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India fuels the Global Energy Discourse: A round-up of the 2018 IEF Ministerial conference

Ravi Sankar

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India recently took another step in showcasing its potential for global leadership in the field of sustainable development by hosting the 16th International Energy Forum – Ministerial Conference. The event was held in New Delhi from 10th to 12th April 2018 on “The future of global energy security – Transition, Technology, Trade, and Investment”. This was the second major event on energy hosted by India in recent time. The International Solar Alliance Summit was held in March, where India for the first time turned into a headquarters for the global solar alliance.

IEF is the world’s largest platform for energy ministers. The member countries account for 90% of global supply and demand in energy. India has been a permanent member of the IEF Executive Board since its set up. This time, energy ministers from 50 countries, CEOs of 30 MNCs, Heads of 12 International Organizations and over 500 guests took part in the conference.

It is important to understand the context of the conference. The energy sector is complex and has played a key role in making and breaking of economies in the last 150 years. The present world energy trilemma is the challenge to provide secure, affordable, environmentally sensitive energy to all against the backdrop of is the rapid technological disruption.

We live in a time of increasing uncertainties, shifting roles and emerging configurations. In the recent past, 195 countries in December 2015 signed the Paris agreement on environmental measures. The US withdrew in 2017. Further, the disruption made by the discovery of shale oil caused a glut in the industry, forcing the OPEC and 10 non-OPEC countries to call for a production cut. The agreement is going to end in 2018. The shale oil boom might continue and these countries could again go for a production cut to avoid crude oil glut in the market. Taking these into consideration, a conference like this is essential for a dialogue between politics, economics, and markets. This is also a platform for G2G, G2B, B2B partnerships.

The conference was hosted by India with China and South Korea as co-hosts. Prime Minister Narendra Modi and Dharmendra Pradhan, Minister for Petroleum and Natural Gas & Skill Development and Entrepreneurship inaugurated the conference. Prime Minister Narendra Modi, in his inaugural address, stressed on energy access, efficiency, sustainability, and security. He also mentioned about the need for a  supportive relationship between producer and consumer countries. Modi said India would be a key driver of global energy demand in next 25 years. The ministerial dialogue for informal discussions on these was structured in four thematic plenary sessions and four parallel roundtables.

The plenary sessions were focussed on:

  • Global shifts: The Future of Global Energy Security – Finding New Balances
  • Sustainable and Inclusive Growth – Energy Access and Affordability
  • Oil and Gas Market Stability and Change – Investment in a New Era
  • Uptake of Clean Technologies: Disruption and Coexistence of New and Existing Technologies – The Way Ahead

Parallel Roundtables:

  • Refining and petrochemical sector: New growth potentials and rationalization
  • Fiscal regimes and legal reform to attract investment in the energy sector
  • Energy sector digitization: Benefits and challenges
  • Human resources: Attracting talent to a vibrant industry – Integrating new generations and technologies.

India presented that energy would be a key engine for its economic growth and mentioned it’s ambition to generate 175 GW of clean energy by 2022. India signaled that it is open for investments in the Oil and Gas sector. Gas trading hubs, to control the gas pricing across the nation would become functional by end of 2018. India is also developing energy infrastructure in its neighboring countries.

Informal meetings at policy and technical levels took place, with an aim to improve policy and investment decisions through increased knowledge and experience sharing. India along with China, responsible for 50% of growth in global energy demand, called for reasonable pricing, in the response to the Asian premium that makes us pay 6$ per barrel more than other western countries. Saudi Aramco, one of the world’s largest oil company partners with IOCL, HPCL, BPCL  to set up world’s largest refinery in Ratnagiri, Maharashtra with 44 billion USD (3 lakh crores) investment.

As solar and wind tariffs of India are cheap at  Rs. 2.44 per kWh, Bangladesh expressed its interests to buy at least 2000MW of the solar power set up in Gujarat and Rajasthan. Zambia expressed its interests to learn from India’s expertise in renewable energy and also said that China with its effective pricing and low-interest rates is able to win their bids. The Iranian oil minister cautioned the world against politicizing the global oil market, noted that adopting such policy will harm not only suppliers but also customers. ONGC Videsh Ltd has recently cut a deal with Iran over Farzad-B field. ONGC also expressed that it will produce gas from KG Basin by end 2019 and oil by 2021. UAE is exploring Hydrogen for its future energy strategy. The valedictory address was given by the Minister of External Affairs Sushma Swaraj.

Energy is one of the prime drivers of economic and social development. Of the top 20 in the Fortune 500,  seven are oil companies. The oil sector had played a crucial role in making countries powerful. Because of raising environment measures and technology disruptions every decade, organizations like IEA, OPEC, IEF are continuously working to stabilize these disruptions. India with its high GDP growth rate might be responsible for one-third of the global growth in energy demand till 2030 and is also trying to project itself as a global leader for sustainable growth. We wish to see India fulfilling these promises both to the Indian public and the world. In a world where, Energy, Infrastructure, and Connectivity are the key players, India seems to be making the right moves.

The author has an interest in issues concerning socio-economic development through global energy dynamics. He has built prototypes for Road Power Generation and published the same. He worked as a consultant for global energy MNCs through NTT Data, before joining Vision India Foundation, a public-policy think tank.

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Potential of Pakistan’s Power Sector

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A few years ago, several hours of load-shedding in Pakistan was very common, even in Islamabad, the capital of Pakistan was without electricity for 6 hours on daily basis. Thanks to CPEC, thanks to China, who has completed several power projects and the people of Pakistan are relieved a lot. Now there is still load-shedding but only for couple of hours. The country was able to produce 16000 MW of electricity in the 7 decades almost. And most of the mega projects were completed in 1960s or 1970. Last 4 decades the nation was unable to add any significant amount of power into national grid.

China helped Pakistan to over-come its power shortage and just within few years, under CPEC, the country was able to add 11000 MW of power into National Grid. There are several power projects under execution or in the pipe line. It is believed, that next couple of years and we may get rid of load-shedding absolutely. However, it is also expected that due to planned industrialization, the demand may also increase tremendously. We still need to focus on the power generation, transmission and distribution. As the transmission is rather old and line losses are rather high. There is a need to up-grade our transmission system on urgent basis. The major issue is still the distribution, which resulted in theft of electricity. Line losses and theft made electricity rather expensive as it has to be recovered from consumers.

However, Pakistan possess potential of 65000 MW hydropower generation. Some of the sits are natural dams and suits for electricity production easily. Building big dams or mega dams, require a lot of investment as well as technical expertise too. But, small dams are easily constructed by our private sector. The requirement of investment is within the reach of our private sector and the technology required is also available within the country.

Dams also store water which will be additional value for Pakistan. As Pakistan is a country which faces water related disaster twice a year. During the rainy season, heavy rains causes flood every year and damages our crops, cattle’s, villages and loss of human live. Floods cause spread of seasonal diseases and epidemics also cause a big loss to nation. Just after a few month, Pakistan faces drought season too. During the drought season, water shortage cause big damage to human life and animals’ and husbandry. Crops suffered heavy losses due to shortage of water.

If appropriate dams are built, it may generate power to meet the national requirements as well it stores water during rainy season to avoid floods and utilize water during the drought season. We can overcome some of our serious problems by indigenous technology and domestic resources, without going to International donors.

Usually building big dams requires a long time 10-15 years, but our political system is based on 5 years tenure term. Most of political parties do not initiate any project, which cannot be completed within their tenure and they get benefits of completed projects during the election. As a practice, most of political parties never takes any initiatives, which may goes to credit of next government. But recently, Pakistani voters have become matured and they understands the worth of long term projects and may vote for those who are visionary leaders and sincere with Pakistan, and take long tern initiatives for the best interest of the nation. Our political parties may also up-date their strategies accordingly.

Not only hydropower, even Pakistan is rich with coal. Only Thar coal can meet the nation’s energy requirement for next 500 years. Coal technologies are on its path of rapid development. There exists technologies to convert coal into natural gas, or diesel. Coal can also help the whole downstream hydrocarbon industry too. Clean coal technologies are already applied in the field. Pakistan can be major beneficiary of its coal reserves.

God has blessed Pakistan with unlimited solar energy. There are areas in Pakistan, where the Sun shine duration is above 300 days in a year, and upto 18 hours of Sun shine on daily basis. This unique potential may be exploited for green and clean energy. Wind is also one of our strength.

What do we need? An enabling policy from Government of Pakistan. The policy may be focused to attract local entrepreneurs based on incentives. Sustainable and long term incentives, and protection may be the priority of Government. Our private sector possess the potential of rapid growth. It may include International market too. But the indigenous know-how and domestic investment may be given priority.

If PTI government can deliver something like this, their next elections are guaranteed to win.  As per my perception, Imran Khan, the prime minister of Pakistan has vision, has will and sincere with the nation, based on our understanding, we expect he will take serious notice of things and include power sector in its priority too.

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Back to the future

Laszlo Varro

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In the classic Back to the Future movies, the future was powered by a decentralized clean-energy system. Houses and flying cars ran on fuel cells fuelled by residential garbage. The technology itself isn’t particularly far-fetched – not the flying car bit, but the process to power a fuel cell from hydrogen produced by methane from garbage is relatively straightforward for today’s biogas plants.

But time travel aside, what the 1980s vision of the future missed are the actual technologies that emerged started to reshape our energy system in the last three decades since the movies came out – namely wind, solar and battery electric cars. While the present of the energy system is strikingly similar to the 1980s with a practically unchanged domination of fossil fuels, the expectations of what will follow shifted. This is a very different future and one that creates a delicate challenge for the electricity sector.

Transport is a huge and growing energy consuming sector. It represents 28% of total final energy consumption, and is responsible for almost 60% of global oil demand. Electricity is used in transport, though today mostly in electric railways compared to which electric cars are still minor.

If garbage, or, in a more scalable fashion, biomass or hydrogen produced from natural gas, were to provide a clean-energy alternative for transport, the transport sector could move away from oil without integrating more deeply into the electricity sector. There would be no need to deploy new infrastructure to support electric car charging, no concerns about charging times and impacts on power flows, it would be business as usual for electricity.

In addition, garbage is easy to store, and fuel cells can regulate their production in a flexible fashion. In technical terms this creates decentralised dispatchable clean-energy production – meaning it can collect power into a central system, much like the current system. Such a technology would enable the continuation of a hundred-year paradigm of regarding electricity demand fluctuations as a given and managing the system from the supply side.

But, this market is tiny. Only a few thousand residential fuel cells are sold in Japan each year, nothing compared to the millions of solar panels sold around the world. To be sure, solar production varies with the weather and it is often not well correlated with demand. A solar rooftop with a battery in the garage seems like a perfect distributed dispatchable solution and generates increasing attention. However, more than 99% of the solar panels are deployed without batteries – their variability is handled at the system level rather than at a project level. In fact the optimal location is of batteries is often not next to the solar panel but in specific network nodes where their operation can relieve bottlenecks.

Solar and its twin brother, wind experienced a radical technological progress, cost declines and are rolled out at an impressive scale. While the energy system will continue to rely on a diversified set of fuels and technologies, the rapid growth of wind and solar will have to play a key role in tacking  disruptive climate change. Nevertheless, both of them generate electricity which accounts for only 20% of energy consumption today.  The full potential of wind and solar will be realised only if a much higher proportion of energy is consumed by electrifying other sectors, including transport. Such electrification not only reduces direct fossil fuel use in vehicles or buildings, but if done smartly it unlocks need new flexibility sources that wind and solar will need for really large-scale growth.

The transport technology that generates the most excitement is electric cars. Although personal cars represent only a minority of the oil use of the transport sector, electric cars capture public imagination in a fashion that is disproportional to their energy footprint. As a result, they tend to dominate discussions on the future of energy even though ships, aircraft or heavy trucks are most likely to continue to use oil for a considerable time. Linking electric cars to wind and solar creates major opportunities but also challenges. Cars and wind and solar production will need to interact through an interconnected system. An EV can’t be self-sufficient when coupled with a residential rooftop solar panel since solar production is low in the winter precisely when the car has a higher electricity need. In temperate climates, nearly all solar households remain connected to the grid with a changed utilisation pattern and wind is evolving towards a quintessential utility scale big business where technological progress makes wind turbines bigger and bigger rather than small and decentralised.

While early adopter electric cars used in suburban commuting can take advantage of the existing network and charge in the garage of the owner for mass adoption and long distance travel a new infrastructure development will be needed. High capacity chargers will require network reinforcements as well as a careful coordination of when the cars charge. Due to the energy density of hydrocarbons, it is not possible to copy the gasoline lifestyle to the electricity age. Plugging in and quickly filling the car at sunset will be part of the problem, responding to changes in wind with smart charging will be part of the solution.

A dominant role of electricity is not a new dream. The 19th-century science fiction novels of Jules Verne are full of electric cars, battery powered submarines and even electric helicopters. This electric future was delayed by the century of oil, but it is now arriving. Its features are becoming increasingly clear: A new electricity network that is more robust and more flexible at the same time. A new market design that is able to orient and optimise millions of producers, consumers and prosumers giving value to time and location. A new transport system where parking vehicles are not idle but act as active system assets.

Because of its security implications and importance to modern society, electricity will remain a heavily regulated industry where government policy plays a crucial role in guiding the transformation. This complex interplay of technology, investment, policy and regulation shaping the growing role of electricity will be depicted in the upcoming World Energy Outlook focus. In special effects, it might not be up to Hollywood’s standards, but it will be as exciting and innovative.

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Israel’s Gas Ambitions are Valid but Challenges Remain

Antonia Dimou

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The discovery of Israel’s natural gas resources promise important benefits of energy security and economic gains. Israel is a leading country because preparations to extract gas are already at advanced stages despite that its gas fields’ development has proved to be a lengthy process.

Delays are attributed to the fact that the fields’ development is capital intensive and entails risks that unsettle investors. A major risk is the lack of energy transportation infrastructure in Israel. Leviathan field partners namely Noble Energy, Avner Oil Exploration, Ratio Oil Exploration and Delek Drilling are likely to develop infrastructure used exclusively by Leviathan, blocking out competitors and endangering prospects for future gas discoveries in Israel. In particular, the likelihood that competitors will have to finance their own transportation infrastructure, raises the costs of developing smaller fields at prohibitive levels. Concurrently, the Israeli Leviathan field’s development, the largest exploration success since December 2010,is capital intensive given that it requires significant investment that will be carried out in two stages: the first stage foresees four development wells with an annual capacity production of 12 billion cubic meters (bcm) of gas, and, the second, four additional wells that would increase production capacity by another 9 bcm.

In regional terms, Israel’s efficiency as a gas exporter is significant. This is evidenced by the signing in early 2018 of two agreements valued $15 billion between Leviathan and Tamar fields’ consortium and Egyptian company Dolphinus Holdings for the provision of 64 bcm of gas over a ten-year period. The agreement are expected to produce three benefits. First, Egypt is a viable export market for Israeli gas and will thus generate interest from foreign energy companies to bid for licenses in future Israeli international auction rounds. Second, the Israeli government would benefit financially from royalties on sales and taxes on profits. Third, Leviathan partners will secure funding for the field’s development.

Reservations however subsist when it comes to the transportation of Israeli gas to Egypt via the existing pipeline infrastructure in Sinai as terrorist attacks on the pipeline could halt exports from Israel as it happened in 2012. The prospect of terrorism raises the cost of the Israeli fields’ development because of the increased risk premium. It is in this spirit that the construction of a subsea gas pipeline that connects Israel to Egypt could present a safer option. In any case, transportation of Israeli gas to Egypt is not only a milestone in regional gas cooperation, but also supports authentic Israel-Egypt normalization.

Israeli government interference in the form of heavy regulation and bureaucracy is a self-inflicted wound that prevents foreign energy companies from participating in bidding processes. Despite the approval of a revised framework for gas regulation by the Israeli government,  the first Israeli bidding process received limited attention taking into account that only a Greek energy company and a consortium of Indian companies participated. Notably, the main outlines of the revised gas regulatory framework included the mandatory sale by Delek Group Ltd, Avner Oil & Gas LP and Delek Drilling LP of all their rights in the Israeli Tanin and Karish fields that are currently owned by Greek Eneregan Oil & Gas Company; and, a stability clause which foresees that the Israeli government guarantees regulatory stability for ten years.

On a parallel level, overlapping maritime claims between Israel and Lebanon over a 854-square kilometer maritime boundary carry the risk of escalation. The January 2018 signing of Lebanon’s first exploration and production agreement (EPA) with a consortium of companies led by French Total as operator, and Italian Eni and Russian Novatek as partners signals competition that could evolve into confrontation over energy resources. Undoubtedly, in the absence of mutual diplomatic recognition between Lebanon and Israel, no trans-boundary natural resource sharing initiative can be taken. The consortium’s announcement that no operation within 25 km of the disputed area will happen leaves room for a third party mediation to minimize the risk of armed conflict and to work on reciprocal acceptance of the 2012 American proposal so that consensual and authorized economic activity becomes feasible. Noteworthy, the 2012 American proposal involved division of the disputed area granting Lebanon a larger share with the aim to serve as basis of bilateral discussions and be deposited with the UN.

To fulfill its energy potential, Israel should speedy proceed with the supply of gas pumped directly from the Leviathan and Tamar fields to LNG plants in Egypt as this will benefit both Egypt’s natural gas industry and development of Israeli fields.  Israel should also invest in security of its energy supply to refute the notion of insecurity that prevents foreign energy companies from investing in the country’s gas fields. Equally important, risks that concern investors like export sustainability should be addressed by guaranteeing a certain amount of financial recovery though the existing compensation mechanism. A transparent and predictable Israeli regulatory environment for foreign investors and access to external sources of project finance and loan guarantees and production commitments in Israel are important for the development of export oriented gas resources.

Unquestionably, decisive steps have to be taken by Israel so that a new horizon is revealed; the horizon of indigenous energy development.

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