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The Himalayan Gas Tango

Through September 2009, the government of India has issued a variety of statements designed to quell India's long-lived China bogey. It has done so to contain what it calls panic and scare-mongering about alleged incursions over the India-China border by units of the People's Liberation Army. The 'incidents' (as the Indian media like to call the events) have all occurred over India's north-western border with China, in the mountainous Jammu and Kashmir state.

Officials in both New Delhi and Beijing quickly issued statements to explain away these incidents. The Chinese Foreign Ministry outright rejected Indian media reports that its army crossed the border into India's Ladakh region of Jammu and Kashmir. India's media - in this case an English press whose nationalism is not usually tempered by sound reportage - reported that Chinese troops came more than a kilometre into Indian territory.

In New Delhi, India's Ministry of External Affairs said the incursions will be sorted out diplomatically, with a senior Indian official explaining that the border with China is one of the most peaceful boundaries that India shares with other countries. For its part the Indian Army through its chief, General Deepak Kapoor, said blandly: "There have been several border violations by Chinese troops in the past few months, including an incursion by a helicopter, but they are of not much concern as they are largely inadvertent."

The perception of China by Indians who are over 40 years old is quite different from that of a younger cohort, for whom China means throwaway electronic goods and cheap consumer goods and piles of bootleg DVDs. India and China waged a war in 1962 over territory in what is today north-east India, in the state of Arunachal Pradesh. China is seen by this older group as having first besieged Tibet, and then colonised it. It is seen as having supported Pakistan's military aims in South Asia and as having supported the Myanmarese generals. For this generation, the Chinese dragon is a belligerent menace across all India's land borders.

Myanmar is seen by some commentators in India as all but a Chinese province. China will any week now begin building a twin set of oil and natural gas pipelines from port of Kyaukpyu on the Bay of Bengal up to Kunming in China's Yunnan province. The gas pipeline will transport gas from the Shwe gas fields, which have been taken by a Chinese-led consortium for a 30-year lease. Although India's big public sector energy company, Oil and Natural Gas Commission (ONGC), has a 30% stake in the Shwe field, India's Ministry of External Affairs and Ministry of Petroleum don't sound overly worried by the new pipeline.

The Ministry has let it be known that Yangon's generals had allowed India in 2008 to "build, operate and use" the Sittwe port on the Arakan coast in the Bay of Bengal. India has also been given permission to make the Kaladan river navigable right up to the adjoining Indian state of Mizoram, in India's north-east. There is also an optical fibre network which has been laid from Mandalay to Yangon and onward to the Indian metropolis of Kolkata, in the state of West Bengal. Government officials point out that the private sector Indian oil company Essar is in the oil business in Myanmar and that Tata Motors, the dominant private sector manufacturer of trucks and buses, plans to sell buses to Myanmar.

The Chinese dragon-Indian elephant tango may have a little to do with the state of socio-political unrest in both countries, and the political solution to whip up nationalist indignation that drowns out other concerns. But it is access to energy fuels and creating the means to move fuels (or electricity derived therefrom) which interests both China and India.

In late July, the Gulf Times reported that India had proposed to the government in Dhaka that it import gas from Bangladesh, generate electricity from the gas in a joint venture power plant with Bangladesh (in a north-eastern Indian state close to the border), and export power back to Bangladesh. That may sound like a neighbourly arrangement, but India's gas infrastructure is considered far behind those of 'developed' (more industrialised) economies. European and North American countries are considered to have advanced gas trading markets with gas exchanges, futures and city-wide gas pipelines. "India has none of these," complained the Indian business daily, The Economic Times, "and has a total pipeline length of just 10,600 km. In comparison, even Pakistan has a pipeline length almost five times as much at about 56,400 km."

Two major pipelines run across the country. The older and longer pipeline is the one that connects Hazira (the landing point in the western state of Gujarat) with the consumption centres of Bijapur in the central state Madhya Pradesh and further to Jagdishpur in the populous and large northern state of Uttar Pradesh. This is 3,187 km long. The newer is the pipeline connecting the landfall point for gas from the Krishna-Godavari Basin, which extends into the Bay of Bengal, to the industrial hub of Bharuch in Gujarat state. This pipeline is 1,386 km long.

"The importance of natural gas in India has significantly increased in the last decade due to its efficiency, cost effectiveness and environmental friendliness. India is the 22nd largest natural gas consumer in the world and it is expected that gas consumption will grow at an annual rate of 9.1% until 2020." So says the 'Asia-Pacific gas market growth' (June 2009), a study by the Asia-Pacific Partnership on Clean Development and Climate (the APP) which describes itself as "an innovative effort to accelerate the development and deployment of clean energy technologies". The seven members of the APP partnership are Australia, Canada, China, India, Japan, Republic of Korea, and the USA. The Australian Petroleum Production & Exploration Association (APPEA) is the leader of the project and engaged the global auditing firm PricewaterhouseCoopers to study the APP gas markets.

"There have been some government initiatives to import gas through transnational pipelines," says the APPEA report. "The three most significant proposed pipelines are the Indo-Iran pipeline, the Turkmenistan-India pipeline and the Myanmar-Bangladesh-India pipeline. However despite efforts made by the government, development has stalled due to geopolitical tensions in the region. In view of its proximity to India, the Myanmar project would have the lowest gestation period and is expected to start by 2009/10. Potential imports from this project are limited as the reserve base is smaller than that held by the countries in Central Asia and the Middle East."

In contrast to the glum Economic Times comment, a new analysis by consulting firm Frost & Sullivan (cited in Downstream Today, 06 August 2009) says instead that rapidly rising consumption of petroleum oil and gases, together with liquid chemicals, is bringing growth to the market for transportation of liquid and gaseous cargo in India. "More than half of the liquid and gaseous cargo in India was transported domestically by road in 2008; but with growing consumption, pipelines are expected to gain share from road and railways in the petroleum, oil, and lubricants (POL) segment. The main reasons behind this are higher safety, lower rates of pilferage, and faster transportation time."

By 2010, India's public sector oil companies say they will spend about US$ 11.33 billion on expanding supplies and building new transportation networks for oil and gas. India's Ministry of Petroleum also expects the demand to increase from the 176.4 mm toe (tonnes oil equivalent) in 2007-08 to 233.6 mm toe in 2011-12. Moreover, Reliance Industries, the leading private participant in the Indian oil and gas sector, plans to invest between US$ 5.45 billion to US$ 6.54 billion over the next three years to lay a 10,000 km-pipeline.

The size and scale and impact of India's gas plans, with or without provocation by the Chinese dragon, are in direct contradiction to the country's stated aims concerning CO2 emissions and climate change responsibilities. These aims have been repeated for the last two years in a number of high-profile international fora such as the World Economic Forum, the G8 meetings and at the annual jamborees of the multilateral development banks. India's Central Electricity Authority, the government agency which plans for and guides power sector development and growth, has either not been able to comment on the matter of India's per capita emissions or cannot do so for fear of upsetting the equation that more fossil fuel-based power plants are needed to give each one of India's citizens their right to electricity in the form of a kilowatt hour per day.

It takes a headline like "India has projects of over 45,000 MW running behind schedule" to show how the aspiration of climate change responsibility gets derailed by the economic logic of needing ever more megawatts to support the GDP growth trajectory. The financial daily, Business Standard, had reported on 19 July 2009 that "at a time when the government is trying hard to add power generation capacity of over 78,000 MW during the current Five-Year Plan, projects of over 45,000 MW currently under construction are running behind schedule". The newspaper quoted data from the Central Electricity Authority to show that "projects behind schedule include around 35,000 MW of thermal power projects and 10,000 MW of hydro power projects, a major chunk of which is scheduled to be commissioned during the current Plan period ending March 2012". Using this logic, Indian industry and the business media are in a continuous state of bemoaning the power deficit, the slow pace of addition of megawatts and the perceived impact of these deficits on India's new magic number: 9% GDP growth per year for a generation.

But gas geopolitics harbours no sympathy for magic numbers. Commentator Tariq Fatemi writing (13 August 2009) in Pakistan's news daily, Dawn, said: "Many experts are convinced that it is only the Iran-Pakistan-India pipeline project that is technically viable and economically attractive. But US opposition has prevented any concrete movement on it. In the past year or so, India has lost some of its ardour for it, partly because of the US civilian nuclear deal and partly because of the high price demanded by Iran. The Pakistani leadership claims to be committed to it, pointing to the presence of Presidents Zardari and Ahmadinejad at the signing ceremony of the gas sale agreement earlier on." Fatemi then added: "However, a recent controversy is causing concern. The petroleum adviser has resigned a couple of weeks after his startling disclosure that two countries, one western and the other in the Middle East, were applying pressure on Pakistan to abandon the project. This had come as a rude shock to those who were reminded that the Indian petroleum minister Mani Shankar Aiyar had been eased out soon after his public defence of the project."

Meanwhile, the dragon has become Russia's largest trading partner. "Russia and China are discussing co-production arrangements in oil, gas, and electric power settlements and deals totalling US$ 100 bn, the use of their national currencies in mutual settlements, and Russian officials are even promoting both the rouble and the yuan as new international reserve currencies," commented Dr Stephen Blank in Asia Times, a professor at the Strategic Studies Institute of the US Army War College. He said in his 12 August 2009 commentary that these deals demonstrate "China's growing dominance, through its economic power, of Russia's policy toward Asia, a situation facilitated by the global economic crisis."

The irritation over straying Himalayan platoons is easing, India's garrulous English media has let up and its stock market is bouyant. The signs on the surface are favourable for the industrial-political complexes in both China and India to celebrate the replacement of the G8 with the birth of a G20 which includes them as equal partners. But in the heart of the sub-continent, there are still 299 districts (sub-state administrative units) which have so far been declared as being affected by the drought of 2009. For their residents - the rural cultivators and farm labour - there is succour from neither a magical GDP, nor a gas pipeline nor a seat at the G20 table.

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