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Advanced Economies Vs Emerging Markets: Differing Opinions Come To Fore On Energy Security At IEW 2023

The general consensus at IEW 2023 hammered the fact that oil and gas will continue to play a substantial role in meeting the international energy needs in years to come

Photo Credit : Rohit Chintapali | BW Businessworld


The anticipation for India Energy Week (IEW) 2023, the first major event under India’s G20 presidency, was palpable weeks before its grand opening on 6 February 2023 in the technology capital of the country - Bengaluru. While a great deal of expectations was grounded on conversations around the predictable, global narrative of green/clean energy, the event completely took a different route by emphasising the importance of Oil and Gas for realistic efforts towards energy transition and energy security.

Energy had been a contentious topic against a difficult geopolitical backdrop in 2022. It has continued to be so, or even more so, in 2023, with the western lobby contesting India’s position on acquiring Russian oil at discounted rates.  

PM Modi inaugurates India Energy Week 2023 at BIEC, Bengaluru. BW BUSINESSWORLD/ Rohit Chintapali

India’s crude oil imports from Russia have spiked drastically since the beginning of the Ukraine-Russia war, rising from a market share of less than 1 per cent in India’s imports to 1.27 million barrels per day in January 2023. This market share is now at 28 per cent, according to Vortexa.

According to the Indian Government, roughly 60 million people go to the petrol bunk each morning to fill up and 5 million barrels are consumed in a day. Speaking on these lines, Union Minister for Petroleum & Natural Gas Hardeep Singh Puri said, “(In India) energy security means not having to worry about fuel, whether crude is going to be available or not.”

While the Minister put a lot of emphasis on green initiatives at IEW 2023, he also stressed the importance of freedom to acquire resources to meet the demands and requirements of the country from anywhere. Puri said that India was making long-term supply arrangements, which are predictable and reliable.(Centre) Union Minister for Petroleum & Natural Gas Hardeep Singh Puri speaks during a panel at IEW 2023; Igor Sechin, Russian Oligarch and CEO at Rosneft (Left); Haitham Al Ghais, Secretary General at OPEC. BW BUSINESSWORLD/ Rohit Chintapali

This line of thought was supported by the Organization of the Petroleum Exporting Countries (OPEC), UAE and International Energy Forum (IEF) leaders too at IEW 2023.

India is currently the third largest consumer of energy in the world and its energy demand is expected to expand more than any other country in the future. “It is no exaggeration to say that the future of energy will be determined in India,” said IEF Secretary General Joseph McMonigle.

McMonigle said investments into Oil and Gas need to persist even as the industry presses ahead with clean energy revolution. He said that investments in oil and gas would be crucial for supporting the global economy and protecting the quality of life for many people.

“When markets are tight, the markets send us signals in the form of high prices, signaling the need for investment,” he said, emphasising that oil and gas investments can help mitigate the pricing crisis in the energy sector.  

Citing IEF’s latest findings on upstream oil and gas investment outlook, the IEF Secretary General reported a large increase in investment last year in 2022, where capital expenditure jumped by 39 per cent to USD 499 billion. “This is the highest level since 2014 and the largest annual gain in history. But this increase did not mean the corresponding growth in drilling because costs and inflation also rose steeply,” he said.

The IEF report estimates that an annual upstream in oil and gas investment will need to hit USD 640 billion in 2030 to ensure adequate global supplies. In total, USD 4.9 trillion will be needed until 2030 to meet market needs, even if the growth in oil and gas demand slows down.

“As we saw last year, our high prices and volatility had disastrous effects on households all over the world hitting the poorest people the hardest.”IEF Secretary General Joseph McMonigle speaks at IEW 2023. BW BUSINESSWORLD/ Rohit Chintapali

He said that under-investment in oil and gas threatens energy security and stalls progress on climate goals by increasing reliance on more carbon-intensive options.

“High prices and volatility caused by this under-investment puts at risk public support for climate goals. So, we need to manage the transition,” IEF Secretary General Joseph McMonigle said.

Energy Transition Narrative Skewed Against 'Global South': Leaders

At the COP27 last year, a package of decisions by participating countries committed to limiting global temperature rise to 1.5 degrees Celsius above pre-industrial levels. While such ambitions are well-intended, a host of nations that are still developing and relying on Oil and Gas for energy security are being left in a lurch in recent times, according to the views that came to light during IEW 2023.

UAE Minister and designated COP28 President Dr Sultan Ahmed Al Jaber at the event said the Global South had 800 million people that had no access to electricity and they were being impacted wrongly due to an energy transition that was not inclusive.

“It is not a conflict of interest. It is in our common interest to have the energy industry working alongside everyone on the solutions the world needs,” said Al Jaber.

UAE Minister and designated COP28 President Dr Sultan Ahmed Al Jaber at IEW 2023. BW BUSINESSWORLD/ Rohit Chintapali

The UAE Minister of Industry and Advanced Technology pointed out that the narrative around the energy transition was skewed against the ‘Global South’. “We must address this head-on,” he said.

He said that previous climate finance pledges made by the world have come with a price tag or not at all. While these pledges must be honored, the UAE minister opined that the world must expedite the reform of international financial institutions and MDBs.

“We need to get more concessional finance to vulnerable communities around the world to lower risk and attract more private finance and turn billions into trillions,” he said.

The minister said that capital will be key to operationalise the losses and financing must be increased for communities that are most exposed to the effects of climate change.

Al Jaber called for the global stakeholders in the energy transition to steer away from polarisation and divide. “We must unite our governments, our businesses, scientists, academics, civil society, and women and you all must come on board.”

During his address, Al Jaber said UAE has stepped up investments in nuclear and hydrogen. He said that the country is expanding its global renewable energy footprint to at least 100 Gigawatt by 2030. But he emphasised that plans around renewables alone are not enough.

“The world still needs hydrocarbons and we need them to bridge from the current energy system to the new energy system,” UAE Minister Dr Sultan Ahmed Al Jaber said.

Al Jaber was of opinion that without a breakthrough in battery storage, the world needed to invest heavily into carbon capture and the hydrogen value chain.

“But spending on these fundamental enablers of decarbonisation is less than 5 per cent of what is spent on renewables. And this must change,” he said.(L-R): UAE Minister and designated COP28 President Dr Sultan Ahmed Al Jaber; Union Minister for Petroleum & Natural Gas Hardeep Singh Puri; IEF Secretary General Joseph McMonigle. BW BUSINESSWORLD/ Rohit Chintapali 

Speaking to Reuters on the sidelines of IEW 2023, Tanzania's energy minister January Makamba asked nations to “move away from hypocrisy”. He said that Japan had rejected a proposal to finance gas-fired power plant in southern Tanzania as the country had stopped funding such projects.

“Japan is one of the largest importers of LNG (liquefied natural gas). So, if gas is good for you to run an economy but it's bad for me to generate power, there's a problem,” Makamba told the conference in Bengaluru, according to a Reuters report.

The report also mentioned that Japan had stopped financing two coal power plant projects in Indonesia and Bangladesh in June, responding to global criticism over its continued support for the polluting fuel.

"The choices for me to be able to increase (energy) access and consumption cannot be impaired by politics that have nothing to do with me," Makamba had said at the event.

The energy adviser to the Prime Minister of Bangladesh Tawfiq-e-Elahi Chowdhury told Reuters that there was a surge in gas prices in the country after sanctions were imposed on Russia after war broke out in Ukraine, making LNG inaccessible to the country. This resulted in many hours of power cuts during the second half of 2022 which also affected commercial and industrial power.

"There were ships floating around Western Europe carrying gas, and other countries were not able to buy because of the price," he told Reuters on the sidelines of the conference.

Many such emerging nations still depend on oil and gas to keep their ambitions of development alive. The western narrative of energy transition at that point makes one wonder – if the way forward, as prompted, by the advanced economies is inclusive in nature.

‘Oil Needs More Investment For Realistic Energy Transition’ 

On the first day of IEW 2023, OPEC Secretary General Haitham Al Ghais said that oil needs more investment even as the energy narrative shifts towards cleaner fuels. He said that the oil sector will need USD 12.1 trillion in investments until 2045.

Speaking to BW Businessworld on investments in oil, Shelly Abraham, Head (Renewable Energy) at BPCL said "USD 12 trillion is not a big number in the Oil sector, if you see it. Going by the latest reports, this fiscal year the investment was around USD 1 trillion. But this is likely to come down going forward as investments in renewables go up."

Weighing in on the topic of the practical energy transition, Minister of Petroleum and Gas Hardeep Singh Puri said the process must be done in a manner that would provide a cushion to the most affected and vulnerable people, who get impacted by the volatility and global turbulence in the energy space.

Minister for Petroleum & Natural Gas Hardeep Singh Puri speaks on Energy Security at IEW 2023. BW BUSINESSWORLD/ Rohit Chintapali

He said, driven by global decoupling – the global energy equation is fundamentally different for emerging markets and advanced economies. The energy equation for emerging markets with import dependency is a quadrilemma, wherein the ‘security’ becomes a pivotal and precursor element to the other variables – ‘access’, ‘affordability’, and ‘sustainability’.

“Common public commentary would propose that the solution to the problem is a binary response, the immediate removal of oil and gas and their replacement by low-carbon energy solutions. The reality is more complex because the starting point and there is no playbook as the capacity of each country and region to transition from a reliance on conventional hydrocarbons to low-carbon energy is different across the globe,” said Puri.

He added that the energy transition will be a wave of managed change in the global energy portfolio as opposed to being an event that would progress towards net zero.

Speaking to BW Businessworld, Bryan Glover, President at Honeywell UOP said, “Just the ability to replace fossil fuels with other forms of energy – it's going to take a long time. I think we'll see more and more decarbonisation of the fossil fuel chain, whether it’s through producing fuel as efficiently as we possibly can, or, we'll probably start to see things like carbon capture or green hydrogen participate more in the production of the fuel.”IEW 2023 attendees take photos. BW BUSINESSWORLD/ Rohit Chintapali The general consensus at IEW 2023 hammered the fact that oil and gas will continue to play a substantial role in meeting international energy needs in years to come. The conversations at the event also brought back the focus on inclusive energy security while pursuing energy transition. It will be interesting to see how the advanced economies respond to this emerging narrative.

Also Read: Continued Investments In Oil & Gas Important To Support Global Economy: IEF General Secretary