12-March-2025-Editorial

INDIA-US ENERGY TRADE AND INDIA’S ENERGY SECURITY

India has decided to increase its oil and natural gas imports from the United States, aiming to boost energy trade from USD 15 billion to USD 25 billion. This move aligns with the broader goal of doubling bilateral trade to USD 500 billion while enhancing energy security and economic ties amid global geopolitical changes.

Why is India Expanding Energy Trade with the US?

1. Ensuring Energy Security

• India is the world’s third-largest importer and consumer of oil, meeting over 85% of its crude oil needs through imports.
• With energy demand expected to double by 2040 due to economic growth, securing stable and diversified supply sources is essential.
• Increasing energy trade with the US reduces dependence on Middle Eastern and Russian supplies, lowering risks from geopolitical tensions.

2. Strengthening Bilateral Trade

• Expanding energy imports balances India’s trade surplus of USD 45.7 billion with the US.
• It aligns with the ‘Mission 500’ initiative to increase bilateral trade to USD 500 billion by 2030.

3. Infrastructure and Economic Growth

• Affordable US crude and liquefied natural gas (LNG) support India’s industrial expansion, refinery development, and petrochemical investments.

4. Geopolitical Advantages

• Stronger US-India energy ties help India gain full membership in the International Energy Agency (IEA).
• It provides a counterbalance to China’s influence in global energy markets.

Current State of India’s Energy Consumption

1. Crude Oil

• Imports (2023-24): 234.26 million tonnes.
• Dependence: India imports 87.8% of its crude oil; domestic production meets only 13% of total demand.
• Future Demand: Expected to grow at a 4.59% annual rate, reaching 500 million tonnes by 2040.

2. Petroleum Products and Diesel

• Diesel is India’s most consumed petroleum product, accounting for 40% of total fuel consumption.

3. Natural Gas and Cleaner Fuels

• LNG Imports (2023-24): 31.80 billion cubic meters, worth USD 13.4 billion.
• Target: Increase natural gas’s share in the energy mix to 15% by 2030 (from the current ~6%).
• Ethanol Blending: The ethanol blending target has been advanced to 20% by 2025-26, reducing fossil fuel reliance.
• Impact: Ethanol blending has cut CO₂ emissions by 544 lakh metric tons and reduced crude oil imports by 181 lakh metric tons.

India’s Strategies for Meeting Energy Needs

1. Increasing Domestic Production

• India plans to expand its oil and gas exploration area from 0.5 million sq. km to 1 million sq. km by 2030.
• New exploration projects in the Krishna-Godavari (KG) Basin and offshore areas aim to boost domestic output.

2. Expanding Global Energy Partnerships

• India imports oil and gas from the US, Russia, Brazil, Canada, and African nations to ensure energy security.
• Russia now supplies 40% of India’s crude oil, compared to less than 1% before 2022.
• Strengthening ties with the IEA and OPEC+ ensures long-term supply contracts.
• India has initiated the Global Biofuel Alliance to promote biofuel adoption worldwide.

3. Expanding LNG and Gas Infrastructure

• The Unified Pipeline Tariff supports a “One Nation, One Grid, One Tariff” system, benefiting remote consumers.
• India is expanding city gas distribution networks and LNG import terminals to meet growing demand.

4. Strategic Petroleum Reserves (SPR)

• India’s SPR program provides a buffer against supply disruptions and price fluctuations.
• Plans include commercializing 50% of SPRs to raise funds for additional storage and counteract high oil prices.

5. Clean and Renewable Energy Expansion

• India aims for 500 GW of renewable energy capacity by 2030 through solar, wind, and hydro projects.
• Government initiatives support ethanol blending, biodiesel, and compressed biogas (CBG).
• In 2024, India announced a USD 67 billion investment in hydrogen energy projects to promote clean fuel adoption.

6. Policy Reforms to Attract Investments

• Foreign Direct Investment (FDI): 100% FDI is allowed in oil & gas PSUs, private refining projects, and exploration ventures.
• Hydrocarbon Exploration and Licensing Policy (HELP): Encourages domestic production by easing regulatory restrictions.
• Incentives for Green Energy: Government subsidies promote electric vehicles (EVs), green hydrogen, and biofuels.

Conclusion

India’s rising energy demand requires a comprehensive strategy involving import diversification, refinery expansion, and clean energy investment. Strengthening trade with the US enhances supply security, supports economic growth, and aligns with India’s long-term energy transition goals.