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India looks east for gas

Siddharth Srivastava
From Asia Times
September 28, 2005
link to this article.

With the Iran-Pakistan-India (IPI) gas pipeline caught in the US crossfire over Iran, India's quest for energy security continues in other fronts, with progress being made in the proposed Myanmar-Bangladesh-India (MBI) gas pipeline project.

As US interests in these regions is low at the moment, India has been talking in earnest with the two nations to iron out differences on the project. Some analysts predict an early breakthrough, with the project possibly moving onto the implementation stage quicker than expected.

India's zealous Petroleum Minister Mani Shankar Aiyer has been shuttling between Iran, Bangladesh, Pakistan, Myanmar and Central Asian countries. Earlier this month, a fractured leg did not prevent Aiyer from proceeding to Dhaka from London (where he was on a visit) for talks on MBI. Aiyer said there has been positive development on the US$1 billion tri-nation pipeline project. "My impression is that things are moving forward," he said after a one-hour meeting with Bangladesh Foreign Minister M Morshed Khan.

With the IPI in a logjam, deepened by India voting for the possible UN Security Council referral of Iran at the International Atomic Energy Agency meeting at Vienna, Prime Minister Manmohan Singh is believed to have prodded Aiyer as well as Foreign Minister Natwar Singh on the MBI.

The high-level meeting with the prime minister cleared Aiyer's visit to Dhaka for talks to thrash out the details of a trilateral memorandum of understanding with Bangladesh and Myanmar that has been delayed over inclusion of bilateral issues, which India feels should be dealt with independently.

Though Bangladesh stands to earn substantial transit fees of $125 million per year, it has set conditions that include creation of corridors through India to carry out trade with other neighbors such as Nepal and Bhutan as well as steps to reduce its $2.5 billion trade deficit with India.

In January, India had reached an agreement in principle with Myanmar and Bangladesh on the pipeline that will bring natural gas from Myanmar's Shwe gas fields to India via Bangladesh. Under the agreement, Dhaka can decide whether to supply its own gas into the Myanmar pipeline without any fear of depending too much on its giant neighbor, India.

Apart from energy security for India, the deal can improve relations between India and Bangladesh, which have dipped sharply in the last few years due to India's suspicions that Dhaka is ignoring the rise of Islamic extremism and militancy.

Aiyer had said in January: "When you look at a map you may accuse me of dreaming, but as a minister I am paid to dream. We have the Bangladesh-Burma [Myanmar] pipeline, we are looking at a pipeline from Iran that would cross Pakistan, and we want a pipeline from Turkmenistan that would cross Afghanistan and Pakistan."

India has been trying hard to push the Turkmenistan-Pakistan-Afghanistan pipeline. During his visit to Kabul in August, Manmohan said India would prefer to have gas pipelines from both Iran and Turkmenistan. Analysts are, however, skeptical about the natural exportable gas reserves from Turkmenistan.

Aiyer's latest visit to Dhaka assumes significance as New Delhi and Yangon have begun exploring alternatives for importing gas from offshore Myanmar due to failure of progress with Bangladesh. Aiyer has talked of the possibility of constructing the pipeline from Myanmar into Mizoram and onwards to Assam (both in northeast India) and culminating in West Bengal, a total distance of 1,400 kilometers.

This route is approximately twice the length the pipeline would travel if it were to pass through Bangladesh. As a further hardening of its stance, Bangladesh was not invited to the third meeting on the project in New Delhi. However, given the economic advantages as well as higher feasibility, India opened another window for negotiations with Bangladesh. Foreign Minister Natwar Singh visited Dhaka in August and said the tri-nation project would not proceed without Bangladesh's involvement.

Some analysts see India's renewed vigor in MBI due to a possible delay in the IPI project because of US reservations about Iran's nuclear program. With India siding with the US and Europe at the IAEA, it is now apparent that New Delhi does not want to jeopardize its growing relations with the US. In early June, Aiyer made a 10-day trip to Uzbekistan, Pakistan, and Iran to secure long-term oil and gas contracts for energy-starved India. He struck deals everywhere, but caught the attention of US when he arrived in Tehran to announce that India was ready to proceed with the $7 billion IPI gas pipeline. The US at once denounced the project.

As was apparent during Manmohan's recent four-day visit to New York for the UN General Assembly meetings, the US will make it difficult for India to pursue the IPI, with Pakistan also indicating that it might withdraw from the project if the US meets some of its strategic demands. There is thus immense political pressure on New Delhi to show results on the energy front.

India is happy that Dhaka seems to have turned a new leaf, given the economic benefits that can flow and the pressure from India and Myanmar. Briefing newsmen after the talks with Aiyer, Bangladeshi energy advisor Mahmudur Rahman said: "The Indian minister visited Dhaka to understand our stand on the pipeline issue and we tried to let India understand that economic development of Bangladesh would also benefit India." He said Aiyer did not have any objection in principle against Dhaka's conditions but thought that those should not be tagged with the pipeline issue.

India's quest for energy sources is also rooted in the huge supply gaps that need to be plugged. India imports nearly 70% of its energy needs, with estimates suggesting that by 2020 the country will be importing 85% of its energy requirements. India has to tap into international resources for crude oil or natural gas.

India produces about 90 million standard cubic meters of natural gas per day as against its daily demand of 120 million standard cubic meters that is likely to go further in the coming years. The projected demand of natural gas in India by 2020 stands at a huge 400 million standard cubic meters a day which cannot be met domestically.

In the past few years, India's public sector oil companies such as the Oil and Natural Gas Commission and Oil India have made successful bids in oil exploration and production deals in Libya, Iran and Central Asia. Experts say the switch to natural gas and the construction of the three pipelines provides three huge resources of energy from three different directions. This will give India a jump of 20 years to implement other alternative energy like hydrogen fuel.

In an interview, Aiyer said: "Our primary focus is now to convert these in-principle [pipeline] deals into firm techno-commercial agreements. If these can become a reality, it would herald a new beginning in the Asian oil economy ... If these pipelines can bring together countries that have been separated from each other, we can build the biggest geopolitical pact of the 21st century."

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