India’s Energy Diplomacy Amid West Asia Crisis

Context

During the visit of the Prime Minister to the United Arab Emirates (UAE), important agreements are expected to be signed between India and the UAE on Strategic Petroleum Reserves (SPR) and Liquefied Petroleum Gas (LPG).

Key Highlights

• The development comes at an opportune time, when global energy markets are on stress as tensions are mounting in West Asia and disruptions are appearing around the Strait of Hormuz.
• The agreements reflect the India-UAE Comprehensive Strategic Partnership’s evolving significance and India’s enduring commitment to ensuring energy security, diversification, and resilience to global supply disruptions.

Why the India-UAE Energy Partnership Matters

• The role of UAE in the energy security of India.UAE’s contribution for India’s energy security.
• The UAE is in the process of:
  • India’s 4th largest supplier of crude oil
  • Supplies almost 11% crude oil requirements of India
  • India’s biggest LPG supplier accounting for 40% of the domestic demand for LPG.
• Signing of long-term supply contracts between the UAE and India has served to further bolster India’s energy security in times of crisis.

Strategic Petroleum Reserves (SPR)

• Strategic Petroleum Reserves are storage facilities for crude oil that are maintained as an emergency supply of crude oil to:
  • Handle supply disruptions
  • Stabilise fuel availability
  • Avoid price fluctuations.
• Indian Strategic Petroleum Reserves Limited (ISPRL) is responsible for the management of India’s SPR infrastructure.

Key Agreements Expected During PM Modi’s Visit

• LPG Cooperation Agreement
  • The proposed MoU will:
    • Make LPG supply as stable as possible to India
    • Minimize vulnerability in the face of global energy disruptions
    • Ensure that India’s household energy and clean cooking initiatives are supported.
• Termination of Strategic Petroleum Reserve Agreement 
  • The UAE could increase cooperation in India’s crude oil storage facilities.
  • This follows the historic agreement between ISPRL and Abu Dhabi National Oil Company (ADNOC) in 2018 to store more than 5 million barrels of crude oil in India’s Mangaluru reserve.

Importance for India

• Energy Security
  • India depends on imports for more than 85% crude oil requirements.
  • West Asia will continue to be of vital importance to India’s energy requirements.
  • Strategic Reserves are useful for India:
    • Reduce risks from geopolitical conflicts
    • Maintain supply continuity
    • Manage inflationary pressures
• Economic Stability
  • As the price of crude oil rises, so do the costs:
    • Import bills
    • Current Account Deficit (CAD)
    • Inflationary pressures
  • Good energy relations can largely protect the Indian economy from external shocks.

Geopolitical Significance

• The visit to the UAE showcases:
  • The situation of India in West Asia is a balancing act.Indian strategic balancing in West Asia is a balancing act.
• Diplomatic cooperation with known allies
  • India’s expanding presence in the field of energy diplomacy in the region.India’s rising presence in energy diplomacy in the region.

Challenges and Concerns

• Strait of Hormuz Crisis
  • The Strait of Hormuz is one of the world’s most important oil transit routes.
  • A long-lasting disruption will have a huge effect on India’s energy imports.
• Global Oil Price Volatility
  • The volatility in the region has spooked investors, leading to a rise in oil prices.
  • Rising fuel costs impact:
    • Transport costs
    • Fertiliser prices
    • Industrial production
• Dependence on Imports
  • India is still extremely reliant on fossil fuels.
  • Sustainability is only achievable through diversification into renewable energy.

Way Forward

• Strengthening Strategic Reserves
  • India needs to increase the capacity of SPR beyond the existing capacity.
  • More cooperation with Gulf countries to enhance supply security.
• Use of Alternative Fuels
  • Increase investments in:
    • Renewable energy
    • Green hydrogen
    • Biofuels
    • Nuclear energy
• Deepening India-UAE Cooperation
  • Cooperation should grow to:
    • Clean energy technologies
    • Green hydrogen
    • Logistics and shipping
    • Maritime security
• Enhancing Domestic Production
  • India needs to pay attention to these:
    • Increasing domestic oil and gas exploration
    • Energy efficiency measures
    • Gradual shift towards less dependence on imports with time

Source: The Indian Express

Mains PYQ

Q. The question of India’s Energy Security constitutes the most important part of India’s economic progress. Analyse India’s energy policy cooperation with West Asian countries. (2017)

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