The politics of natural gas By Siddharth Srivastava
NEW DELHI - The dispute between Russia and Ukraine over natural-gas supplies
that has rattled Europe has once again brought to focus the geopolitics that
revolves around the control, transportation and consumption of energy, and more
specifically, natural gas.
Natural gas has emerged as a more environmentally sound, cheaper and more
easily available substitute for oil. Compared with oil at more than US$60 a
barrel, an energy-equivalent amount of gas costs in the region of only $20.
Experts predict that gas, which was once considered a wasteful by-product of
oil exploration, will turn into the No 1 fossil fuel. Vying for gas resources
are the world's top guzzlers of energy, the United States, Europe, China and
India.
The problem is that the US and India, as well as Japan and European Union
nations, are all some distance from major reserves of gas in countries such as
Iran (with reserves of 971 trillion cubic feet - tcf), Qatar (910 tcf), Yemen,
Russia (with the world's largest reserves of more than 1,700 tcf), Central
Asia, Nigeria, Angola and Venezuela. There is also the issue of these supplier
nations facing unstable political situations, so the gas from fields there has
to be carried through disturbed and often dangerous physical and political
quarters.
China and India have been quickly tying up with these countries to tide over
future requirements, with the US trying to balance growing Asian demand with
its own rising requirements. India has signed a $22 billion deal to buy
liquefied natural gas (LNG) from Iran over a period of 25 years starting 2009,
this after protracted negotiations. India has also signed an LNG deal with
Qatar.
However, the tussle will turn more acute. A global energy crisis is brewing as
the economic powerhouses continue to consume more oil than they can possibly
produce or import. It is estimated that by 2025, today's global demand for 84
million barrels of oil per day will have grown to 121 million to 130 million.
The US is the world's largest energy consumer. No amount of digging domestic
resources in Alaska will yield the US requirements. China and India, too, will
have to import considerable quantities of crude oil to make up for
gasoline-guzzling automobiles. India imports 70% of its crude.
It is in this context that one can read the resistance of the US to the
proposed 2,575-kilometer gas pipeline from Iran through Pakistan to India,
despite the three countries agreeing to go ahead with the massive project.
In its latest caution, Washington has said that any plans by the Indian
government to sign energy deals with Iran are "years away" and exist only in
the hypothetical realm. Nicholas Burns of the US State Department did not
specifically mention the talks between India and Iran to build the $7 billion
pipeline through Pakistan, but the message was apparent.
"The Indians have assured us that there is no plan on the table that is ready
for decision by the Iranian [and] Indian governments, that any plans, any
discussions, have been hypothetical and are years away," Burns said recently,
speaking at the Johns Hopkins University School of Advanced International
Studies. "We would hope that those relationships would not be consummated."
However, both New Delhi and Islamabad (which stands to gain more than $700
million annually in transit fees alone), despite misgivings on other issues,
have been trying to work out the parameters of the project.
Over the past few months, the three involved countries have held talks. "We
have made significant progress. We hope to complete the project by 2010,"
Pakistan's petroleum secretary, Ahmad Waqar, said after talks with officials
from India's Oil Ministry in New Delhi last month.
His Indian counterpart, S C Tripathi, said talks had gained momentum. "We have
made significant progress. We are now talking about details of the project," he
said.
Iran, happy at the November International Atomic Energy Agency (IAEA) outcome
that delayed its possible referral to the United Nations over its nuclear
program, has decided to continue talks with India on the pipeline without any
reference to nuclear politics.
Tehran had made it apparent to New Delhi that siding with Europe and the US on
the nuclear issue would have its repercussions. Iran had warned that the
pipeline project could be in jeopardy because of New Delhi's anti-Iran vote at
the IAEA meeting last September.
Russia, which is slowly trying to claw its way back as a nation that needs to
be counted among those that matter, has expressed interest in building the gas
pipeline. "Gazprom [the Russian energy giant involved in the spat with Ukraine]
is ready to share the construction risks," Industry and Energy Minister Viktor
Khristenko said after talks with his Indian energy counterpart recently.
Khristenko, who was in New Delhi for an Asian energy forum, said he hoped Iran
and Pakistan would support the idea of sharing project risks with Russia.
Given the delicate situation with Iran, New Delhi has been trying to engage
Saudi Arabia as a possible fall-back option. Iran is the Organization of
Petroleum Exporting Countries' second-largest crude-oil producer (after Saudi
Arabia) and has the world's second-largest reserves of natural gas.
New Delhi has also been pursuing a Myanmar-Bangladesh-India gas pipeline. An
agreement has been reached in principle to build the pipeline to bring natural
gas from Myanmar's Shwe gas fields to India via Bangladesh.
While India does not want to annoy the US, it favors a delinking of issues
concerning energy security and Iran's supposed nuclear aspirations. "We live in
a very complex neighborhood, surrounded by governments and rulers of different
orientation - communists, military dictatorships, monarchies ... we hope the US
understands the difficult choices we have to make for the well-being of our
people," India's ambassador to the US, Ronen Sen, has said while referring to
Washington's dislike for Iran.
Many nations, including India, have also been active in the recent past to
enhance their nuclear energy capabilities to reduce excessive reliance on gas
and oil. While India signed an expansive nuclear pact with the US last July,
reports from Pakistan indicate that the country is negotiating to buy at least
six nuclear power reactors from China over the next decade.
According to media reports this week, Islamabad's nuclear shopping from Beijing
would cost more than $10 billion. Islamabad has been unsuccessful in pleading
with Washington to open its nuclear gates, given Pakistan's dubious record of
proliferation. However, China, fearing the developing relations between India
and the US, has obliged. Elsewhere, Finland is moving ahead with plans to build
the world's largest nuclear reactor to lessen reliance on Russian gas.
Last year, US President George W Bush said his country would encourage China
and India to turn into more efficient users of oil. "It's in our economic
interest and our national interest to help countries like India and China
become more efficient users of oil. That would help take the pressure off
global oil supply, take the pressure off prices here at home," he said.
But such diplomatic tones disappear when nations across the world fight over
gas.
Siddharth Srivastava is a New Delhi-based journalist.
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