Red Sea and India’s Energy Security

 Red Sea Disruptions and India’s Energy Security

• The recent turmoil in the Red Sea has sent ripples through India’s oil import dynamics, triggering notable changes in its reliance on conventional suppliers like the US.

Why is India Moving its Oil Imports Away from the US?

• For a while, the US has consistently ranked among India’s top five crude suppliers, with domestic refiners procuring an average of 205,000 barrels per day (bpd) of crude in 2023.
• However, recent data indicates that Indian refiners did not acquire any US crude in January 2024.
• Red Sea troubles escalated freight rates, rendering US crude economically unviable for Indian refiners. Consequently, Indian refiners reverted to traditional suppliers in the Persian Gulf (West Asia).

• Recently, Chemical tanker MV Chem Pluto was struck by a drone attack, approximately 200 nautical miles off Gujarat’s coast.
• MV Chem Pluto is a Liberia-flagged, Japanese-owned, and Netherlands-operated chemical tanker.
• It had started its journey carrying crude from Al Jubail, Saudi Arabia and was expected to arrive in New Mangalore, India.
• It is believed to have been carried out by Houthi rebels based in Yemen, citing protest against Israel’s actions in Gaza.

Who are the Top Crude-Oil Suppliers for India?

• Status of Oil Imports: India currently is the 3rd largest consumer of oil behind the US and China. It imports 85% of its oil needs and this dependence is likely to rise as domestic production falls.
• India will overtake China as the biggest driver of global oil demand in 2027. Diesel will be the single largest source of demand growth, accounting for almost half of the rise in the nation’s demand (International Energy Agency).
  
  Major Oil Suppliers:
• Russia: Russia is currently India’s largest supplier of oil. Russian oil imports to India surged to 1.53 million barrels per day (bpd) in January, 2024.

• India capitalised on discounted Russian offers following Western sanctions on Russia (due to Russia-Ukraine Conflict), displacing traditional suppliers.
• The Urals crude oil grade of Russia has become a cornerstone of India’s energy diversification efforts.
• Ira: Iraq is the second-largest source of crude supplier to India, with imports reaching 1.19 million bpd in January 2024, the highest since April 2022.
• India’s efforts to diversify oil procurement channels aim to mitigate geopolitical risks and ensure a stable energy supply.

• Saudi Arabia: Saudi Arabia is India’s third-largest oil supplier and exported approximately 690,172 bpd of crude oil to India in January, 2024 maintaining its position as a key player in India’s energy security landscape.
• UAE: Oil imports from the UAE surged by 81% in January, 2024 reaching around 326,500 bpd.
• Abu Dhabi is India’s fourth-largest supplier of crude oil.

What are Government’s Recent Initiatives to Control Surging Oil Demands?

• Promoting Energy Efficiency: Schemes like PAT (Perform, Achieve and Trade) incentivize industries to reduce energy consumption.
• Star labelling for appliances helps consumers choose efficient options.
• Fuel Diversification: Initiatives like the Ethanol Blending Program (EBP) aim to blend 20% ethanol with petrol by 2025, reducing gasoline dependence.
• Similarly, Compressed Natural Gas (CNG) is promoted for vehicles.
• Electric Mobility: FAME scheme is a subsidy programme aims to support electrification of public and shared transportation
• By 2030, the government intends to have an electric vehicle (EV) sales penetration of 30% for private cars, 70% for commercial vehicles and 80% for two and three-wheelers.
• Boosting Domestic Production.
• Attractive Exploration Policies: Production Sharing Contract (PSC) regime, Discovered Small Field Policy, and Hydrocarbon Exploration and Licensing Policy (HELP) aim to attract investments in oil and gas exploration.
• Technological advancements: ONGC is investing in Enhanced Oil Recovery (EOR) techniques aimed to extract more oil from existing fields.

Way Forward

• Diversifying Biofuel Development: Beyond ethanol blending, the government can invest in research and development of advanced biofuels derived from algae, agricultural waste, and municipal solid waste.
• These biofuels can be used in transportation and industrial sectors, reducing the need for fossil fuels.

• Promoting Public Transportation and Active Mobility: Integrated public transportation systems with efficient last-mile connectivity can encourage more people to opt for sustainable modes of travel and reduce the demand for oil-based transportation fuels.
• Green Building Standards: Mandating green building standards for residential and commercial constructions can reduce energy consumption for heating, cooling, and lighting.
• Incorporating energy-efficient designs and materials in buildings can lessen the reliance on fossil fuels for electricity and heating purposes.
• Towards Hydrogen Economy: Developing India as a hydrogen economy can offer a clean alternative to traditional fossil fuels.
• Hydrogen fuel cells can be utilised in various sectors including transportation, manufacturing, and power generation.

India’s Strategic Petroleum Reserves

• Strategic petroleum reserves (SPRs) are stockpiles of crude oil maintained by countries ensuring a stable supply of crude oil even during times of geopolitical uncertainty or supply disruptions.
• These underground storage facilities play a crucial role in maintaining a steady flow of energy resources for the nation’s growth and development.

• As per the terms of the International Energy Programme (I.E.P.) agreement, every nation belonging to the International Energy Agency (IEA) is required to maintain emergency reserves of oil amounting to a minimum of 90 days’ worth of their net oil imports.
• In case of a severe oil supply disruption, IEA members may decide to release these stocks to the market as part of a collective action.
• In 2017, India attained the status of an associate member within the International Energy Agency.

Current SPR Infrastructure and Capacity in India:

• Indian Strategic Petroleum Reserves Ltd. (ISPRL) was created by the Government of India as a Special Purpose Vehicle under the Ministry of Petroleum & Natural Gas in 2004.
• India’s existing underground SPR facilities have a combined capacity of 5.33 Million Metric Tonnes (MMT) of crude oil. These storage sites are strategically positioned across two states:
  -Visakhapatnam, Andhra Pradesh – 1.33 MMT capacity
  -Mangaluru, Karnataka – 1.5 MMT capacity
  -Padur, Karnataka – 2.5 MMT capacity
  
  Filling Strategy:
• Leveraging the opportunity presented by low crude oil prices in April/May 2020, India successfully filled its existing SPR facilities to full capacity.
• This tactical move resulted in substantial notional savings, estimated at around INR 5000 crore.
• Expansion Plans and Commercial-Cum-Strategic Facilities
• In July 2021, the Indian Government granted approval for the establishment of two additional commercial-cum-strategic SPR facilities.
  -Chandikhol, Odisha – 4 MMT capacity
  -Padur, Karnataka – 2.5 MMT capacity (expansion)
  These facilities, totalling a storage capacity of 6.5 MMT, will operate under a Public Private Partnership (PPP) mode.
  
• Transfer and Timeline:
• At the conclusion of the 60-year Concession Period, the concessionaire will transfer the SPR, along with associated infrastructure such as Single Mooring Points (SPMs) and onshore/offshore pipelines, back to the Government of India.
  
• History of Reserve:
• In 1990, during the Gulf War in West Asia, India was grappling with a significant energy crisis, with its existing oil reserves deemed sufficient for only a mere three days.
• Although India successfully averted the crisis at that time, the persistent risk of energy disruptions remains a tangible and ongoing concern.
• In an effort to tackle this energy insecurity, the administration led by Atal Bihari Vajpayee put forward the idea of establishing strategic petroleum reserves in 1998.
• In the present day, as India’s consumption of energy continues to rise, the rationale for developing such reserves becomes increasingly compelling.
• Biggest Global Strategic Petroleum Reserves in the World:

• United States- 714 million barrels
• China- 475 million barrels
• Japan- 324 million barrels

Practice Questions for Prelims

Choose the correct statements:
1. Strategic petroleum reserves (SPRs) are stockpiles of crude oil maintained by countries.
2. As per the terms of the International Energy Programme (I.E.P.) agreement, every nation belonging to the International Energy Agency (IEA) is required to maintain emergency reserves of oil amounting to a minimum of 6 months’ worth of their net oil imports.
3. In 2017, India attained the status of an associate member within the International Energy Agency.

a) Only 1 and 2
b) Only 2 and 3
c) Only 1 and 3
d) All of the above

Ans. c)

Mains Practice Question

The global trade disruptions pose unique security challenges in an increasingly unpredictable world. Suggest some foreign policy measures that India can take to tackle the situation.

Chetan Bharat Learning is the best institute in Chandigarh for UPSC IAS ,PCS preparation. To know more about Chetan Bharat Learning’s Online & Classroom Courses, click on the following links: