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Emerging Energy Challenges in India and Africa
The fourth session of the dialogue focused on the theme ‘Emerging Energy Challenges in India and Africa’. It pointed out that the India Africa energy relation is not a buyer-seller relation but a partnership for development. Focus in this respect has been also on what India can offer and slogans must be turned into tangible programs on ground. The Addis Ababa Document is a clear and simple framework for India-Africa cooperation. Bhatia mentioned that energy development cannot take place without focus on infrastructure and sustainability aspects.
China and India are responsible for the rise in global energy demand and that India’s energy demand is expected to triple in 2030 from 2010 levels. Africa has vast amounts of fossil and renewable energy; even the knowledge about its reserves is growing as more and more deposits are being explored. At present it is estimated that Africa has 10 percent of the global oil reserves. There are a very few refineries in Africa and this could be a point of focus in Africa-India relationship in the future.
In the earlier era, Nigeria dominated the African energy scene but now the sector has diversified with many producers growing the capacities. Recent and future economic growth in Africa and also in the BRICS countries will push the need for more substantial energy supply. Options for this in the energy matrix include efficiency improvement, focus on renewables etc. Many African countries themselves face energy shortages as intra-Africa energy trade is also very small. Domestic African growth can strain energy trade unless capacity development is undertaken.
India is looking at Africa for growth in the primary energy sector for its growing economy and India also needs to diversify its suppliers and energy sources. As far as Africa is concerned, the risks include domestic growth, competition with other buyers, poor local human resource and transport infrastructure, corruption, regime instability, non-transparency, fragmentation with many states regimes and cultures, growing civil society that can help in transparency but slowdown environmental clearances, price volatility. There are also huge opportunities in Africa which include affordable and useful technology that Africa needs and India could partner here. However, India needs to be more assertive and proactive in Africa in order to remain active. Relations with Africa would continue to be good only if India continues to see Africa as trade and business partner and not just as a donor-recipient dependent structure.
The session underlined that India is an important player in the new diverse global energy demand. In the new era, focus has to be on renewable energy development and similarly, climate change concerns cannot be ignored. India’s biggest challenge is import dependence for energy which also hurts its imports bill and currency value. Economic and population growths will continue to be drivers. Despite high gross numbers per capita energy usage in India is low so it is bound to rise. At the same time, India has not explored the domestic resources completely and the domestic regulatory framework sometimes acts as a constraint. Renewables development is hampered by costs and the gaps between capacity and actual generation. Energy matrix will always be based on the issues of access, price and environmental impact. Therefore technology development is the best option; as of now biofuels compete with food supply, shale gas has environmental implications. India also needs to focus on demand management to improve efficiency.
India’s partnership has changed from focus on ideology to more stress on business interests, trade and resources and India also sees Africa as a partner on global forums. Realist perspective guides India’s new approach and at the same time there are elements of soft-power approach visible. India’s import dependence for crude oil and listed the supply constraints that challenge India’s energy security. India only has 0.5 and 0.6 percent of global oil and gas reserves respectively. For energy security, India must explore the options of equity oil, diversified supply and energy diplomacy with Africa. For an outsider, it appears as if India is losing out to China. However, there are also areas where bilateral cooperation is possible.
Nigeria has oil reserves of 37.7 billion barrels and its daily production is 2.2 million barrels per day. Nigeria is the largest oil producer in Africa and 11th largest in the world. However, even at their full capacity, Nigeria’s four refineries produce only about 10 million litres of petrol while local consumption is about 35 million litres per day. Thus, despite good reserves, Nigeria is also bound to import petroleum products. Similar scenario highlights the gas sector as Nigeria’s role in global LNG supply has dropped to 7 percent from 10 percent in the past, due to lack of investments. Therefore, India can help Nigeria overcome this constraint by technological support since India also imports oil from Nigeria. Developments in these sectors will have spinoff for economic growth as well as peace.
Infrastructure is an important impediment; however to overcome this, Nigeria’s gas master plan aims an investment of $32 billion by 2020. Second impediment is militancy that has hurt the energy sector. The third impediment of vandalism and theft has gradually come under control after the amnesty program. However, vandalism hurts because it is difficult to target and some of the companies have shut their operations due to vandalism. Diversification of laws dealing with the sector, 17 as of now, slows down the process, these are to be combined in the Petroleum Industry Bill. However, it is also caught in controversy due to the most stringent revenue sharing and other clauses.
India can help Nigeria in its international campaign against crude theft which is still not an issue in African Union. India can also help in joint military campaign against militancy, by way of investments and by participating in crude swap arrangements.
Nuclear energy forms an important part of India’s efforts to balance its energy imports dependence and it can form an important part of India Africa energy partnership by way of uranium commerce. The NSG exemptions brought the Indian needs to the global limelight. In fact, India is one of the primary propellants of the current phase of nuclear renaissance. India is constructing six nuclear reactors at the moment and plans to have 25 more in the next 20 years.
India will need sustained uranium supply to help its nuclear energy expansion plans. South Africa is likely to emerge as the largest supplier of the uranium. Other countries in the region that are part of this include Malawi. Other countries in the region with proven reserves include Algeria, Burundi, and Congo among others. African uranium has historical linkages with the global nuclear history. Even now France depends on uranium imports from the region for its energy needs.
The Pelindaba Treaty and particularly Article 9 (c) is the biggest impediment to establishing India Africa uranium trade. After the NSG exemptions, India has signed contract agreements with many countries and has already received uranium from France, Russia and Kazakhstan. In Africa, India has an agreement with Namibia and its ratification by Namibia is holding up the commencement of the trade as of now. South Africa has also shown interest in this respect. Even Uganda has initiated the discussions. Larger trade with more countries in Africa is possible if the Art 19 of Pelindaba Treaty is amended. India can give similar undertakings like it has given to the NSG and IAEA for the same and all the same safeguard mechanisms will be applicable.
Report prepared by Avinash Godbole, Researcher, IDSA.