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Last Updated: Saturday, 5 February, 2005, 17:39 GMT
Indian ambitions in the pipeline
By Ethirajan Anbarasan
BBC Tamil service

An Indian oil worker walks through a refinery
India imports more than 70% of its oil
India is embarking on a concerted "pipeline diplomacy" to meet its growing energy demands, an effort that could bring about a major shift in the oil economy of Asia.

When Indian officials sit down with Iranian, Bangladesh and Burmese oil ministry counterparts in the coming days, the negotiations are expected to be long and tortuous.

But if deals are struck it would be to the advantage of India, whose energy demands, both in oil and gas, are expected to double by 2020.

With a growth rate of 6-7%, India needs sufficient and cost effective energy from internal as well as external sources.

Considering that India imports more than 70% of its oil, the quest for energy security has been topping the diplomatic agenda as well.

Sharp differences

In the past few months, two major breakthroughs for Delhi include agreeing with Iran to transport gas via Pakistan and getting Bangladesh's consent to allow a transit gas pipeline from Burma. But final agreements are still being negotiated.

Mani Shankar Aiyar
It is time Asian countries woke up to the imperatives of Asian co-operation
Mani Shankar Aiyar,
Indian petroleum minister

"Our primary focus is now to convert these in-principle deals into firm techno-commercial agreements. If these can become a reality then it would herald a new beginning in the Asian oil economy," India's petroleum minister, Mani Shankar Aiyar, told the BBC.

A former diplomat himself, Mr Aiyar enthusiastically talks about "pipeline diplomacy", through which he hopes to bring about a change in India's relations with its neighbours.

A few months ago it would have been unthinkable for Bangladesh to strike any deal on either exporting gas to India or offering a transit pipeline for Burmese gas.

Delhi and Dhaka differ sharply on issues ranging from water-sharing to allegations of terrorists operating from Bangladeshi territory.

But economic needs combined with pragmatism seem to have changed minds in both the capitals.

Any overland line to Iran will have to transit Pakistan

Indian officials say with the proposed deal Bangladesh can get a hefty transit fee and eventually Dhaka may also decide to sell its gas.

For its part, Dhaka is reportedly trying to extract additional concessions from its big neighbour - like a trade corridor to land-locked Nepal and Bhutan.

India is also eager to get Iranian gas.

But any overland pipeline will have to cross its arch-rival Pakistan.

That pipeline could trigger a backlash from Islamic hardliners there.

To bypass potential pitfalls, India is now proposing two separate agreements - one between India and Iran on the purchase of gas and another between Iran and Pakistan for the pipeline.

"The best way to protect this deal is not to be a party to the pipeline at all," says Mr Aiyar.

"We can merely be a party to the purchase of gas," says Mr Aiyar.

India would then avoid entering into any direct agreement with Pakistan.

Risky strategy?

The Indian government may be hard-pressed to satisfy its energy requirements, but on the other hand Indian oil companies are extending their reach - from Russia to Angola.

The biggest risk is not to secure India's energy security
Mani Shankar Aiyar

In the past few years, India's public sector oil companies - like the Oil and Natural Gas Commission, Videsh and Oil India - have made successful bids in oil exploration and production deals in Libya, Iran and Central Asia.

But India's quest for energy security deals has possible hitches.

Is it a risky strategy to get into political unstable countries?

"The biggest risk is not to secure India's energy security," argues Mr Aiyar.

"If we don't get sufficient energy, then we won't be able to achieve the 7% to 8% economic growth required to abolish poverty."

The other factor, he points out, is that big oil importers have already acquired facilities in trouble-free, oil-rich nations. Being a late entrant, India's options are limited.

With India's oil imports expected to rise from 70% to 85% by 2020, Mr Aiyar's arguments may sound reasonable.

But he is aware that securing energy needs alone cannot offer solutions.

He admits that India's record in energy conservation is far below international standards and emphasises improving energy efficiency.

He also has grander ambitions.

With demand throughout the Asian market on the rise, India argues for a pan-Asian oil co-operation to push for changes in global oil markets.

Oil analysts say consolidation among Asian giants like China, India and South Korea could have an impact on world oil prices in the long run.

"It is time Asian countries woke up to the imperatives of Asian co-operation," says Mr Aiyar.

Pakistan pushes India on pipeline
29 Jan 05 |  Business
India and Iran in gas partnership
03 Nov 04 |  Business
Iran urges India to back pipeline
27 Jan 03 |  South Asia
Bangladesh to consider gas pipeline
16 Jul 02 |  South Asia

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