UAE, India strike a balance in energy ties

On May 14, 2018, when I sat down to interview Dharmendra Pradhan, then India’s Minister of Petroleum and Natural Gas, who was on an official visit to the UAE, he highlighted a “win-win deal” for both countries. It related to a strategic oil reserve in India’s Mangalore that the two countries had just agreed upon. “The UAE crude oil is going to fill up the strategic storage facility for the first time,” he said, adding that the UAE will invest in India’s storage as part of a seven-year arrangement in which India reserved the first right on that crude.

During the interview, Pradhan also talked about the 10 per cent stake India acquired in Abu Dhabi’s very prolific oilfield, the Lower Zakum. Next on the minister’s agenda during the visit were roadshows to promote and attract investments into India’s upstream and downstream activities. These few revelations then pointed toward a multi-pronged transformation in the India-UAE energy relationship. In other words, an already existing energy synergy was reaching an entirely new level.

Navdeep Singh Suri, India’s Ambassador to the UAE at the time, defined this transformation succinctly. “Until fairly recently, this was a very unidimensional and binary sort of relationship where the UAE was a big oil producer, and we are a big consumer, so it was a buyer-seller relationship,” he remarked.

He attributed the transformation to the Comprehensive Strategic Partnership between the two countries, putting “flesh and bones and structures” into it. “Energy relationships are a key part of that,” he said.

The fundamental of India as the biggest energy growth market in the region has endured, which has been reason enough for an energy producer of the UAE’s scale to engage it. Moreover, India seems determined to have a substantial strategic reserve to meet its exigency requirements. The UAE has been more than willing to become part of that demand-supply equation. Owing to these factors, Ambassador Suri saw “a very bright and energetic future for our energy relationship.”

The clean energy thrust India’s rapidly evolving energy dynamics have often resonated with the UAE’s quest to develop a firm plan for the coming decades. The country has been on its way to getting the balance right. Launched in 2017, the UAE ‘Energy Strategy 2050’ became the country’s first unified supply-demand-based energy strategy, aiming to increase clean energy’s share in the total energy mix to 50 percent by 2050. It also set a target to cut 70 per cent of power generation carbon footprint by the middle of this century.

Targeting an energy mix combining renewable, nuclear, and clean energy sources, the UAE is set to invest Dh600 billion by 2050 to meet its growing energy demand and ensure sustainable economic growth. In other words, and at similar levels, renewable energy and an overall impetus for sustainability have become another dimension of the developing energy synergy between India and the UAE.

At global climate negotiations last year, India committed to reaching net-zero greenhouse gas emissions by 2070. New Delhi also reiterated its objective to mount 500 GW of non-fossil power capacity by 2030, going up from its February 2022 level of 159 GW of non-fossil capacity. Policymakers in India realize that shifting support away from fossil fuels – and toward clean energy – is a vital step toward its net-zero path.

These targets look ambitious yet doable as long as the will to accomplish them remains intact. There is no reason why that wouldn’t be the case, considering how critical this is from a sustainability perspective. Here is the catch: Notwithstanding volatility in the energy markets, India faces enormous uncertainty associated with fossil fuel revenue. In these circumstances, a stable energy partnership with the UAE will benefit it in the long run.

According to an International Institute for Sustainable Development (IISD) study, the extensive range reflects the uncertainty in the pace of policy shifts to clean energy and how much progress has been made toward India’s net-zero target. “Beyond 2030, as fossil fuel use begins to peak and decline, revenues would ultimately fall significantly,” says IISD’s report – Mapping India’s Energy Policy 2022.

Even as India looks for synergy between social protection schemes and clean energy consumption, the country must deliberate a new investment paradigm under the same umbrella. Many would say that is India’s battle to be fought. While that may be true, a greater synergy with the UAE would be another step in the right direction.

Shorter-term developments, such as the Covid-19 pandemic continue to drive India’s energy policy. According to one estimate, New Delhi committed around $150 billion to energy since the outbreak of Covid-19. At least $44.3 billion was for fossil fuels, while $37 billion was for clean energy. With a stable supplier and a potential investor in India’s energy industry, the UAE remains critical to India’s energy needs.

- The writer is a senior journalist and researcher