Author: Amit Singh*
Date: July 04, 2013
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:
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Block 6.1
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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.
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Block 127
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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.
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Block 128
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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.
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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.)
