India has a moral duty to secure oil supplies for its people: Oil Minister Hardeep Singh Puri

India is taking every measure possible to secure energy supplies in times of conflict and economic uncertainty says the country's Petroleum and Natural Gas Minister Hardeep Singh Puri in an exclusive interview to Khaleej Times. On Russian oil supplies to India despite Western sanctions, he says: "If one were to dive deeper and see the per-capita consumption of Russian crude, it will give you an even starker figure of the disparity between India and countries from where some criticism about India’s energy trade seems to be appearing."

The UAE has oil storage facilities in Mangalore and Padur in Karnataka in India. Do you think they are likely to supply more oil as India expands its supplier base?

The UAE is an important energy supplier for India. In 2021-22, our total bilateral trade was over $72 billion. In fact, in FY 2022, 29 per cent of our LPG, 14 per cent of LNG and about 10 per cent of crude oil were sourced from UAE, totalling more than $17.7 billion even as India exported petroleum products worth $5.72 billion to the UAE. It has been among our top five suppliers of crude oil, LPG and LNG.

As I mentioned earlier, India's energy demand is on an upward trajectory. We welcome all parties to enter into mutually beneficial arrangements with Indian companies.

India's ties with the UAE and GCC have grown steadily over the last few years, especially with the rise in oil imports. How do you see this energy cooperation going forward?

India and the GCC share historical ties that are strengthened and enriched by constant dialogue, and as you rightly pointed with a robust energy partnership. For the financial year ended March 2022, our total bilateral trade stood at $154.65 billion – an increase of 77 per cent from 2020-21. Energy trade constituted around 53 per cent of the total trade, which translates to more than $82 bn. Crude imports from GCC alone were close to $50 billion, and in volume, was around 48 million metric tonnes (MMT).

What is important to note is that this relationship is mutually reinforcing and beneficial. For instance, while Saudi Arabia is our second-largest supplier of crude, India is also their second-largest export destination. Similarly, while UAE was the third-largest source of crude oil to India in 2021-22, India was also their third-largest export destination for crude. Indian public sector undertkings (PSUs) have made investments in producing blocks in UAE and Oman whereas Adnoc (UAE) and Saudi Aramco are partnering with Indian companies for investment in petrochemicals.

Since my association with the Petroleum and Natural Gas ministry beginning in July 2021, I have been underscoring the importance of India’s energy demand as well as the importance of other consuming countries to the decision-making processes in the energy sector. These are opinions that many authorities and experts in the world are also echoing. According to BP 2022, India's energy demand is expected to grow two times by 2040 while the recently released World Oil Outlook estimates that India will be the largest contributor to incremental demand by 2045, adding around 6.3 million barrels per day (bpd) against a total increase of 12.9 million bpd.

There is global recognition that India is a leader in the renewables and emerging fuels sector. In fact, our companies have already signed agreements to supply green ammonia to Europe. Such developments have spurred many other countries to partner with India across various verticals of the energy ecosystem. In this context, we are progressing on broadening our relationship with the GCC countries. I was recently at Adipec 2022 where we signed an MoU with Dr Sultan al Jaber, UAE Minister for Advanced Technology and Adnoc Managing Director, covering not just natural gas but also renewable energy.

National oil companies (NOCs) of GCC countries are also partnering with Indian PSUs in the oil and gas sector on greenfield projects, India’s strategic petroleum reserves, and technological advancement in clean energy. India is a preferred investment destination for many GCC countries which want to collaborate in the areas of natural gas, green hydrogen, and clean energy technologies. This partnership is not restricted to our major public sector companies; even Indian private sector companies are patterning with investment firms of GCC countries.

India has been criticised a lot, especially by the Western media, over its increase in oil imports from Russia, even as the Ukraine crisis drags on. What is your take on this 'moral posturing' by the West and some others?

I don't share your assessment. I was recently in the United States for the meeting of the Sustainable Clean Energy Partnership and met with Secretary for Energy, Jennifer Granholm. Similarly, I was invited by both Sultan Al Jaber and UAE Minister of Economy Sultan Al Mazroui last month at Gastech. They did not refer to this at all in our interactions. In fact, it was only some journalists who seemed to ask me questions on these lines.

It is important to appreciate the global scenario under which we are all operating. Russia has been exporting close to 4.5 million bpd, which is roughly around 5 per cent of the global production. In the tight oil markets we are facing currently, ensuring supply stability is important. You would have seen various reports from agencies that have posited that the impact of reduced Russian exports of crude will result in an increase in crude price to between $175-380 per barrel.

As for imports by different countries, you would have seen the recent import figures estimated by Bloomberg. I believe seaborne imports of crude, not including pipeline imports for Europe were more than two times that of India. On top of this, you will need to add Russian pipeline exports. In fact, for the month of September, Europe total crude imports were almost thrice that of India. If one were to dive deeper and see the per-capita consumption of Russian crude, it will give you an even starker figure of the disparity between India and countries from where some criticism about India’s energy trade seems to be appearing.

I have been clear from the beginning; India has a moral responsibility to its citizens. We have to ensure that they are supplied with energy. While developed countries require energy availability to sustain their high standards of living, the requirements of energy in developing countries such as India are to ensure socio-economic development and upward mobility. To appreciate the scale and magnitude of India’s requirements, it is important to bear in mind that 60 million people in India visit petrol bunks every day. Our crude oil imports increased by 15.1 per cent during April-September 2022 year-on-year. Our demand for petroleum products this year has already gone up by 13.4 per cent. This was led by an 18.5 per cent growth in motor spirit (MS), a 16.1 per cent in high-speed diesel (HSD) and a 72.1 per cent in aviation turbine fuel (ATF) consumption during the half-year.

Against this backdrop, one must also consider the proactive steps taken by the Government of India such as introducing revenue cuts to ensure that energy remains affordable. Despite the burden it put on the exchequer, India has not only ensured energy availability and energy affordability for its citizens.

So, while the issue of India’s imports may generate attention in certain sections of the Western media, it is clearly a non-issue when weighed against the larger responsibility India has to its citizens. By and large, decision-makers across the world appreciate the volatile situation currently and the need for a country like India to secure its supply stability. The US treasury secretary's statements a few days which noted that the US is happy for India to purchase as much Russian oil as it wants is another indication of the global position on this matter.

Keeping in mind the fact that coal continues to be major source of energy in India, how does India then plan to make the transition to clean energy?

India is not merely planning to transition to clean energy, but has already taken definitive steps to mainstream sustainability in development and reduce the country’s carbon footprint on relative terms. A clear indication of this progress is that India is the only G20 nation that is on track to achieve the country-level goals set under the Paris Agreement.

The Ministry of Petroleum and Natural Gas in India is maximising the deployment of energy sources like natural gas and biofuels, and emerging fuels such as hydrogen. In the coming decades, India’s energy base load will be met by traditional hydrocarbons wherein natural gas will be both a bridge fuel and an enabler in our transition to clean energy. At the same time, the Government of India has embarked on energy transition pathways by increasing the use of Green and Blue Hydrogen, biofuels, waste-to-wealth through Compressed Bio Gas, and renewable energy including solar and wind.

Over the last 8 years, we have increased the number of city gas distribution connections from 2.5 million to 9.6 million. Around 98 per cent of the country’s population and 88 per cent of the area has been covered is covered by city gas distribution (CGD). We have nearly doubled our LNG terminal Re-gasification capacity from 21.7 million metric tonnes per annum (MMTPA) in 2014 to 42.7 MMTPA in 2022 even as a further 20 MMTPA LNG regasification capacity is under construction. At the same time, our LPG coverage has surged from 55 per cent in 2014 to more than 99 per cent today.

There is a bio-fuel revolution in India today. India’s ethanol blending programme has resulted in a significant jump in blending percentage, with us achieving 10 per cent blending before time. Buoyed by the success, we have advanced the 20 per cent ethanol blending target by five years to 2025. Ethanol is one of the major priorities of 21st century India. We are setting up 2G biofuel refineries with the twin objectives of reducing pollution along with achieving energy security goals. The Indian government is incentivizing in-country production of auto components capable of running on up to Ethanol-85 fuel and has earmarked $3.4 billion for this initiative.

We are also in the process of boosting the rural economy by waste-to-wealth generation under the Sustainable Alternative Towards Affordable Transportation (SATAT) initiative. We have a target to set up 5000 compressed biogas (CBG) plants by 2024 with a production of 15 MMT.

In terms of renewable energy (RE), you would be impressed by the progress India has made. In March 2014, our installed RE capacity, including large hydro, was about 75 GW. Today, it has more than doubled to about 163 GW. In March 2014, our solar installed capacity was just 2.6 GW but it has now crossed 59 GW, increasing by more than 22 times. In 2014, solar tariffs were around Rs7 per unit and wind tariffs around Rs3.5 per unit. They have now fallen to Rs1.99 and Rs2.77 respectively.

This has supported our push for Green Hydrogen, and has enabled us to target to make India an exporting hub by 2030. To this end, we have launched the National Hydrogen Energy Mission (NHEM). We are working with companies in countries such as UK and Germany for the domestic manufacture of electrolysers to make deployment of Hydrogen as an affordable energy source possible. GAIL is setting up a 10 MW PEM electrolyser to produce 4.3 TPD/1.4 KTA Green hydrogen at Vijaipur. It is also in the process of selecting partners for electrolyser manufacturing to aid in the production of Green Hydrogen. Avantika Gas Limited (AGL), an Indian CGD company, has started blending of 2 per cent volume of Hydrogen in Natural Gas for distribution to PNG/CNG/Industrial customers as a pilot project in Indore, and is now exploring the possibility of increasing the share of blending to 5 per cent. Indian Oil Ltd., India’s largest crude refiner, is venturing into Green Hydrogen production, and is targeting 5 per cent of hydrogen produced by it as green hydrogen by 2027-28, and 10 per cent by 2029-30.

Do you think that the India-UAECEPA (Comprehensive Economic Partnership Agreement) can serve as a template for an FTA (Free Trade Agreement) between India and GCC countries?

Discussions regarding the resumption of India-GCC FTA negotiations are ongoing. I will not give any further comments at this time.

The rising prices of LPG in India add to the economic woes of the common man. What is the government doing in this regard and how well is PM Narendra Modi’s Ujjwala scheme working on the ground in ending energy poverty?

Currently, India's import dependency for LPG is more than 60 per cent. As a result, prices are dependent on Saudi Contract Prices (CP). However, the Government of India continues to modulate the effective price of LPG to the consumer.

As you are aware, Saudi CP has varied from $236 per metric tonne (MT) in April 2020 to $952/MT in April 2022 to Rs638 USD/MT in June 2022. To insulate Indian citizens from this volatility, the Indian government has modulated the Retail Selling Price (RSP) of domestic LPG. In the same period as this high volatility was observed in Saudi CP, the RSP of the 14.2 kg LPG cylinder was increased from Rs744 per unit in April 2020 to just Rs1,053 per unit in July 2022. Since then, there has been no increase in the prices. The government also provided a one-time grant to the tune of Rs220 billion (about Dh10 billion) to public sector Oil Marketing Companies such as IOCL, BPCL and HPCL to compensate them for the under recovery from the sale of domestic LPG. It can be seen very clearly that the Government of India has done its best to avoid the volatility passing on to the consumer.

The PM Ujjwala Yojana is globally recognised as a successful exercise of transitioning away from traditional fuels for cooking on such a massive scale. When it was launched on May 1, 2016, the National LPG coverage was a mere 61.9 per cent. Under the scheme, 95.7 million LPG connections have been given to Indian households, most of whom are among the economically weaker or vulnerable sections of society. Presently, the national LPG coverage stands at 104.7 per cent. The total number of LPG distributors across the country has also increased in that time, from 17,916 to 25,326. Due to this, more than 70,000 livelihoods have been created.

The 34th Opec nd non-Opec ministerial meeting will take place on December 4. What is your expectation from the meet and what would you urge them to do?

I do not engage in anticipating what decisions Opec+ will make. Nonetheless, my message to all energy-producing countries is the same. While I agree it is the sovereign decision of countries to judge how much crude should be produced, they have to be cognisant that actions have consequences, intended and unintended.

High prices of hydrocarbons will invariably push consumers away from oil and gas. In India, for example in FY 22, our EV sales increased by over 220 per cent year-on-year. Indian companies have entered into joint ventures with international companies to develop innovative solutions including development of aluminium-air batteries, 2G ethanol production using bamboo feedstock, and manufacture of electrolysers, among others. This has been ably supported by a robust domestic ecosystem. To give you an example, one of our national oil companies, IOCL, has developed a revolutionary indoor solar cooker which not only can be used for all types of cooking, it also has the ability to store energy thus enabling its use in all seasons, regardless of the weather. Necessity is the mother of invention and high prices of energy will spur the entrepreneurial spirit to look beyond traditional hydrocarbons. In India, we have the economic growth, skill, demand and policy framework to support this. The Bloomberg NEF study found that India received close to $15 billion in energy transition investment in 2021 alone.

Based on recent OECD data, 50 per cent of OECD member countries are facing double-digit inflation. Energy inflation was reported to have been above 28 per cent. According to the IMF World economic Outlook Report in published in October 2022, emerging and developing economies are expected to grow by 3.7 per cent in 2022 and 2023 each. This is 0.1 per cent and 0.7 per cent lower than the forecasts in April 2022 respectively.

Against this backdrop, you may note that India alone imports 14 per cent of Opec's total exports. India has taken multiple initiatives to stabilise oil and gas prices, including multiple excise duty reductions impacting revenues while also financing massive social schemes. Naturally, this comes at a significant cost. I believe this is a cost that India and other developing countries in similar predicaments are disproportionately shouldering even as net incomes from oil and gas production reach record highs.

The current high crude oil price is not sustainable in the long term. Since 2001, i.e. the past twenty years, the annual Brent price has been seen above $100 on only three occasions i.e., 2011, 2012 and 2013. The 20-year average annual Brent price has been $65.5 and even the volume-weighted average price since 2001 has been just $66. Even at these price levels, crude oil consumption has seen a steady increase from 3,600 MMT in 2001 to 4,250 MMT in 2021.

Higher energy prices are also resulting in the greater use of non-oil and gas hydrocarbons, and are increasing food insecurity in many developing economies. The heaviest burden falls on poorer households where a larger share of income is spent on energy and food. The S&P Global Commodity Insights reports that the EU plans to increase its existing coal-fired capacity by almost 12 per cent. If nations set up permanent thermal power generation infrastructure, it will be difficult to switch back to the oil- and gas-based power generation system.

India understands the complex dynamics of the global oil market, and we trust that Opec will be cognisant of all the aforementioned factors and its responsibility for reasonable pricing while charting its next move.

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