Energy
Security, Energy Policy and Nuclear Energy – II

Prabir
Purkayastha

IN
the first part of the article (People’s Democracy, November 7-13, 2005)
we had shown that nuclear power would meet only a small part (4 per cent) of our
overall power requirement. We had also shown and the likelihood of an
accelerated programme, which could take it to about 15 per cent, is well beyond
our current capabilities and would mean the abandonment of an independent fuel
cycle. With the experience of Tarapur, if India again went in for a nuclear
power programme, which would depend on American goodwill for supply of enriched
uranium, this would be folly indeed. In this section, we will look at India’s
energy basket as a whole and see how nuclear energy compares with hydrocarbon
requirements. We will also examine the issue of greenhouse gases and India’s
long term energy strategy and energy security.

THE
PRIMARY ENERGY BASKET

Between
1981 and 2001, though India’s primary energy needs grew at a rate of 6 per
cent per annum to reach 314.7 Million Tons of Oil Equivalent (MTOE), it is still
only 20 per cent compared to the global average of per capita consumption.
Even compared to countries such as China, Brazil and Thailand, its per capita
consumption is quite low. Therefore, there is little doubt that in the coming
years there will be a considerable growth in the consumption of primary fuels.
We provide in Table I the demand estimates of primary fuels for the next 10
years based on the Tenth Plan.

Table
I

Demand
of Primary Fuels

The
requirements of primary fuels would of course depend partially on what kind of
fuel we use for electricity generation. However, it is clear that in any case,
the bulk of India’s electricity needs – from 85 per cent as the best-case
scenario to 96 per cent as per current plans — would have to come from
non-nuclear sources. For the foreseeable future, nuclear option is going to have
little impact on our need for other sources of energy.

If
we take into account that thermal would have to play the major role in any
future strategy we draw up for the power sector, gas would become an important
fuel.

IMPORTANCE
OF
GAS

Gas
is the fastest growing fuel worldwide. It is a clean fuel, has much lower carbon
dioxide emissions and has larger known reserve than oil. In India also, gas has
been the fastest growing fuel, earlier using Bombay High and later the Krishna-Godavari
Basin gas fields. The current annual consumption of Gas in India is around 31
Billion Cubic Metres (BCM). If we take into account the naphtha based power
plants that want to switch to gas as fuel and others who would like gas as
feedstock, the latent demand could be even as high as 80 BCM annually. The
recent gas finds by ONGC, Reliance and Cairns Energy, coupled with known gas
reserves in India show that gas will continue to be a promising fuel for India.

The
usage of gas for electricity generation would depend on its comparative costs
with coal. If Gas or LNG were available at a price of $3.00 per Million BTU or
mbtu (a dollar price as we have accepted pricing of private players’ fuel
price in dollars), gas would certainly be economical. If the price of gas
goes up to $5 per mbtu, as the current prices of LNG suggest, gas would not be
economical. Between these two extremes, we can work out what is the price at
which gas could be a fuel that people could use for power generation. Therefore
the key to LNG use is its price and the possibility of long term and stable
price contracts. The $21 billion deal with Iran to ensure Liquefied Natural Gas
(LNG) supplies for 25 years beginning from 2009 has to be seen in this context.

Though
LNG use could continue to grow, the only three LNG terminals that are coming up
currently – Hazira, Kochi and Dahej — amongst the 15 that the government had
sanctioned are near naphtha-based power plants that are obviously eager to get
off the costly naphtha route or where plants are suffering from a shortage of
gas. But its continued growth for power generation will depend very much on the
price and the long-term stability of this price. However, its use in fertiliser
and other petrochemical products could continue to grow. Already, more than half
of India’s fertiliser feedstock is gas. Table 2 shows the use of gas in
various sectors of the economy.

Table
2

Indian
Gas Usage Statistics (2004-05):

The
use of piped gas is a different scenario. Once gas fields are developed and the
pipelines built, it is possible to have long-term contracts in place. Therefore,
unlike naphtha and LNG, prices are less volatile and it is possible to tie gas
from such sources without incurring the risk of volatility in the same way. NTPC
and Reliance have reached an agreement, reportedly at about $3.00 per mbtu as
against the quotation of $4.00 per mbtu for international LNG suppliers. A gas
pipeline from Iran, Bangladesh or Myanmar could have prices that are comparable.
So the issue of gas as a fuel or a feedstock for the chemical, fertiliser or
petrochemical industry would depend on the mode of supply as well as its
availability.

OIL
USE IN
INDIA

Oil
has been used in India primarily for transport and industry.
The Tenth Plan has this to say about the growth of hydrocarbon demand:

“The
share of hydrocarbons in the primary commercial energy consumption of the
country has been increasing over the years and is presently estimated at 44.9
per cent (36.0 per cent for oil and 8.9 per cent for natural gas). The demand
for oil is likely to increase further during the next two decades. The
transportation sector will be the main driver for the projected increase in oil
demand. Consequently import dependence for oil, which is presently about 70 per
cent, is likely to increase further during the Tenth and Eleventh Plans.”

It
has been estimated that by 2015, Indian demand for crude oil would be around
4.25-4.5 million barrels/day (mb/d) and it would be importing about 80 per cent
of this, almost entirely from the West Asian region. The important issue here is
that if we look at the power sector demand, oil does not figure in this. So
nuclear energy, which can be used to produce electricity, is not a substitute
for oil in any case. While India account for only about 2 per cent of
world’s oil consumption, it is already amongst the 10 largest importers of oil
in the world. With increasing oil consumption, this trend is likely to
continue with India and China emerging as major importers of oil accounting for
at least 15 per cent of world’s oil demand.

The
major part of India’s oil imports today is from West Asia. Though Caspian area
is also as a possible source, it does appear that its reserves were
overestimated earlier. The key bottleneck here is infrastructure. It is unlikely
to replace West Asia as a major source for South Asia in the near future. Though
there has been a talk of bringing a pipeline from Central Asia to South Asia
through Afghanistan, it is still remains a pipe dream unless peace returns to
Afghanistan.

COMPARING
VARIOUS  SOURCES OF ENERGY

If
we now take stock of India’s energy basket and compare the various energy
sources, it is clear that nuclear will be a marginal player, whichever the
scenario is chosen. As the table below shows, irrespective of whether we
take the ambitious Arunachalam route of adding 3000 MW, it will at best
constitute 5–6 per cent of our primary fuel basket and probably not more than
2.5-3.0 per cent. If we look at oil and gas, even with an ambitious nuclear
energy programme, they will constitute more than 30 per cent and 10 per cent
respectively and together more than 40 per cent of our energy needs. There is
very little possibility of switching of fuel between nuclear and hydrocarbon
fuels.

Table
3

Comparison
Between
Different Forms of Energy

Therefore
the nuclear deal that has been signed between India and the US will not help us
address our primary energy needs. The argument that nuclear energy is the energy
for the future is not backed up by either an analysis of India’s energy needs
nor does it take into account that nuclear energy is an option very few
countries are exercising today.
We have argued for keeping this option open for the future but to present this
as a panacea for our energy needs flies in the face of reality.

CARBON
EMISSIONS & GREENHOUSE GASES

The
only argument presented in favour of nuclear energy is with regards to carbon
emissions. Thermal power has high carbon dioxide emissions and given the reality
of global warming, reducing carbon dioxide emissions should be an important
element in our energy planning. Even though the Kyoto protocols do not mandate
cuts for India’s carbon emissions, this may not remain true for the future.

Coal
has the disadvantage of high carbon emissions and also disposal of huge amounts
of ash due to high ash content in Indian coal. The shift to natural gas in power
production has internationally been driven by the lower carbon dioxide emissions
in using Natural Gas as also the higher efficiency of combined cycle plants. If
we have 620 Mt of coal burnt in India by 2011-12, this will mean greenhouse gas
emission of 900 million tonnes of CO₂ emissions and more than 200
million tonnes of ash disposal. Therefore, a case can be constructed to reduce
the use of coal as a primary fuel and go over to nuclear energy. However, if
the aim is to reduce greenhouse gases and also other environmental impact,
Natural Gas is a better alternative as the capital cost of gas-fired power
plants are considerably lower than coal-fired or nuclear ones.

While
it is true that India does not have to restrict carbon dioxide emissions as yet,
nevertheless it is also true that if India and China reach per capita levels of
carbon dioxide emission of the developed countries – the US, EU and Japan –
the global carbon dioxide emission levels will rise to two and a half times of
today’s levels.
With the global sinks already unable to fix the current level of emissions, they
will be simply be overwhelmed by this volume of emissions. Therefore we cannot
treat the issue of greenhouse effect as a problem only of the developed
countries but must also devise strategies to control our emission of greenhouse
gases. The threat we face today is far more our global carbon sinks running out
than fossil fuel being exhausted.

ENERGY
OPTIONS FOR THE FUTURE

The
existing reserves of petroleum are projected to run out in another 40 years or
so with Natural Gas lasting somewhat longer.
There is a strong school of thought that soon we would have peaked our crude oil
production and start on a long-term irreversible decline of crude oil
production. The key issue that the energy experts are focussing on is that new
finds are coming in at a slower rate than the increase in consumption. Energy
experts state that annual consumption has exceeded new discoveries every year
since the early 1980s and only half the total produced last year was replaced by
new field discoveries.

While
these views need to be taken seriously, there are countervailing tendencies that
need to be taken into account. They are that the price of crude also determines
the amount of petroleum reserves we have. At $100 a barrel, oil shale, which is
available in very large quantities, becomes economically viable. Dutch Shell
claims that they have a technology that can produce oil from shale at $30 per
barrel. Similarly, oil hydrates, which are there on continental shelf in huge
amounts, may become viable if the prices rise further and investments are made
to develop new technology. So the picture of energy running out in another 40
odd years, is not the real picture. Nevertheless, the current trends do show
that unless there is a radical shift in either demand or production, we are
likely to see high prices and some demand supply gap opening up.

The
recent turn towards gas as a fuel has seen a number of new discoveries of gas
fields. It is clear that gas is better distributed in the world than oil and its
potential still remains relatively unexplored. The recent successes in India of
Reliance, Cairns and ONGC in finding new gas fields are all pointers in this
direction. In any case, technological predictions beyond the 20-year range are
fraught with great risk. Instead, one should plan with current technology and
known reserves while keeping various options open. If no other course remains
open for the world but to go in for hazardous nuclear power or face a heat
death, we should not then root around to develop this technology. The nuclear
option needs to be kept open for this reason.

Undoubtedly,
a major thrust needs to be given towards solar and other renewable forms of
energy. This includes hydro-power where the state’s inability to address the
problem of oustees from the submergence in building large dams has made the task
of building large dams much more difficult. But given that greenhouse gases are
driving the world towards a non-sustainable path, all possible options have to
be pursued at this stage.

GEO-STRATEGY
OF OIL AND GAS

The
focus in oil and natural gas has been more on the ownership of the oil and gas
fields. However there is more to the geo-strategy of oil and gas than just
ownership. The key to controlling oil and gas supplies to the world also lie in
controlling the flow of oil and gas. Transportations of petroleum and gas remain
“one of the most strategically important circulations of resources in the
global economy.” Controlling the outlets of oil flow therefore provides an
enormous strategic advantage to a country, just as its denial can create
enormous pressures. Energy security therefore means not only ownership of oil
and gas fields, but also the ability to access such fields.

An
obvious example of the strategic significance of such flows is in the politics
of pipelines. The Baku-Tbilisi-Ceyhan pipeline was constructed at US behest to
provide the Caspian region with an alternate way of reaching oil to European
markets bypassing the Russian Druzhba pipeline system, as well as reducing the
importance of West Asian oil. While the second aim has not been fulfilled with
scaling down subsequently of Caspian region reserves, reducing Russian influence
in the Caspian region has certainly happened.

For
India, not only is West Asia the major source of its oil and gas (LNG) imports,
the choke point is that almost all of it comes through the Strait of Hormuz. It
is one single choke point in its oil supply. Therefore the Iran Pakistan gas
pipeline is not only about long-term gas contracts but also having another
supply route for India’s hydrocarbon fuel imports. 

CONCLUSIONS

It
should be clear from the above that nuclear energy is no substitute for
hydrocarbon fuels required by the transport sector and various industries. It
can substitute for coal in power production where it will help to reduce carbon
dioxide emissions, but at the cost of producing hazardous wastes. While we need
to keep this route open for power generation, an aggressive nuclear policy of
adding 30,000 MW in the next 10 years is neither feasible nor desirable. Even
after such a programme, the contribution of nuclear energy to India’s primary
energy basket will not be more than 5-6 per cent. The overwhelming bulk of our
energy needs is going to be fossil, with oil and gas meeting more than 40 per
cent of our primary fuel needs by 2015. In such a scenario, India needs to plan
its energy security and consider alternate sources as well as access to oil and
gas fields. The Iran option was
an initiative, which was well thought out and would be an important contribution
to India’s energy basket and energy security. Therefore any option that aborts
this initiative for a mythical nuclear energy security is at best ill-informed
and at worst consciously sabotaging India’s future security.