% by 2015 and
100% by 2025. Sufficient resources to be made available for
appraising the unexplored/party explored acreages through Oil
industry Development Board (OIDB) cess and other innovative
resource mobilisation approaches including disinvestment and
privatisation.
Provide internationally competitive fiscal terms, keeping in view the
relative prospectively perception of Indian basins, in order to attract
major oil and gas companies and through expeditious evaluation of
bids and award of contracts on a time bound basis.
Optimize recovery from discovered/ future fields.
Improve archival practices for data management.
Continue technology acquisition and absorption along with
development of indigenous Research & Development (R&D).
Ensure adequacy of finances for R&D required for building
knowledge infrastructure.

15
 Make Exploration and Production (E&P) operations compatible with
the environment and reduce discharges and emissions.
Support R&D efforts to reduce adverse impact on environment.
Acquire acreages abroad for exploration as well as production.

Long term

100% exploration coverage of the Indian sedimentary basins by

2025.
Leapfrog to technological superiority.
Put in place abandonment practices to restore the original base line.
Conserve resources and adopt clean technologies.

External policy & Oil Security

Objectives

Supplement domestic availability of oil with a view to provide adequate,

stable, assured and cost effective hydrocarbon energy to the Indian
economy.

To achieve the above objective the following actions are required to be

taken.

Medium term

Put in place a comprehensive policy to include total deregulation of

overseas E&P business and empowering them to compete with
international oil companies with provision of fiscal and tax benefits.
Evolve a mechanism to leverage India's “Buyer Power" to obtain
quality E&P projects abroad.
Have focussed approach for E&P projects and build strong relations
in focus countries with high attractiveness like Russia, Iraq, Iran
and North African countries.

Natural Gas

Natural gas is emerging as the preferred fuel of the future in view of it

being an environmental friendly economically attractive fuel and also a
desirable feedstock. Increased focus needs to be given to this potential
sector.

16
Objectives

To encourage use of natural gas, which is relatively a clean fuel.

To ensure adequate availability by a mix of domestic gas imports
through pipelines and import of LNG.
To tap unconventional sources of natural gas like coal bed methane,
natural gas hydrates, underground coal gasification etc.

To achieve the above objectives the following actions are required to be

taken.

Medium term

Timely and continuous review of gas demand and supply options to

facilitate policy interventions.
Pursuing diplomatic and political initiatives for import of gas from
neighboring and other countries with emphasis on transnational gas
pipelines.
Expediting setting up of a regulatory framework.
Import LNG to supplement the domestic gas availability and
encourage domestic companies to participate in the LNG chain.
Provide a level playing field for all the gas players and ensure
reasonable transportation tariffs. .
Rationalize customs duty on LNG and LNG projects.
Put in place an effective organizational structure, which would
facilitate progress in the National Gas Hydrates Programme.
Make the Coal Bed Methane Policy operational.
Formulate National Policy on Underground Coal Gasification in a
time bound manner.
Increase R&D efforts on conversion of gas to liquids.

Long term

Review of LNG option in the light of economic, political and energy

security considerations.

Exploit the gas hydrates reserves.

Produce gas from Coal Bed Methane and through Underground Coal
Gasification.

Commercialize the production and use of alternate fuels like Di-Methyl

Ether and use of Fuel Cells through increased R&P efforts.

17
Oil and Gas Suppliers to India
The chief suppliers of oil and natural gas to India have been the countries
of the Persian Gulf and the Middle East, a region that India has
traditionally had close liaisons with. This region, home to nearly 3.5
million Non Resident Indians (NRIs), has a two way trade of over US$ 20
billion with India and this trade is likely to grow with various long term
joint venture projects already in place.

The second principal supplier is Russia, India‟s traditional ally. Indian oil
companies are partnering Russian oil majors in developing oil fields and
more joint ventures are already in the offing. Central Asia has suddenly
become the focal point of India‟s hunt for scarce global reserves of
energy. Also India is growing its engagement with not just Uzbekistan
(the sixth largest producer of oil in the world) but with the region as a
whole. Efforts are already on to make Kazakhstan and Turkmenistan
natural gas suppliers to India via a proposed pipeline through politically
unstable Afghanistan.

Africa, the third major supplier of energy to the world, has historically not
evoked much interest in New Delhi. Africa however, is a happening story
and the mandarins in New Delhi have realised this fact. Sub-Saharan
Africa holds 7 percent of global oil reserves and accounts for 11 per cent
of the world‟s produce of oil. In fact in 2001, out of the 8 billion barrels of
oil reserves discovered, nearly 7 billion were in West and Central Africa.
With oil production from this region set to increase from the current
output of 3.8 million barrels per day (mb/d) to about 6.8 mb/d by 2008,
its time New Delhi cultivated long lasting relations with the countries of
this region.

Latin America is another region that is suddenly making its presence

count in the world energy market. India already has significant stakes in
Venezuela‟s energy sector and is gunning for more business in Columbia,
Cuba, Ecuador, Argentina and Trinidad and Tobago.

But there are those who discount India‟s quest for foreign oil. Sceptics
argue that merely mopping up oil from foreign shores and shipping it to
India does not really mean that we have secured our energy needs. India
sits on top of one of the largest coal reserves in the world. It is estimated
that we have 92 billion tons (and growing) of proven coal reserves, one-
third of which can easily be mined. The trick, say analysts, lies not in
importing oil and gas but in harnessing this resource which is so readily
available to us.

18
Our current yearly production at around 400 million tons is grossly
inadequate. Till not too long ago, India exported coal (mainly to Nepal
and Bangladesh); last year our power plants had to import 10 million tons
to make full utilisation of their capacity. Even one per cent increase in
thermal energy output requites 5 million additional tons of coal. If one
considers India‟s projected energy requirement in the next five years, this
shortfall is expected to rise to 50 million tons by 2008-09 and to 80
million tons by 2011-12.

19
Oil Reserves, Production and Consumption
Oil-Proven Reserves
At end At end At end
At end 2009
1989 1999 2008
Thousand Thousand Thousand Thousand Thousand
million million million million million Share
barrels barrels barrels tonnes barrels of total
US
34.3 29.7 28.4 3.4 28.4 2.1%
Canada
11.6 18.3 33.2 5.2 33.2 2.5%
Mexico
52.0 21.5 11.9 1.6 11.7 0.9%
Venezuela
59.0 76.8 172.3 24.8 172.3 12.9%
Total Europe &
Eurasia 84.2 107.8 137.2 18.5 136.9 10.3%
Iran
92.9 93.1 137.6 18.9 137.6 10.3%
Iraq
100.0 112.5 115.0 15.5 115.0 8.6%
Saudi
Arabia 260.1 262.8 264.1 36.3 264.6 19.8%

United Arab
98.1 97.8 97.8 13.0 97.8 7.3%
Emirates

Total Middle East 661.0 685.8 753.7 102.0 754.2 56.6%

Russia NA 59.2 74.3 10.2 74.2 5.6%

Libya
22.8 29.5 44.3 5.8 44.3 3.3%
Nigeria
16.0 29.0 37.2 5.0 37.2 2.8%
China
16.0 15.1 14.8 2.0 14.8 1.1%
India
4.3 5.0 5.8 0.8 5.8 0.4%

Total World 1006.4 1085.6 1332.4 181.7 1333.1 100.0%

OECD
116.4 93.3 91.3 12.4 90.8 6.8%
OPEC
763.2 831.9 1028.8 140.4 1029.4 77.2%
Non-
OPEC 175.8 166.4 180.6 24.6 180.9 13.6%

Table: Oil-proven reserves, 2010, BP Statistical Review of World Energy

20
Oil Production
Change 2009
2009
share
over
Million tonnes of total
1999 2000 2006 2007 2008 2009 2008
US
352.6 352.6 310.2 309.8 304.9 325.3 7.0% 8.5%
Canada
121.0 126.9 153.4 159.5 157.7 155.7 -1.0% 4.1%
Brazil 7.1%
56.3 63.2 89.2 90.4 93.9 100.4 2.6%
Venezuela -4.9%
160.9 167.3 144.2 133.9 131.5 124.8 3.3%
Norway -4.8%
149.7 160.2 128.7 118.6 114.1 108.3 2.8%
Russian Federation 1.5%
304.8 323.3 480.5 491.3 488.5 494.2 12.9%
Iran -3.3%
178.1 191.3 208.2 209.7 209.9 202.4 5.3%
Iraq 2.4%
128.3 128.8 98.1 105.2 119.3 121.8 3.2%
Kuwait -11.3% 3.2%
102.6 109.1 132.7 129.9 137.2 121.3
Saudi Arabia -10.6% 12.0%
423.6 456.3 514.3 494.2 515.3 459.5
United Arab Emirates -12.0% 3.2%
117.4 119.3 139.0 135.1 137.3 120.6
Total Middle East -7.3% 30.3%
1079.4 1138.1 1220.0 1200.8 1251.5 1156.4
Nigeria
100.8 105.4 117.8 112.1 103.1 99.1 -3.6% 2.6%
China
160.2 162.6 183.7 186.7 195.1 189.0 -2.8% 4.9%
India
34.6 34.2 35.8 36.1 36.1 35.4 -1.8% 0.9%
Total World
3479.3 3609.0 3910.0 3901.4 3934.7 3820.5 -2.6% 100.0%
of European
which: Union 174.8 166.3 114.6 113.1 105.4 98.7 -6.1% 2.6%
OECD
988.9 1011.1 912.0 897.7 864.4 860.1 -0.2% 22.5%
OPEC
1432.9 1507.6 1673.7 1654.4 1703.8 1574.7 -7.3% 41.2%

Table: Oil production, 2010, BP Statistical Review of World Energy

21
Oil Consumption
Change
2009
2009
share
over

Million tonnes of total

2000 2005 2006 2007 2008 2009 2008
US -4.9% 21.7%
897.6 951.4 943.8 942.3 888.5 842.9
Canada -4.4% 2.5%
88.1 100.3 99.6 102.8 101.7 97.0
Mexico -3.4% 2.2%
85.7 87.7 86.8 89.2 88.9 85.6
Brazil -0.2% 2.7%
91.6 89.5 92.1 99.0 104.8 104.3
France -3.5% 2.3%
94.9 93.1 93.0 91.4 90.8 87.5
Germany -4.0% 2.9%
129.8 122.4 123.6 112.5 118.9 113.9
Italy -6.3% 1.9%
93.5 86.7 86.7 84.0 80.4 75.1
Netherlands -3.6% 1.3%
42.7 50.8 52.2 53.8 51.4 49.4
Russian Federation -4.8% 3.2%
123.5 121.9 127.1 126.3 131.6 124.9
Spain -5.2% 1.9%
70.0 78.8 78.1 78.8 77.1 72.9
United Kingdom -4.3% 1.9%
78.6 83.0 82.3 79.2 77.9 74.4
China 6.7% 10.4%
223.6 327.8 347.7 364.4 380.3 404.6
India 3.7% 3.8%
106.1 119.6 120.4 132.9 143.6 148.5
Japan -10.7% 5.1%
255.5 244.1 237.5 229.3 221.9 197.6
South Korea 1.5% 2.7%
103.2 105.4 105.5 108.3 103.1 104.3
Taiwan -3.3% 1.2%
49.1 51.3 51.7 52.5 48.3 46.6
Thailand 1.7% 1.1%
36.7 46.9 46.2 45.1 43.6 44.2
Total World -1.7% 100.0%
3562.1 3877.8 3916.2 3969.5 3959.9 3882.1

Table: Oil consumption, 2010, BP Statistical Review of World Energy

22
A few inferences that can be made:

While the oil consumption of major economies (OECD) as a whole

dropped in the year 2008-09, India and China demand remand
buoyant. The Chinese oil consumption increased by 6.7%, and for
India, this figure stands 3.7%. At the same time the growth rate for
China and India was 8.3% and 6.7% respectively.
India‟s oil production is only 0.9% of world total, but 3.8% of world
consumption.
India leapt ahead of Germany (in 2007) to become fourth largest oil
consumer.
From 2000 to 2009, China‟s consumption increased by 80%, while
for the same period India‟s figure is 40%, and world; 11%.
OPEC has around 77% of proven reserves.
Venezuela has around 13% of the world‟s proven reserves.
India‟s domestic production has been more or less static in this
decade.

23
The Mix for energy security: Fifth Principle
By utilizing all the principles, we must formulate our vision. One must be
clear about where we are and where we want to go–the starting point and
the destination. We need a clear regulatory framework to enable business
to invest with confidence to build such a future. And we need to set out
practical pathways towards the destination.

Creating a diverse energy mix

Projections suggest that world will need around 45% more energy in 2030
than we consume today-and double what we consume today by 2050.
That‟s going to require investment of more than $1 trillion a year–every
year.

How do we meet that demand sustainably? Certainly there will need to be

changes in the energy mix. We need more low-carbon energy. And we
need to use energy more efficiently. But the main point is that there is no
magic solution, and we will need a wide mix of energy types in 20 years
time.

The share of renewable energy will certainly increase, but we have to be

realistic about its contribution. As of today, all of the world‟s wind, solar,
wave, tide and geothermal energy accounts for around 1% of total
consumption. Given the practical challenges of scaling up such
technologies, the International Energy Agency can‟t see them accounting
for much more than 5% of consumption in 2030, even with aggressive
policy support.

Undoubtedly nuclear energy and bio-fuels will play a part, and by 2030
carbon capture technology could be deployed at scale. But there will still
be a major role for hydrocarbons. Indeed the IEA analysis indicates that
even in a low carbon scenario predicated on keeping the atmospheric
concentration of CO2 to less than 450ppm, hydrocarbons will remain
dominant.

The good news is that we have enough reserves of oil, and especially
natural gas, to last for decades and reserve estimates are rising as we
develop ways of unlocking both conventional and unconventional
resources. Analysis indicates that the world has sufficient proved reserves
for over 40 years of oil and 60 years of gas at today‟s consumption rates.
But the consumption is bound to increase as the economies boom and the
population increase.

24
So the foundation stone of energy security is creating a diverse supply of
energy–diverse in the forms it takes and diverse in the places it comes
from.

Today we say „there are no silver bullets‟. A century ago Churchill said the
same thing in the language of his time when he declared that “Safety and
certainty in oil lie in variety and variety alone.”

The energy of the future will be more than oil. But oil will still be a major
part of it. The critical point is that it will be a diverse mix, i.e. use of the
fifth principle.

Government and the energy security architecture

Building such a future demands action both from businesses and policy-
makers. Business can provide the building blocks and tools - but we need
to work within the architecture provided by governments. There are two
ways in which the current energy security architecture can be
strengthened.

First, with continuing pressure on supply, it‟s important to develop energy

resources as efficiently as possible and opening them up to competition.

Restrictions on market forces are key when it comes to unlocking the

resources we need. Right now much of the world's oil is held by countries
in which access is restricted and so the application of technology held by
the International Oil Companies is limited.

So competition has a big role to play. Opening access to a range of

potential operators encourages the most efficient solutions, and often
involves partnerships that provide new combinations of skills.

Iraq is a very good example. BP is teaming up there with CNPC of China

and Iraq‟s South Oil Company to drive a major investment programme
that will nearly triple production from the super-giant Rumaila field. With
this and the other agreements concluded with national and international
oil companies in the last six months, Iraq has the potential to contribute
10mmb/d to global supplies in the next 10-15 years. That‟s a big piece of
the additional resource we need.

Advanced technology is essential to producing these resources

efficiently. The revolution in shale gas in the United States in the past
three years, unlocked by new application of drilling and fracturing
technology, is a great example that has transformed the US‟s energy
future. So too is the series of discoveries we and others have made with

25
the help of advanced seismic imaging techniques in the deep waters of
the Gulf of Mexico. One of our recent finds, the Tiber field, involved
drilling a well 10 kilometres deep.

The second area where policy is critical is the question of climate

change. It is, of course, central to sustainable energy security that we
find a clear way forward on this issue.

In that sense, to paraphrase Churchill again, it not as the end of the effort
to curb carbon emissions. Not even the beginning of the end. But it is,
perhaps, the end of the beginning.

The crux of the matter is this. If policy makers encourage investment –

whether in low-carbon energy or fossil fuels - then investment will flow-
but if it doesn‟t then the risk is that spare capacity will dwindle and we
will return to the price volatility we saw in 2008.

Pathways to energy security and efficiency

This can‟t be a one-size-fits-all approach. Each country or economic bloc
will have to assess its natural advantages and deficiencies in energy, so
that it can set a workable framework within which the market can deliver
energy security.

The first conclusion is that, in all circumstances, energy efficiency is the

biggest priority. That means more efficient vehicles, buildings and
electronic appliances – more investment in technology and infrastructure
such as smart grids.

For example, flaring of produced gas - the process of burning-off

surplus combustible vapours from a well, either as a means of disposal or
as a safety measure to relieve well pressure - is the most significant
source of air emissions from offshore oil and gas installations.

Along with the loss of gas, gas flaring is increasingly recognised as a large
environmental problem, contributing more than 1% to global emissions of
CO2.

The gas flaring from ONGC‟s Mumbai region has reduced as a result of
various actions/initiatives taken. Cairn India uses recovery technique to
arrest the gas flaring and utilise it.

Efficiency is the key

In the IEA‟s latest low-carbon scenario, efficiency is projected to be

capable of driving more reductions of energy-related emissions by 2030

26
than renewable power, nuclear, carbon capture and bio-fuels put
together.

In transport, by far the most effective pathway to a lower-carbon

transport industry is through making car engines more efficient.

Hybrid vehicles will be increasingly important. So, in the medium term,

will advanced bio-fuels. Electric vehicles and hydrogen fuel cells will have
a part to play in the long term. But they need massive new infrastructure
and their electricity or hydrogen needs to be produced more sustainably.
Electric vehicles are only as low-carbon as the power that fuels them.

Looking at the power pathway, it will increasingly make sense to use

more natural gas. Gas is the fuel that offers the greatest potential to
achieve the largest greenhouse gas reductions - at the lowest cost - in the
shortest time - and by using technology that's available today.

Gas is easily the cleanest burning fossil fuel. It's very efficient and
combined-cycle turbines, fuelled by natural gas, are quick and relatively
cheap to build.

Europe is already a big user of natural gas, which is one reason why its
industrial and power sectors emit less carbon than the US. The trouble is
that European politicians sometimes speak as if dependence on imported
gas is a problem. Same way is Delhi for its public transport.

Russia is a big gas supplier. Abundant new supplies from places like Qatar
mean LNG is coming into its own as a globally traded commodity like oil.

Energy efficiency, gas fired power, lighter cars and advanced bio-fuels all
offer relatively low-cost routes, while more headline-grabbing options are
not the most cost-effective in terms of cost per tonne of mitigated CO2.
With today‟s technology, carbon capture and storage to make clean coal,
for example, is very expensive. Offshore wind is also costly - for example
in comparison to onshore wind, which is now a big business for BP in the
United States, and indeed to nuclear.

27
Conclusion
Energy security is one thing, finding new reserves inland, offshore and
outside the country, finding the real solution is different. Different sources
predicts end of oil within next hundred years. Though it is enough for next
two or may be three generations, it will not last after that, and that is for
sure. Also the environment impact that burning of fossil fuel is close to
irreversible. Another accumulation of CO2 and other green house gases
will contribute their part in changing the climate and the environment that
we live in.

India, along with moving forward with its energy security policy must
develop a long term view. It must develop an energy mix, with
contributions from each source.

Also a huge investment is what is needed in research and development of

the fuel of the future.

28
Bibliography

Articles and Books

Sorrell, Steve, Miller, Richard, Bentley, Roger and Speirs, Jamie Oil
futures: A comparison of global supply forecasts,
www.elsevier.com/locate/enpol

Yergin, Daniel, The Fundamentals of Energy Security, Cambridge Energy

Research Associates

Hiro, Dilip, Blood of the Earth

Yerin, Daniel, Ensuring Energy security

Malik, Aman, India's oil security

Dutta, Tanima, China and India: Geo-political tension and Rage for Oil

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http://foreignaffairs.house.gov/110/yer032207.htm

http://www.commodityonline.com/news/Volatile-Asian-oil-market-ahead-
12529-3-1.html

http://petroleum.nic.in/reports.htm

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