Friday, June 18, 2021

INDO-US Energy Ties: To See A Quantum Leap

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Indian Prime Minister Narendra Modi during his latest US visit had tweeted upon arriving in Houston that ‘It’s impossible to come to Houston and not talk energy!’ The choice of Houston, Texas, one of the energy epicentres of the globe, as Mr. Modi’s first port of call was intended to send a clear signal that energy linkages occupy centre stage in Indo-U.S ties. Prime Minister Modi’s tweet came on back of his meeting with top global energy CEOs to tap investments in the energy sector. At the impressive ‘Howdy Modi’ event, both Mr. Modi and US President Donald Trump had underscored that the energy vertical forms one of the cornerstones of the bilateral strategic partnership.

Both the leaders had reaffirmed the U.S-India Strategic Energy Partnership during their meeting in June 2017. President Trump’s ‘An America First Energy Plan’ seeks exploration and production of untapped shale, oil and gas reserves by removing legal and investment barriers. India’s rapid growth necessitates a high energy consumption and therefore its policy is focussed on exploring alternative sources of energy and reducing sourcing dependence on a few countries. India’s policies are tuned to transition to a gas-based economy and meet the Paris Climate Change (CoP 21) commitments.

India and the US have been at the receiving end of energy cartels. India has aggressively reached out to non-gulf countries to reduce excessive dependence of crude imports from the Middle-East. The US is quickly emerging as a major source of oil and gas supplies to India. The crude imports from the US, which started in 2017, has taken a quantum leap in just a span of two years. India received the first shipment of gas last year and, the increased imports from the US, shall help in narrowing the trade deficit- a concern which the US has often raised with India.

With a view to advance energy access, energy security and energy efficiency, both countries held the first strategic energy partnership meeting last year. The meeting co-chaired by India’s Minister for Petroleum and Natural Gas Dharmendra Pradhan and US Secretary for Energy Rick Perry decided to pursue four primary pillars of cooperation, namely (1) oil and gas (2) power and energy efficiency (3) renewable energy and sustainable growth and (4) coal.

In a significant development, India’s Petronet LNG Ltd and US based Tellurian Inc signed a $7.5 billion pact, of which investments worth $2.5 billion would ensure Petronet’s 18% stake in the Driftwood LNG export terminal. Petronet shall have rights to 5 million metric tonnes of LNG per year which is concurrent with its equity investment. This deal, inked in presence of the Indian Prime Minister, is one of the largest foreign investment commitments in the U.S

shale gas sector. Separately, in well calibrated moves, companies like the Indian Oil Corporation and Bharat Petroleum have entered into agreements to lift US crude in substantial quantities, while players like GAIL and Reliance have invested in US gas projects which can also benefit in state-of-the-art exploration and production in oil and gas fields in India through technology transfers.

During their deliberations with the Indian Prime Minister, the global energy CEOs were upbeat about investments in India’s energy transition projects and welcomed the liberal investment climate and reduction in corporate tax rates. The International Energy Agency (IEA) has noted that India’s foreign energy investments grew by $85 billion during the Modi regime- a record 12% increase and the highest growth, world over. India shall offer investment opportunities in the range of $300 billion in the hydrocarbon sector over the next decade.

Other Indo-US energy sector initiatives include furthering the much celebrated civilian nuclear partnership, investments in power grids and transmission lines under the Partnership to Advance Clean Energy (PACE) programme and so on. Indo-US relations are on an upswing and the stage is set for a quantum leap in energy ties in the years to come.

Script: Satyajit Mohanty, IRS, Senior Economic Analyst

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