Vijay Jayaraj: India speeds up fossil-fuelled economy, despite Net Zero noises

India is increasingly aiming for a fossil-fuel dominated energy sector, and not a green one.

India, the world’s third biggest oil importer, is now on a mission to diversify its oil imports and look beyond the Middle East. For the first time, oil processors and buyers in India are buying oil from Guyana and Brazil.

The decision comes at a time where India is facing a complex energy situation which is dominated by rising domestic oil prices and mainstream media’s pressure to make India join the Net Zero bandwagon. 

India, it appears, is increasingly aiming for a fossil-fuel dominated energy sector, and not a green one. The new oil markets in South America play right into India’s demands.

Focussed on Fossil Fuels, Despite the Net Zero Noises

Last week, Bloomberg’s Indian enterprise Bloomberg Quint reported that, “India Considers 2050 Net-Zero Target, a Decade Before China.” It claimed, “Officials close to Prime Minister Narendra Modi” are drawing up a plan to achieve the Net-Zero target.

When contacted about the source of this information, Bloomberg did not respond. As of March 25, this information from Bloomberg remains as a false news, as no official sources have confirmed that New Delhi is devising a Net-Zero target for 2050.

But other news agencies, both national and international, were quick to redistribute this unofficial statement. India’s NDTV reported, “Under pressure to commit to a net-zero target before climate change talks in Glasgow in November, the world's third-biggest emitter of greenhouse gases has been considering a 2050 deadline.” 

Pressure on India, if any, has been from the journalists, and not those in International bodies. India, despite its renewable push and commitment to be a member of Paris climate agreement, is defiant on its rights to use fossil fuels.

Oil is an important commodity in India. It determines prices of all other commodities, as the trucks in the country run almost exclusively on oil. The economic recovery post-COVID19 lockdown has now been negated by increasing oil prices. Increase in oil prices during the last three months has led to a three-month high inflation in the retail sector.

At a time when the country is desperately seeking to curtail the inflation and secure additional oil imports, anti-fossil journalists have ushered in confusion by claiming that the Indian government is now aiming to achieve Net-Zero emissions by 2050.

The anti-fossil lobby, which includes journalists, adopt this strategy to pressurize developing countries into shutting down their fossil industry. Not surprisingly, the same authors who made the claims about India’s Net-Zero, came up with an article few days later that called for banishing of coal in India.

India, unfaced with these noises, is currently going ahead with its second tranche of commercial coal mine auctions, where 67 mines across the country were offered for auctions. A constant increase in production is critical to support its expanding fleet of coal plants. India is currently constructing coal plants with capacity of 36.6 GW and a further 29.3 GW are in the pipeline.

As a strategy to expedite the auctions, the government has even made a call for private bidders to make a request of their preferred mines. “With rolling auctions, we will upload a comprehensive list of mines along with key technical data and bidders can submit their preferences for the mines to be included in the next tranche of auction. This would be a continuous process and would result in expediting the auction setup. Moreover, it will also help bidders in planning better and would further enhance transparency in the system,” said Pralhad Joshi, India’s Minister for Coal and Mines.

South America’s New and Affordable Oil: Attracts India and Other Buyers

For major oil importers like India and China, where energy forecasts indicate a prolonged and increased dependence on oil for domestic energy needs, the new oil discoveries in Guyana provides a great opportunity for diversification of imports.

After a flurry of oil exploration activity off the coast of Guyana and Suriname, the region has now become an area of interest for oil companies and importers.  Production estimates indicate that oil from Guyana will account for more than 750,000 barrels of oil equivalent a day in 2026.

John Hess, CEO of Hess Corporation-energy company which is involved in the exploration and production of crude oil and natural gas in the region, said that they “continue to see multibillions of future exploration potential remaining in Guyana, where the three partners including China's CNOOC have made 18 discoveries with recoverable resources of more than 9 billion boe.”

“Guyana's reservoirs rank among the highest quality in the world, with high recovery rates. The reservoirs are relatively shallow with no salt, so wells can be drilled faster than other deepwater basins in the world,” he added.

The United States, China, Panama, and the Caribbean are some of the major importers from Guyana. India will be keen on securing imports from Guyana, Suriname and Brazil, as it allows them to reduce their reliance on traditional oil partners who are embroiled in geopolitical volatility.

Iran and Venezuela for example have been at odds with the U.S. As an ally to Washington, India may not be able to depend on these countries for oil import needs. Likewise, the politics surrounding the OPEC group and the group’s proclivity to constrain supply and manipulate prices, make it difficult to trust the Middle East oil exporters.

Last week, Reuters reported that India’s oil refiners may be preparing to cut imports (10.8 million barrels in May 2021) from Saudi Arabia due to escalating tensions between the Indian government and the OPEC consortium regarding the supply and prices.

Given these uncertainties, the new oil markets in South America are crucial to India’s economy. March marked the beginning of oil shipment from Guyana to India, the buyer being HPCL-Mittal Energy. Oil and Natural Gas Corporation, India’s state owned oil and gas entity, has now booked oil imports from Brazil as well. Industry experts will not be surprised if India ends up being one of the major importers of South American oil in the coming decade.

In order to secure future supplies of oil, India’s diversification plans cannot get complacent with just the new oil markets in South America.

India’s oil minister Dharmendra Pradhan, speaking at an industry summit,  said that, “India seeks to further diversify sourcing of crude oil and LNG. Africa has a central role - largely due to its proximity and absence of any choke points in trans-shipments…...Therefore, we would naturally be seeking commercial partners in Africa to meet India’s growing energy needs through imports of crude oil, LNG and other petroleum and energy products.”

India’s open admission to seek new oil producers and push to expedite coal mining auctions gives a clear signal on its priorities. Though the country may announce further expansion of the renewable industry (in principle) during the upcoming global G7 and COP26 summits, it’s steadfast efforts to bolster the fossil fuel sector will continue.