India’s Energy Security And Australia

While countries across the world are amazed by China’s amazing growth story, not too many observers realize that India has one of the fastest growing economies in the world. A recent IMF study mentions that India’s GDP is “expected to grow 8¾ per cent in 2010/11, with robust growth supported by high investment in infrastructure and productivity gains.”

At current levels, the demand for energy in India is expected to double by 2025; by which India will import almost 90 per cent of its petroleum requirements. One of the essential prerequisites for India as it continues on this growth path is energy. Indeed, energy security is one of the key aspects of India’s foreign policy these days. At present, coal accounts for more than half of the country’s energy consumption. However the inferior quality of Indian coal and lack of modern technology to clean it makes it a major environmental hazard.

Australia could be one of India’s key partners in meeting its burgeoning energy demands, given that it already exports coal, crude petroleum, LNG (Liquefied Natural Gas) to India and has expertise in modern, technology-intensive mining techniques. Of course, one must not forget that Australia commands almost 40 per cent of the world’s uranium reserves. In 2009-10, Australia exported coal worth A$5,532 million and crude petroleum worth A$499 million to India. A joint working group on energy and minerals was established way back in 1999. The inaugural Australia-India Energy and Minerals Forum was held in Perth during June 2010, with the involvement of both the government and private players.

During the visit of the Australian Minister for Resources, Energy and Tourism Martin Ferguson to India in November 2008, five Action Plans were signed with the Indian ministries of coal, mines, new and renewable energy, petroleum and natural gas and power, signalling the desire of both the countries to forge a closer partnership in this area.

In August 2009, India’s Petronet LNG signed a 20-year agreement to import gas from Australia’s Gorgon project. The deal was signed between the Gorgon joint venture partner Exxon Mobil Corporation and Petronet, India’s largest LNG importer. Under this agreement, Exxon Mobil will supply about 1.5 million tonnes per annum of its share of LNG from the Gorgon LNG project where it has a 25 per cent stake.

India is also taking to nuclear power generation in a big way. Presently, India meets only 3% of its total energy needs from nuclear power. However it has ambitious plans to produce 20,000 MWe from the nuclear sector by 2020 from the measly amount of 3,700 Mwe at present. In a significant move which will help India achieve this target, the Nuclear Suppliers’ Group (NSG) granted a country-specific waiver to India in September 2008, to conduct nuclear trade and commerce.

However, one of the biggest stumbling blocks in India’s energy and bilateral ties with Australia has been Australia’s insistence that it will not supply uranium to India unless India signs the Nuclear Non-Proliferation Treaty (NPT). India on the flip side is not willing to sign the NPT as a non-nuclear weapon state and has pointed out that the NPT has discriminated against states not possessing nuclear weapons as on January 1, 1967 and does not contain serious disarmament obligations for existing nuclear powers.

Australia’s decision to supply uranium to China has also raised a few eyebrows in India. In 2006, Australia and China concluded a nuclear deal paving the way for China to import Australian uranium. However, unlike China which has proliferated nuclear technology to Pakistan and other countries like North Korea, India has a clean slate when it comes to nuclear non-proliferation.

India has already signed nuclear deals with countries like the United States, Russia and France. Already, during the visit of the French President Nicholas Sarkozy to India in early December 2010, an agreement was signed between the Nuclear Power Corporation of India Limited (NPCIL) and French energy-giant Areva for the construction of nuclear power plant (NPP) units at Jaitapur in India’s Maharashtra state.

The export of uranium could significantly add to Australia’s export basket to India and to the overall volume of bilateral trade. Already, a feasibility study undertaken by Australia’s Department of Foreign Affairs and Trade (DFAT) has recommended that the Australian and Indian Governments consider negotiation of a bilateral Free Trade Agreement(FTA).

Given the scarcity of good-quality coal and the difficulty in setting up additional hydro-electric power plants (given the problems of displacement of people and rising concerns for the environment) in India, it is safe to assume that India will increasingly go for nuclear power generation. It also appears unlikely that the IPI (Iran-Pakistan-India) gas pipeline will go through because of American pressures to the contrary, the highly volatile situation in Pakistan and India’s desire not to annoy the US. This gives India more reasons to look at sourcing its energy requirements from countries like Australia. Given India’s huge population and the increasing use of fossil fuels which has already led to a disastrous impact on its environment, it will be beneficial if countries like Australia help India reduce its dependence on fossil fuels and help it focus more on clean sources of energy.

The issue of uranium sales to India has been an irritant in the relations for far too long and it is time Australia did a rethink on this issue. Of course, there will be a domestic debate on this issue in Australia, but the government must be able to convince its allies and the opposition of the benefits that would accrue to both the countries from a supply of Australian uranium to India. Given the immense potential of Australia-India ties, especially in the field of energy, this is one bus the two countries cannot afford to miss.