India's Energy Interest in the South China Sea

Author: Amit Singh*

Date: July 04, 2013

Published by the National Maritime Foundation, New Delhi

India is the fourth largest consumer of energy in the world after USA, China and Russia. India’s economy is growing rapidly and to sustain this growth uninterrupted energy supply is essential. The Planning Commission of India in the 12th Five Year plan (2012-17) has underlined that coal dominates the country’s energy mix with a robust 52% share in primary energy consumption, followed by oil at 30% and gas at 10%. Other sources include 2% hydroelectricity and less than a per cent nuclear energy. Import dependence of oil consumption is currently about 75%, which is projected to increase to 80% by 2016-17. Import component of gas is currently ruling at 19%, slated to increase to 28% by 2016-17. Similarly, coal import is expected to rise from about 90 million tons at present to over 200 million tons in 2016-17.

As per the US Energy Information Administration (EIA), India imported approximately 64% of its oil from the Middle Eastern countries in 2012 (see diagram). But due to political instability in the region and ‘political compulsions’ (US is still urging India to delink its energy requirement from Iran), New Delhi has found it prudent to diversify its energy resources and take a look eastwards. Even though the availability of oil and gas in the South China Sea (SCS) has only somewhat limited potential to satisfy India’s energy quest in comparison to West Asia, it is still an attractive option for India’s energy security and related diplomacy. Significantly, on November 23, 2011 during an address on Security dimensions of India’s Foreign Policy at the National Defence College (NDC), Ranjan Mathai, Foreign Secretary of India underscored that “the South China Sea remains crucial to our foreign trade, energy and national security interests”.

The South China Sea is the world's second busiest international sea lane. More than half of the world's super tanker traffic passes through these waters. The main reason behind the scramble for the two island chains (Spratly and Paracel) is their richness in natural resources, especially oil and gas. On April 19, 2011 China’s Global Times published a special report that termed the region as the “Second Persian Gulf”- a repository of 50 billion tons of crude oil and more than 20 trillion cubic meters of natural gas (about twenty five times China’s proven oil reserves and eight times its gas reserves). EIA estimates that the South China Sea contains approximately 11 billion barrels of oil and 190 trillion cubic feet (Tcf) of natural gas in proven and potential reserves.

On September 14, 2011, Beijing objected to ONGC Videsh’s (OVL) venture in Vietnam and asked India to refrain from entering into deals with Vietnamese firms exploring oil and gas in the disputed SCS over which China claims sovereignty. India responded to the Chinese objections to its companies scouting for hydrocarbons in the SCS, saying that its cooperation with Vietnam is in accordance with international laws. During the External Affairs Minister, SM Krishna’s visit to Hanoi in September 2011, India underlined that the OVL will go ahead with oil and gas exploration in the disputed region or the two offshore blocks (127 and 128) which Vietnam claims as its own. In 2011, India and Vietnam also signed a three-year deal covering investment and cooperation in energy exploration, production and refining.

The ONGC Videsh Ltd. (OVL) provides the following information regarding their exploration activities in Vietnam:

Block 6.1	Block 6.1 is an offshore Block located 370 km south–east of Vung Tau on the southern Vietnamese coast with an area of 955 sq km. The exploration License for Block 6.1 was acquired by OVL in 1988. After subsequent assignments and transfers of Participating Interest (PI) between the parties to Block 06.1 and Petro Vietnam, the present holdings of PIs with effect from October 17, 2011 are ONGC Videsh 45%, TNK Vietnam BV 35% (Operator) and Petro-Vietnam 20%. Lan Tay field in the Block has been developed and the field started commercial production in January, 2003. OVL share of production from the project was 2.023 BCM of gas and 0.036 MMT of condensate during 2011-12 as compared to 2.249 BCM of gas and 0.038 MMT of condensate during 2010-11. Lan Do field in the Block is under development with first gas expected in October 2012. Wells Lan Do-2P and Lan Do-1P have been drilled and completed between January 14, 2012-April 18, 2012. Presently, subsea construction works are in progress and first gas from Lan Do field is expected in October 2012. OVL’s share of the development expenditure in the block was about USD 342.78 million till March 31, 2012.
Block 127	Block 127 is offshore deep water Block, located at water depth of more than 400 meters with 9,246 sq km area in Vietnam. The PSC for the Block was signed on May 24, 2006. OVL holds 100% PI in the Block with Operatorship. OVL has acquired 1,150 sq km 3D seismic data in the Block and the interpretation of the seismic data has been completed. Location for drilling of exploration well was identified and the well was drilled in July 2009 to a depth of 1265 mts. As there was no hydrocarbon presence, the Company has decided to relinquish the block to Petro-Vietnam. OVL has invested approx USD 68 million till March 31, 2010.
Block 128	Block 128 is offshore deep water Block, located at water depth of more than 400 metres with 7,058 sq km area in Vietnam. The PSC for the Block was signed on May 24, 2006 and the extension to the exploration Phase-I for the Block 128 was valid till June 15, 2012. OVL holds 100% PI in the Block with Operatorship. 1650 sq km of 3D seismic data was acquired and interpreted in the Block by your Company and location for drilling of exploration well was identified. Drilling was attempted on the location during September 2009; however, the well could not be drilled as the rig had difficulty in anchoring at the location due to hard carbonate sea bottom. Meanwhile, OVL has found solution to the anchoring problem and asked for extension to the exploration phase to undertake review of additional G&G data to find out a viable location for drilling to fulfil the PSC commitment. Petro-Vietnam (PVN) has suggested ONGC Videsh to continue the exploration programme in the block for additional two years with effect from 16th June, 2012 by revisiting the geological model with the integration of data likely to be available with the assistance from PVN. Till March 31, 2012, OVL has invested about USD 49.14 million in the Block.

It is interesting that the OVL has been working in this region since 1988 especially on block 06.1 but only recently has China started opposing India’s oil exploration in the SCS. However, Russia’s Gazprom is also exploring oil and gas in the Vietnamese block 112 and 129-132 in the South China Sea since September 11, 2000 but Beijing has never uttered a single word against the Russian exploration.

On December 3, 2012, while responding to the media questions on South China Sea, the Chief of Naval Staff, India, Admiral DK Joshi, underlined that “not that we expect to be in those waters very frequently, but when the requirement is there for situations where the country’s interests are involved, for example ONGC Videsh, we will be required to go there and we are prepared for that.” In response to Admiral Joshi’s comments, the Chinese Foreign Ministry spokesperson Hong Lei said “we hope relevant countries respect China’s sovereignty and national interests”, and emphasised that China opposes any unilateral energy exploration and development activities in the disputed areas in the South China Sea.

The issue at stake here is that if India really supports freedom of navigation in the SCS, then it will be necessary for India to assert, back up and safeguard its own interests in the region. The SCS is not only a strategic maritime link between the Pacific and the Indian Oceans, but it is also a vital gateway for shipping in East Asia. 80% of China’s energy imports and Japan and the two Koreas (South and North) oil supplies pass through these waters. Almost 55% of India’s trade with the Asia-Pacific transits through the SCS. Therefore, it is quite evident that India derives considerable economic benefits from the SCS being an area where all actors enjoy a level playing field. The recent upsurge in tensions in the SCS represents a security flashpoint with global consequences. The dispute has the potential to turn into a military conflict that could end up affecting the peace and security of the entire region and any disruption or conflict relating to SLOCs (Sea Lanes of Communication) will hurt India’s energy and economic outlook severely. As it may compel New Delhi to adopt some alternative route to channelize their economic activities in the region which could force time constraints, increase overheads and consume more energy. 

It is a fact that India is a growing military power and a growing economy and to sustain eight to nine per cent of economic growth annually, New Delhi has to diversify and looks for new avenues for its energy resources. It is interesting to note that after getting an observer status in the Arctic Council now, New Delhi is in the process of acquiring an icebreaker for a whopping $144 million for conducting scientific and business exploration in the polar region as the Arctic is also reasonably rich in hydrocarbons.

As far as hydrocarbon resources in the South China Sea are concerned, India has not invested enough in the region. Till March 31, 2012, the OVL had invested around $460 million in the Vietnamese Blocks and this can be increased. However, the repository of oil and gas elsewhere in the SCS also attracts New Delhi and in some way or the other, India is also dependent on this region for its energy security as India is shipping oil from Sakhalin (Russia) to Mangalore through this sea route. New Delhi is also importing a significant amount of coal from SCS littorals, namely Indonesia and the Philippines, through this maritime channel only. India’s OVL is also eyeing stakes in one of the three joint ventures announced in the Arctic region by the Russian state oil company Rosneft. If India gets this project, then New Delhi will have to ship oil through the South China Sea as this is the shortest sea route for India to transport oil from the Arctic region. At present, OVL produced 2.023 BCM (Billion Cubic Metres) in 2011-12 of gas as compared to 2.249 BCM during 2010-11 form the Block 06.1 of Vietnam which is more than what the OVL is producing from Sakhalin-I, AFPC-Syria and BC-10 of Brazil. And if China controls these waters, it will be difficult for India to continue its unencumbered economic and energy ventures through this region.

India’s national interest lies in the freedom of navigation and any disruption or conflict relating to SLOCs will hurt New Delhi severely as the South China Sea channel is significant for its energy security. It is therefore, an opportune time for India to channelize its foreign policy with the littorals of the SCS….substantively, rather than symbolically.

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 (*Dr Amit Singh is an Associate Fellow at the National Maritime Foundation, New Delhi. The views expressed are those of the author and do not reflect the official policy or position of the Indian Navy or National Maritime Foundation. He can be reached at amitsinghjnu@gmail.com.)

13th General Election Could Mark A Political Transition in Malaysia

Author: Dr. Amit Singh*

Date: April 29, 2013

Published by the National Maritime Foundation, New Delhi

‘Multiracial’ Malaysia is gearing up for its 13th General Election (GE) on May 5, 2013. The forthcoming polls seem to be the toughest challenge for the incumbent coalition of Barisan Nasional (BN) that has ruling Malaysia since independence in 1957. While the BN is ‘representing’ the three major political groups of Malaysia - the United Malays National Organization (UMNO), the Malaysian Chinese Association (MCA), and the Malaysian Indian Congress (MIC) – the coalition government is perceived as a symbol of Malay-Muslim supremacy in the Malaysian political discourse.

Malaysia is a multi-ethnic but a Muslim-majority state with a population of around 29 million, of which 62% are of Malay origin, 23% are Chinese and 7% are of Indian origin (Malaysian Census 2010). Although Islam is the official religion, other world religions such as Hinduism, Buddhism and Christianity also have sizable adherents among the Malaysian population. It is therefore, reasonable to believe that religion and ethnicity play a pivotal role in Malaysian politics. 

Psephologists foresee this election as being the closest ever in Malaysian history. As in the previous GE which was held in March 2008, the main opposition coalition, People’s Alliance, won an unprecedented 82 out of 222 seats in parliament and five out of 12 state governments. Thereby, they denied the ruling coalition, BN, two-thirds majority for the first time in the history of Malaysia. Present day opinion polls also speculate that the People’s Alliance may emerge as the single largest coalition in this election. However, in the face of fresh alliances or tie ups, the exit poll on 05 May would be a more accurate indicator.

The last GE (2008) underscored that the people of Malaysia were losing faith in the ruling coalition (BN) and also indicated towards the political awakening of the Malaysian population. In 2008, elections were held one year in advance as Abdullah Badawi was only in his fourth year as Prime Minister. It was widely speculated that the early call for a renewed mandate was to prevent former deputy prime minister and the incumbent leader of opposition, Dato' Seri Anwar Ibrahim, from contesting. By law, he would have been only eligible to contest elections only after April 2009, five years after the end of his controversial conviction on 'sexual' and 'corruption' charges. The other speculated reason for early election was to seek a new endorsement for Abdullah's beleaguered government which had declined in popularity and credibility due to a spate of mishandled economic and inter-ethnic issues.

The March 2008 GE was also held against the backdrop of the historic November 25, 2007 protests staged by the Hindu Rights Action Force (HINDRAF) in Kuala Lumpur which internationalised the pitiable conditions of the ethnic Indians in Malaysia. Under the banner of HINDRAF, thousands of people joined the peaceful protests against the marginalisation, namely in the denial of jobs, fair wages, educational facilities, electoral reforms and equal opportunities and rights. The decision of Malaysian Government to demolish 79 Hindu temples in the name of ‘development’ and forceful conversion of some Hindus added fuel to the protests. The rally was meant to support a $4 trillion lawsuit filed in London in August 2007 by the HINDRAF demanding that Britain should compensate Malaysian Indians for bringing their forefathers as indentured labourers and exploiting them. It also sought to amend Article 153 of the Malaysian Constitution which provides for Malay supremacy. However, the Malaysian government crushed the peaceful protests and linked the protesters with the Liberation Tigers of Tamil Eelam (LTTE). This further amplified the resentment against the BN, and especially towards the MIC.

During the 2008 election campaign, the HINDRAF used unconventional methods, namely internet and social media, to highlight the wretched condition of the Malaysian Indians and to put forward their demands and agendas. This resulted in the unification and awakening of the Malaysian Indian society. Consequently, the BN came into power with a simple majority and the MIC was reduced to three seats from the previous nine. Even Samy Vellu, the veteran leader of the MIC, lost the election. Taking the responsibility of the unimpressive performance of the coalition Prime Minister Abdullah Badawi stepped down in favour of his successor, Najib Tun Razak, in April 2009. After taking over as the Prime Minister of Malaysia, Najib tried to improve the socio-cultural and politico-economical condition of the country including the grievances of the ethnic Indians. But it was too little, too late akin to ‘putting a Band-Aid on a fractured leg’.

Nonetheless, before dissolving the Parliament, Najib deliberately provided bonuses to over 1.3 million civil servants, cash for low-income families, smart phone rebates and a cut in the income tax rate in the 2013 budget to garner votes on popular measures. On the other hand, Anwar in his election manifesto has promised free secondary education, lower car prices, an increased minimum wage and greater oil revenues for Sabah and Sarawak states of East Malaysia. But the real challenges confronting the country are improved governance, equal representation and opportunity, a government free of corruption, a dwindling economy and a meek foreign policy.

The forthcoming GE is the first test of Prime Minister Najib since taking over in 2009 and the opposition is fighting elections under the veteran leader like Anwar Ibrahim after a long period - making Malaysia’s elections more interesting. However, there is also a fear in the opposition that the elections will not be free and fair as Najib may use the state mechanism in his favour. Another interesting aspect of this election is that during 2008 GE only 50% of the Malaysian population was internet friendly whereas now two-thirds of the population is on internet and social media, which are likely to play a decisive role this time too. Recently, the social media played a crucial role in the Arab Spring, which successfully led to the political transition in some West Asian nations.

If the forthcoming GE in Malaysia is conducted in a fair and peaceful manner, a political transition is likely to happen which may change the fortunes of Malaysia.

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Flourishing Ties between India and Myanmar

Author: Amit Singh *

Date: February 28, 2013

Published by the National Maritime Foundation, New Delhi

Myanmar is an important neighbour of India as both countries share extensive land border and a maritime boundary in the Bay of Bengal. During the long spell of military rule in Myanmar, India followed a policy of disengagement. However, India eased upon this and closed in somewhat after initiating the “Look-East” policy in 1991. The recent democratisation process in Myanmar has further prepared the ground for India to be more proactive in her Myanmar Policy.

The Defence Minister of India Shri AK Antony visited Naypyidaw along with the Defence Secretary, the Eastern Army Commander and the Vice Chief of Naval Staff on January 21-22, 2013. During the visit, Antony highlighted upon the importance of enhancing bilateral ties with Naypyidaw in all the fields, especially defence. He underlined that the visit of all three Service Chiefs of India to Myanmar in the last eighteen months was reflective of Indian government wishes to strengthen ties with Myanmar. While interacting with the delegation, the President of Myanmar Thien Sein assured that Myanmar will not allow its territory to be used by anti-India insurgent groups. He also welcomed the ongoing cooperation between the armed forces of both the countries and anticipated an enhanced interaction between the two navies and the air forces.

Prior to Antony’s visit, several high level bilateral exchanges had taken place in the recent past. In October 2011, the President of Myanmar visited New Delhi and was followed by a return visit in May 2012 by the Indian Prime Minister. The pro-democracy activist and the leader of the opposition Ms.Aung San Suu Kyi visited India in November 2012 and the External Affairs Minister of India; Shri SalmanKhurshid visited Myanmar in December 2012 furthering official engagement. The frequency of bilateral interactions between New Delhi and Naypyidaw is noteworthy and has the potential of further elevating the India-Myanmar relationship to a new level.

At present, both New Delhi and Naypyidaw are engaged at regional and sub-regional contexts onMekong-Ganga Co-operation (MGC), Association of Southeast Asian Nations (ASEAN) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). Consequently, in August 2008 Myanmar was accorded the ‘Observer Status’ in the South Asian Association for Regional Cooperation (SAARC) with India’s support and is now looking forward to be included as a permanent member of SAARC.

Myanmar’s close economic and military relations with Beijing are a cause of concern for New Delhi. This is mainly because China has been actively engaged in Myanmar to build up port and naval facilities inHanggi, the Coco Islands, Akyab and Mergui all of which increase its footprint in the Indian Ocean. Indian media had been particularly concerned about a rumoured intelligence listening post on the Coco islands, only 30 nautical miles away from the Andaman Islands – which are much closer to Myanmar’s mainland than to the east coast of mainland India. Myanmar is the largest neighbour touching India’s east and acts as a buffer zone between its North-Eastern region and the Chinese provinces.

Myanmar also holds an important geostrategic position in the Asia-Pacific region and provides a strategic link to the East and South-East Asian countries. Therefore, further improvement of relations with Myanmar has become desirable requirement not just for India, but for the US as well. Recently, US President Barack Obama visited Naypyidaw, reflecting the importance attached to Myanmar as a potential strategic partner in his Asia-Pacific calculus that aims towards Rebalancing Asia. China, on the other hand believes that the US policy is an attempt to curb Beijing’s regional influence. In Washington’sRebalancing Asia policy, India holds a significant place as the US President himself saying India as “Pivot of Asia”. Therefore, the US is also urging India to engage more proactively with Myanmar. However, it is not US pressure; but a more consensual approach of building a lasting friendship based on bilateral trust that is driving New Delhi at this juncture. India has also recognised Myanmar as a crucial link between India and China which clearly reflects India’s desire to increase its profile in Myanmar withoutjeopardising its bilateral ties with China.

For maintaining peace in North-East, it is in India’s security interest to keep the momentum going in the right direction with Myanmar, since most of the active insurgent groups in this region are using the bordering areas as their safe havens. Although there have been some joint counter insurgency efforts between the two armies along the border, these needs to be intensified on a regular basis.

India looks at the connectivity through Myanmar as being crucial for its “Look East” policy and also for the development of stronger ties with the ASEAN countries as an extended neighbourhood. At present, both India and Myanmar are jointly working on quite a few projects, namely, the up-gradation and resurfacing of the 160 km long Tamu-Kalewa-Kalemyo road, construction and up-gradation of the Rhi-Tiddim Road in Myanmar, etc. India is also implementing the Kaladan multimodal transport project that involves upgrading the Sittwe port in Myanmar and constructing a highway to connect the town ofPaletwa in Chin state to the border state in Mizoram. This flagship project, expected to be completed by 2015 will revitalize the economy of that area and link it with important commercial and shipping arteries. The Chief Secretary of the Manipur government has also announced the long-awaited luxury bus service between Imphal and Mandalay, the first over link between India and Myanmar. This connectivity holds the potential to integrate India’s North-East with the broader ASEAN’s inter-connectivity efforts with substantial benefits for both, India and Myanmar. Furthermore, Myanmar is extremely rich in natural resources, notably oil and gas and closer relations with Myanmar would facilitate India’s energy requirements too.

Recently, the Lok Sabha Speaker Smt. Meira Kumar led the first-ever visit of an Indian parliamentary delegation to Myanmar from 12-15 February, 2013. While interacting with the Indian parliamentary delegation, the President of Myanmar Thien Sein hoped that present visit of Indian Parliamentary delegation will not only contribute to strengthen relations between the two Parliaments but also between the two countries. Smt. Kumar also alluded the training availed of by the 30 MPs of Myanmar and 30 Myanmar Parliamentary staff in India. The present pace and growing momentum in India-Myanmar relations indicates that the bilateral ties are indeed poised to flourish in the near future.

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