Natural Gas Can Strengthen Indo-US. Energy Linkages

Natural Gas Can Strengthen Indo-US. Energy Linkages

Modi-Trump Summit has successfully open the avenues of natural gas cooperation between the U.S. and India. The scope of this cooperation is based on the premise of the U.S. shale gas boom and technology advancement in hydrocarbons, which can not only help India to increase its domestic gas production but also increase its share of LNG exports to India. This would go a long way in strengthening India-U.S. energy linkages.

In the recently concluded Modi-Trump Summit, both the U.S. and India didn’t shy away to put forth core issues concerning their bilateral relationship such as issues of trade deficit and adverse investment climate in India raised by the U.S. and issues of Pakistan sponsored terrorism and H1-B visa voiced by India. While these issues, inter alia were well enunciated in the “Joint Statement of United States and India – Prosperity Through Partnership”, the need for energy linkages between the U.S. and India was also find its places. Such linkages form the basis for their economic prosperity and growth, and natural gas has the key role to play in this.

However to establish such linkages, President Trump has sought for removal of barriers for U.S. exports to India, stating that, “It is important that barriers be removed to the export of US goods into your markets and that we reduce our trade deficit with your country. US looked forward to exporting more energy, including liquefied natural gas (LNG) on long-term contracts.”

Thus, natural gas exports from the U.S. to India would help meet latter’s natural gas demands, while addressing concerns growing trade deficit of the U.S. with India. The trade deficit of the U.S. with India currently stands at US$24 billion.

Given the complementary nature of natural gas dynamics between India and the U.S., its role fits well into their energy cooperation. U.S. natural gas exports as well as its technical support in augment India’s domestic natural gas would help latter to increase its share of natural gas thereby addressing India’s climate change concerns.

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In this regard, revisiting the cooperation framework under the U.S.-India Energy Dialogue launched in May 2005 by both the countries would be a good inception. In this way both the countries can reshape their future discourse of energy cooperation. Under this dialogue, there are six working groups formed and oil and gas is one of them.

To strengthen their energy cooperation both India and the U.S. have signed couple of open-ended MoUs on unconventional energy resources, such has gas hydrates and shale gas. In December 2008, for instance, the U.S. Geological Survey (USGS) and Directorate General of Hydrocarbons (DGH) has signed a MoU on resource exploration hazards and environmental issues associated with Gas Hydrates, Field studies and research for Gas hydrate.

Later in November 2010, U.S. Department of State (DoS) and Ministry of Petroleum & Natural Gas (MoPNG) signed a MoU on unconventional gas development cooperation for exchange of knowledge and expertise in shale gas resource characterization and assessment. These deliberations have helped India to move ahead with its shale gas objectives and national gas hydrate plans.

On October 14, 2013, Government of India has announced “Policy Guidelines for Exploration and Exploitation of Shale Gas and oil by National Oil Companies under Nomination regime”, allowing two National Oil Companies namely, Oil and Natural Gas Corporation Limited and Oil India Limited (OIL) to carry out shale gas exploration in 50 and 6 blocks respectively in the first phase.

While already Indian companies such as Reliance Industries, Indian Oil Corporation and OIL have stakes in U.S. shale projects in U.S. oil and gas fracking technology, the U.S. government can sponsor some more visits for Indian officials and commercial concerns to major fracking regions to share fracking technologies to them with a clear and definitive outcome. In the past, there has been such exchanges of officials from both the sides to discuss regulatory and environmental issues related to shale gas development. However, ‘above the ground’ factors such as, unavailability of sufficient land and water, land right issues, etc., would continue to work as obstacles for shale gas development in India.

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Shale gas requires vast tract of land compared to conventional oil and gas drilling, which is a challenge in India due to limited availability of land. Moreover, unlike the U.S. the occupier of the land in India is not entitled to any monetary incentive and environment regulation in India are stringent enough to discourage fracking compared to that in the U.S. where under Trump administration its environmental laws have spurred shale oil and gas development.

Both the countries are also cooperating under the National Gas Hydrate Plan. While the Expedition-02 of this plan is under way, the U.S.G.S. in association with MoPNG has recently discovered highly enriched accumulations of NGH in the Bay of Bengal, with a potentially producible large accumulation of gas hydrates in the Krishna Godavari Basin, off India’s east coast. This is said to be a game-changer for whole world after it is made economically recoverable and in a safe manner.
While both the U.S. and India continues to work together to address aforementioned challenges the former has already opened its door for shale gas exports to nations with whom U.S. has not signed any Free Trade Agreement and India is one of its beneficiary.

This has facilitated Gas Authority of India Limited (GAIL) to sign an agreement for importing LNG from the U.S. wherein from March 2018, it is looking forward to its first LNG imports after it signed a deal for 2.3 million ton LNG supplies over 20 years from Cove Point in 2013. Similarly, it has also signed a contract for 3.5 million ton of LNG with Cheniere Energy Inc’s Sabine Pass project in Louisiana, US, for which supplies will begin in December 2018.

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Trump administration has further called to greater LNG exports to India, primarily to both diversify its exports and address the concerns of growing trade deficit between India.
To give further momentum to reinvigorated energy partnership, both the countries, therefore, have to give greater emphasis to bilateral exchanges through the U.S.-India Energy Dialogue and Oil & Gas Working Group.

Such exchanges could be directed towards mutual investments in oil and gas sector, cooperation on unconventional natural gas, such as shale gas and gas hydrates, more technological and policy exchanges between MoPNG and DoS and international energy cooperation in oil and gas sector.
Thus, through these efforts natural gas can become a significant resource which can strengthen Indo-U.S. energy linkages.

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