India’s Energy Strategy
Why in News?
India has committed to increasing its oil and natural gas imports from the US, with energy trade projected to rise from USD 15 billion to USD 25 billion in the near future. This move is part of a broader objective to double bilateral trade to USD 500 billion.
The decision is aimed at enhancing India’s energy security while also strengthening economic relations amid global geopolitical shifts.
Why is India Expanding Energy Trade with the US?
Energy Security:
India, the third-largest oil importer and consumer in the world, depends on imports for over 85% of its crude oil requirements. With projected energy demand set to nearly double by 2040 due to rising GDP, supply stability is crucial. Expanding energy trade with the US reduces India’s reliance on West Asia and Russia and diversifies sources, minimizing risks from geopolitical disruptions.
Bilateral Trade Growth:
Increasing energy imports from the US helps balance India's USD 45.7 billion trade surplus with the US in 2024, while supporting the ‘Mission 500’ initiative, which aims to double bilateral trade to USD 500 billion by 2030.
Infrastructure Development:
The availability of competitively priced US crude oil and LNG could make the US a key supplier to India, promoting industrial growth, refining expansion, and petrochemical investments.
Geopolitical Benefits:
Stronger energy ties with the US support India’s bid for full membership in the International Energy Agency (IEA) and can act as a counterbalance to China’s influence in global energy markets.
What is the State of India’s Energy Consumption?
Crude Oil:
- Imports (2023-24): 234.26 million tonnes of crude oil.
- Import Dependence: India's crude oil import dependence rose to 87.8% in 2023-24, with domestic production meeting less than 13% of total demand.
- Future Projection: Crude oil consumption is expected to grow at a CAGR of 4.59% to 500 million tonnes by FY40.
Petroleum Products and Diesel:
- Continued reliance on petroleum products, with efforts to increase energy efficiency and reduce emissions.
Natural Gas and Cleaner Fuels:
- India aims to increase natural gas's share in its energy mix to 15% by 2030, up from around 6% currently.
- LNG Imports (2023-24): 31.80 billion cubic meters (bcm), worth USD 13.405 billion.
- Ethanol Blending Target: Set to increase to 20% by 2025-26, with ethanol production capacity reaching approximately 1,600 crore litres by September 2024.
- Impact of Ethanol Blending: This initiative has reduced CO₂ emissions by 544 lakh metric tons and replaced 181 lakh metric tons of crude oil.
What is India Doing to Meet the Energy Needs?
Increasing Domestic Production:
India aims to double its oil and gas exploration area from 0.5 million sq. km by 2025 to 1 million sq. km by 2030. New projects in the Krishna-Godavari (KG) Basin and offshore exploration efforts are expected to enhance domestic production.
Global Energy Partnerships:
India’s diversified import strategy, which includes sources like the US, Russia, Brazil, Canada, and Africa, ensures security amid geopolitical instability. Russia now supplies 40% of India’s crude oil, up from less than 1% before 2022. India is also strengthening its relationships with the IEA and OPEC+ for long-term contracts.
LNG and Gas Pipeline Expansion:
The Unified Pipeline Tariff aims for a "One Nation, One Grid, One Tariff" system, which will benefit remote consumers and boost gas market growth. India is expanding city gas distribution networks and import terminals to support increasing demand.
Strategic Petroleum Reserves (SPR):
The SPR Program acts as a safeguard against supply disruptions and price volatility in global markets. India aims to commercialize 50% of its SPR to raise funds and build additional storage tanks to buffer high oil prices.
Clean and Renewable Energy:
India has set a target of 500 GW of renewable energy capacity by 2030, with a focus on expanding solar, wind, and hydro power projects to reduce dependence on fossil fuels. Additionally, the government is encouraging ethanol blending, biodiesel, and compressed biogas (CBG), alongside a USD 67 billion investment in hydrogen energy projects in 2024.
Policy Reforms:
India allows 100% FDI under the automatic route for oil and gas PSUs, upstream, and private sector refining projects, boosting investment and energy sector growth. The Hydrocarbon Exploration and Licensing Policy aims to increase domestic oil and gas production. Subsidies for electric vehicles (EVs), green hydrogen, and biofuels are also being provided to reduce dependence on crude oil.
Conclusion
India’s growing oil and gas requirements are driven by economic growth, rising demand, and a high level of import dependence. To ensure energy security, India is expanding refining capacity, investing in natural gas, diversifying imports, and transitioning to cleaner energy sources.
Drishti Mains Question:
How does India's strategy of diversifying its oil and gas imports impact its energy security?
UPSC Civil Services Examination, Previous Year Questions (PYQs):
Prelims: Q1. With reference to furnace oil, consider the following statements: (2020)
- It is a product of oil refineries.
- Some industries use it to generate power.
- Its use causes sulphur emissions into the environment.
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Ans: (d)
Q2. The term ‘West Texas Intermediate’, sometimes found in news, refers to a grade of (2020)
(a) Crude oil
(b) Bullion
(c) Rare earth elements
(d) Uranium
Ans: (a)
Mains: Q. The question of India’s Energy Security constitutes the most important part of India’s economic progress. Analyze India’s energy policy cooperation with West Asian countries. (2017)
Q. “Access to affordable, reliable, sustainable and modern energy is the sine qua non to achieve Sustainable Development Goals (SDGs)”. Comment on the progress made in India in this regard. (2018)
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