Interview with Mani Shankar Aiyar, former Petroleum and Natural Gas Minister and Rajya Sabha member.

With the Indian economy poised for a robust growth in the next few years, energy security has become the focal point of policy formulation. From domestic finds in oil and gas to acquiring hydrocarbon assets abroad, dealing with foreign investors and negotiating transnational pipelines — all these issues have emerged as key points in India's quest to secure its energy future. Sujay Mehdudia spoke to former Petroleum and Natural Gas Minister and Rajya Sabha member Mani Shankar Aiyar on India's oil diplomacy and the changing dynamics of world energy. Excerpts.

How do you see India's position in the context of energy security, especially in view of a robust economy, acquisition of oil and gas assets abroad and exploration of domestic geographical areas?

Today we have a situation where we are more energy insecure today than we were 10 years ago. We have a confirmed discovery of gas in [Krishna-Godavari] KG basin D-6 by Reliance Industries but that is from over seven years back. Since then, not even the private sector has discovered any new find. If our own exploration is going to stagger in both oil and gas and if we do not put in enormous resources that are required in research and development to deal with the peculiar geographical problems found only in India, then the future seems insecure.

R and D is simply not taking place. No determined effort is being made for knowledge networking around the world. We are not really looking for our own oil and gas. We are still evolving a policy for shale gas when China has made huge strides in this field. The oil majors of Asia have converted the Asian premium into Asian discount. No effort is being made to bring Asian oil producers and consumers together. There is very active energy diplomacy called for to secure the full advantage of the Asian discount. Energy security has to be one of the focal points of our diplomacy at least till the mid-fifties of this century.

What is the situation with regard to an integrated energy policy vis-à-vis the external and internal dimensions of energy requirement?

Instead of focusing on West Asia and the extended South Asia, which is a repository of hydrocarbons, we are keen on crossing “two oceans” to secure our energy needs. The government's present integrated policies would not be able to secure energy for India in the 21st Century. The ground reality is that thorium- based energy would not be useful till the middle of the century. There is a need to competitively access oil and gas instead of finding ourselves stranded in a sellers' market.

Our failure has been to recognise that though we ourselves have a hydrocarbon deficiency, our immediate and proximate neighbourhood is simply soaked in hydrocarbons. The largest availability of natural gas in the world is in Qatar.

We are geographically fortunate in being able to potentially access by pipeline the gas resources of not only Turkmenistan and Afghanistan but also Uzbekistan, Russia and other Commonwealth of Independent States (CIS) countries. To the East of us, gas is available in Myanmar, which it supplies to Thailand. We have made no arrangement to pipe this gas through a network of pipelines and bring it to India.

No progress has been made in talks to arrive at a deal with South Korea to supply gas from Sakhalin where we have a commercial interest on the basis of a switch deal to get gas into India from Sumatra.

Australia is emerging as a major supplier of gas; we have done nothing to secure gas assets there. Sitting as a terribly gas deficient nation, sitting in the centre of what would be a multiple sources of natural gas supply and to do nothing to access it shows the absence of recognition of importance of energy diplomacy.

What is the reason that foreign investors are fighting shy of investing in India especially when the economy is doing exceptionally well?

The government's intervention in the Ambani brothers gas dispute had an adverse fallout on India's energy security. To resolve a quarrel between two brothers, the government intervened to remind them that natural gas constitutes a sovereign national resource.

Following the legal dispute, prices are to be determined prospectively or retrospectively and where the gas must be sold will be determined by the government. In consequence, while the internecine fraternal quarrel is over, foreign and even domestic private sector interest in exploration has plummeted.

While the number of blocks for exploration increased, the number of awards has decreased and private bidders are keeping away, due to the government's gas policy and production sharing contract. This is essentially because we are perceived with some justice as a country where production sharing contracts are ambiguously drafted and terms redefined to the disadvantage of the investor who signed the documents in good faith.

India is also perceived as a country where producers can neither determine their prices nor choose their own customer. Cairn, the most successful oil entrant in the Indian hydrocarbon sector, is packing its bags and handing over finds to Vedanta Resources, owned by an non-resident Indian, who has no previous experience of oil and gas.

They are only waiting for the Indian government's green signal so that they can leave forever for the green pastures of Greenland. What an indictment! India imports more than 75 per cent of its crude, along with one-fifth of its gas.

Instead, alas, we are doing practically everything we can to discourage international and even domestic players from entering our uncertain, deeply ambiguous hydrocarbons sector, thus massively promoting energy insecurity.

What should India do to give a new and aggressive look to its energy policy, both inwards and outwards?

India should engage in aggressive oil diplomacy. What we also need is a national energy policy and national energy security adviser to secure our future. We need an explorer-friendly exploration policy if domestic natural gas output is to surge. There is very active energy diplomacy called for. Even if all the dreams of thorium energy of Dr. Manmohan Singh are realised, then also we must realise that we cannot get to the 50s without passing through the 20s, 30s, 40s. And if we falter in between, we won't need thorium based energy as our economy would have collapsed by that time. I don't know why we do not make both in the External Affairs Ministry and Petroleum Ministry as well in other Ministries concerned with energy an ‘External Dimensional Energy Policy' which is integrated with domestic needs. We have to become ‘hunters and predators' for energy sources to keep our economy boiling.

The amount of attention that has been paid to the Indo-U.S. nuclear deal, in getting the Nuclear Suppliers Group (NSG) nod and now the passage of the Nuclear Liability Bill, is a phase behind us. Anyone who has faith in nuclear energy can be content that more has been achieved in this area in the last four years than in the previous 40 years. But how do we face the next 40 years? We cannot face the next 40 years without access to affordable fossil fuel, until and unless the role of natural gas is given high priority and is matched by policies that encourage domestic production.

What are your views on the stalled IPI pipeline?

The Indo-U.S. energy ties including the Indo-U.S. nuclear deal had derailed the momentum of the Iran-Pakistan-India (IPI) gas pipeline also known as the peace pipeline. If we are nervous of the U.S., why are we still continuing negotiations with Iran on the IPI whereas Pakistan, with its image of a failing State, has been able to seal a deal with Iran and secure energy for itself?

Tell us about this new thrust on shale gas and where India stands.

Shale gas is catching the global imagination with India having done little in exploring the potential. Europe and China have emerged as major producers of shale gas. In fact, China is producing more shale gas than the U.S. We are still in the process of evolving a policy on shale gas.

We in India have no understanding of shale gas. Instead of having an open acreage licensing policy, we are still making efforts to asses what are our reserves, locate them and then prepare a policy. We are a decade behind China. We are still hobbling along the path of underground coal gasification, a technology discovered by the Russians in 1920's. We are worse off than Europe. What is going to prove to be the single most important source of fossil fuel energy in the 21st Century, we continue to neglect — the fuel of the century.