Spotlight    Address by Mr. Sarthak Behuria, Chairman, IndianOil at 93rd International Petroleum (IP) Week on India's Energy Perspective: Issues & Challenges Good afternoon, Ladies & Gentlemen Greetings from India! It is indeed an honour to address this distinguished gathering and be a part of the 93rd International Petroleum Week hosted by the Energy Institute. I would like to thank Energy Institute for giving me this opportunity. I apologise for not been able to join you in person due to certain unforeseen developments here in India. I most certainly miss being there with you and interacting with the thought leaders in the global energy industry today. I guess, you are amidst tempting food aromas and a sumptuous meal awaits you. I hope the hosts have served the rich and exotic Indian platter for you. Recently, India in general and New Delhi in particular was in the grip of a cold wave and temperatures had tanked to levels as low as 35 degrees Fahrenheit. We have had occasions when New Delhi was colder this season than New York or may be even London. These changes in the climatic conditions perhaps are pointers to our unsustainable lifestyles and forewarn us about the things to come. Today, the global society stands at the precipice of unprecedented change that has the potential to forever influence world history. The most confounding problem that humanity would face in the next decade will be to find a simultaneous solution to its energy needs while addressing the concerns of global climate change. What we do today about climate change and sustainable growth has consequences that will last a century or more. We are aware that the part of that change that is attributable to greenhouse gas emissions is not reversible in the foreseeable future. You and me are therefore making choices today that will affect our own lives, but even more so the lives of our children and grandchildren. Martin Luther King Jr. once said and I quote, "Human progress is neither automatic nor inevitable. We are faced now with the fact that tomorrow is today. We are confronted with the fierce urgency of now. In this unfolding conundrum of life and history there is such a thing as being too late… We may cry out desperately for time to pause in her passage, but time is deaf to every plea and rushes on. Over the bleached bones and jumbled residues of numerous civilizations are written the pathetic words. Too late." Delivered in a sermon on social justice four decades ago, Martin Luther King's words retain a powerful resonance. At the start of the 21st century, we too are confronted with the 'fierce urgency' of a crisis that links our today and tomorrow. That crisis is climate change. The message that we hear from the top climate scientists is simple: our world will be a very different place in perhaps as little as 10 years, and there is little question that this change will have a major impact on the world. Ladies & Gentlemen, let us view this against the spectre of rising energy demand due to growing consumption and improving quality of life the world over, particularly in rapidly growing economies such as India and China. The result is that today, the global economy faces a threatening prospect of an acute energy and resource squeeze that presents a defining moment and impacts our collective future. As resources face a crunch, the demand on energy sources such as coal, petroleum, natural gas and uranium will witness intense scrutiny. As we slide down the Hubbert "Peak Oil" curve, our frenetic efforts rely on energy conservation, alternative energy sources and new finds of traditional fossil fuels. The global oil peak is liable to manifest as a "bumpy plateau." Markets and Prices will wobble- as the oil markets have been doing in the past. International friction will increase, especially around the places where oil resources are. The global peak oil event will change everything about how we live. It will challenge all our assumptions, and no combination of alternative fuel systems currently known will allow us to run what we are running, the way we're running it, or even a substantial fraction of it. Ladies & Gentlemen, the writing on the wall is clear. We will have to change the way we live, we will have to downscale and re-scale virtually everything we do. This reminds me of the amazing book "Future Shock" written in the year 1970 by renowned sociologist and futurologist Alvin Toffler that takes a stab at trying to understand how we would adapt to the future. Those of us who have read the book know that it argues that the society is undergoing an enormous structural change, a revolution from an industrial society to a "super-industrial society". This accelerated rate of technological and social change will overwhelm people leaving them disconnected and 'future shocked'. Likewise, the current pace of growth, metamorphosing societies, evolving lifestyles worldwide are impacting demographics to a considerable extent. It took mankind 125 years to use the first trillion barrels of oil. We will use the next trillion in 30 years, which is actually a "Demand Shock". This surge in consumption has created a very tight balance and is sending oil prices spiraling upwards. This "Demand Shock" represents the success of globalisation, growth of economies, and the best global economic performance in one generation. For you and me and for millions like us, it means escalating levels of trade, rising disposable incomes, increased industrial production and evolving lifestyles, all this eventually translating into growing use of energy. Let me take India, for instance. With a GDP growth rate over 9%, India is on the cusp of an exciting time. Once labeled a 'sleeping giant', India is now emerging as a 'roaring tiger'. We are now amongst one of the fastest growing economies in the world. India is the latest theatre of global action and is considered an 'emerging superpower', and along with China, it forms a formidable economic market. It is estimated that from the current modest contribution of 2% to the world GDP, India will contribute an impressive 17% to the world GDP by the year 2050. Throughout India's history, the vast majority of its people have lived in desperate poverty. As recently as year 1985, more than 90 percent of Indians lived on less than a dollar a day. Yet, India is poised to undergo a remarkable transformation. New research shows that within a generation, the country will become a nation of upwardly mobile middle-class households, consuming goods ranging from high-end cars to designer clothing. In two decades, the country will surpass Germany as the world's fifth largest consumer market. The headlines of India's growth story are well known. Less known, however, is how this growth is reshaping the lifestyle of Indian families. A dramatic transformation is happening that will touch Indians up and down the income pyramid, from the poorest rural farmer to the wealthiest IT entrepreneur, leading to the emergence of a half-billion-strong market that along with China ranks as one of the most important growth opportunities of the next two decades. Today, millions of Indians are buying their first mobile phone, their first air ticket, their first car and are even spending now in taking vacations! A confluence of positive social and economic factors is fusing a new mindset. This new mindset is influenced by a growing self-confidence, expanding consumerism, increased spending power, and greater access to lifestyle goods and services. Sectors such as infrastructure, banking, industrial and consumer finance, automobiles, housing, telecom, entertainment and software are witnessing a surge. As the seismic wave of income growth rolls across the Indian society, the character of consumption will change dramatically in near future. A huge shift is underway from spending on necessities such as food and clothing to choice-based spending on categories such as household appliances and restaurants. With aspirational levels rising, we are witnessing a paradigm shift in the consumption patterns of the new India. India today is a classic case of a nation awakening. All this is a grim pointer to the humongous energy demand that the country is witnessing. Global experience proves that the energy market needs to keep pace with the growth of economy. It is in this backdrop that addressing fellow countrymen, noted scientist and former President of India, Dr. APJ Abdul Kalam, mounted a challenge. He said and I quote, "Energy Independence has to be our nation's first and highest priority. We must be determined to achieve this by the year 2030. This one major, national mission must be formulated, funds guaranteed, and the leadership entrusted without further delay as public-private partnerships to our younger generation, now in their 30s, as their lifetime mission in a renewed drive for nation-building." To fuel the Nation's growth and be a part of the fast expanding world, Indian oil & gas corporates are exploring opportunities abroad and bidding aggressively for developed fields overseas. In order to feed their burgeoning economies, India and China have been seen as fierce competitors in the recent years to acquire oil & gas assets abroad and bolster their energy security. This trend, perhaps, is symptomatic of the shape of things to come. The impact of spiraling oil prices in the recent years has been quite significant on the world in general and on oil importing countries like India in particular. 'The era of cheap oil is over,' is an oft-heard refrain. For years, 'oil security' or 'control of crude oil reserves' has not only been the key buzzwords for the oil & gas industry, but also the key political plank for many organisations around the world. Every country has been vying for control over oil resources by making huge commitments as well as by inviting resource-rich companies to explore their domestic acreages. Any talk on India's energy security and reliance on alternative fuels is rationalised on the basis of high oil import costs arising out of our import dependence to the extent of 75%, which is expected to further rise. Economists have reported that if the oil prices go up by US $10 in future, India's GDP could be lowered by between 0.5 - 1 percent. It may be pertinent to note that developed economies, though having lower energy intensity with respect to GDP, have grown during the low crude oil price regime. Growing economies like India face incredible challenges to balance high import requirements with rising crude oil prices, and at the same time, sustain good growth rates in the current situation. However, the world as well the Indian economy has shown considerable resilience in the face of surging oil prices. It appears that the world is preparing itself to accept a high oil price regime for all times to come. However, with oil crossing the iconic $ 100 mark, these thoughts may change and only time will tell what impact it has in the medium term on the world. As the demand for energy increases, one way to lessen the impact is to ensure that it is used more efficiently. For instance, India's Integrated Energy Policy document says that the elasticity for India's primary commercial energy supply with respect to GDP is 0.82 since 1990-91, which is a significant improvement over a figure of 1.08 in the 1980s. So, we can see that the amount of energy needed to power further economic growth has dropped over the recent decades. However, we feel that this is not enough, more work needs to be done to further improve it. This is also to say that world over, the economies need to progressively move towards attaining higher levels of economic growth with reduced levels of energy consumption. We believe that an integrated approach to energy management is the key to our energy security. A segmented approach to coal, power, oil & gas and non-conventional energy sources can no longer yield dividend. The need of the hour is the full-scale implementation of India's Integrated Energy Policy. In the process, the challenge lies in tiding over the unresolved issue of integrated energy pricing. Here, I would like to add that India's fuel consumption patterns are influenced by a skewed energy pricing policy. While the issue of integrated energy pricing could be the subject matter of much debate and discussion, it is important to note that several trade-offs in energy choices exist in India that could go a long way in alleviating the potentially crippling energy shortages. As I said earlier, a complete and unrestrained implementation of the integrated energy policy would rationalise energy choices in a free market economy, while ensuring efficiency and least cost. India is making massive investments in infrastructure and research & development to tap our vast potential. Finally, India is also looking at demand-side management since we believe that increased energy efficiency, better public transport, and imaginative urban planning are vital to reduce demand without compromising on growth. Today, India is adopting a multi-pronged strategy and implementing several policies to address the challenges of energy security, including bringing in natural gas in the energy basket and increasing fuel efficiency. Ladies & Gentlemen, an energy alternative is needed to power the human race. World over, large petroleum companies are beginning to adapt their business strategies to reposition themselves as prominent players in the ensuing new global energy economy. While corporates in the energy sector thrash out strategies to transform themselves into sustainable energy providers during the coming decades, the challenge of managing current energy demands of developed and fast developing countries is growing in its formidability. The steep rise in crude oil prices has raised hopes for the economic viability and enhanced use of alternative and clean fuel technologies, hitherto found uneconomical, thus giving them a much-needed boost. Clean technology options, though expensive at present, are here to stay. For instance, clean coal-based options are at nascent stages of commercialization today, but hold very good prospects looking at the kind of reserves countries such as India boast of. In addition, options such as Coal-to-Gas, Coal-to-Liquid, etc., need to be looked into in right earnest to reduce dependence on other forms of fossil fuels. India has made a modest but firm beginning in the use of alternative and green fuels. Green fuel options such as Bio-diesel and Ethanol-Blended Petrol are set for large-scale commercialization in the near future. India is already ranked fourth in the world in terms of installed wind power generation capacity, with most of the high-quality sites taken over for harnessing the potential of this clean and renewable source of energy. Solar energy is also being put to good use for improving living standards in the hinterland. Hydrogen and Hydrogen blends with Compressed Natural Gas are also undergoing trials in the country as part of a detailed road map for moving towards a Hydrogen economy in the country. All these efforts, along with increased contribution from nuclear energy, may ultimately result in a reduction in fossil fuel demand to the extent of about 5-6% in the short term. However, in the medium and long term, with crude oil prices being talked about in three-digit figures, sustained groundwork in alternative fuels may turn out to be an excellent take-off point for new and viable opportunities for corporates, countries as well as environmentalists. Though alternatives to fossil fuels may appear relatively cheaper in the high oil price regime, costs associated with them and investments in supply chain infrastructure may be prohibitively high. Here, fuel options such as bio-diesel and ethanol-blended petrol score higher since they neither require changes in the supply & marketing infrastructure nor modifications in the automobile engines. However, Ethanol and bio-diesel sound impractical on economies of scale. In addition, green energy options such as wind and solar power will not produce significant amounts of power required to support our current lifestyles. However, these options would certainly contribute to partially offset the adverse impact of fossil fuels on the environment. At this point, I wish to reiterate the growing importance of energy conservation and sustainable development with respect to preservation of environment. It amazes me that global climate change is viewed as a partisan issue. What is partisan about this issue is that we have not seen leadership required to bring the nations together to collectively address this issue. Even the most basic ideas of conservation and efficiency have been eschewed. Why? Is it political suicide to suggest that we conserve energy? It would be very difficult to put a price to the impact of energy use on environment and incorporate the same in corporate balance sheets or develop statutory systems of reward and punishments worldwide. However, a consensus approach, as for instance in the Kyoto Protocol, would go a long way in incorporating such systems into the policies of the nations and their corporates and in alleviating the great dangers of greenhouse gas emissions responsible for global warming. As per expert estimates, keeping emissions at safe levels would cost the world 1% of its GDP that is about US$ 430 billion, which may not be too high but is sure to skyrocket if delayed. The urgency of action is evident from the size, scale as well as the enormity of efforts required at the political level to evolve a consensus to jump-start the process right away. In the very near future, corporate social responsibility would possibly become synonymous with environmental concerns. Just as daily balance sheets, the CEOs and the stakeholders would have to adopt 'daily environmental balance sheets' as corporate as well as life mantras in order to protect and preserve this life-sustaining planet. And that goal is neither too unrealistic nor too distant. However, what is also of utmost importance, especially for developed and developing economies is the tough balance between the economic growth and a possible curb in green house gas emissions. "Per capita green house gas emissions", which for India is a fraction of the world average & is not expected to change for many years to come, should be one of the key parameters in determining equitability of contributions for curbing emissions and protection of environment. What is desirable and inevitable in the medium & long term is to de-carbonise energy supplies to the extent possible. For this to happen, Government policies have to play a vital role in demand management and in adjusting tariffs & taxes in such a way as to ensure a smooth transition from fossil fuel economies to alternative, renewable fuel regimes. Perhaps you would agree with me that in the ultimate analysis, the scarcity of fossil fuels would not be as important as the adverse impact they would have on our Planet Earth. This shift in view would play a critical role in optimizing costs, ensuring reliabilities, sustaining resources and integrating these with the profitability concerns of the corporates. Climate change, energy security and the urgent need to increase access to modern energy services for the world's populace create an enormous need for more efficient low-carbon and no-carbon energy supply options. Creative responses based on solid research, shared knowledge and engagement of people at all levels is required to meet the critical challenge. Climate change will be one of the defining forces shaping prospects for human development during the 21st century. Through its impact on ecology, rainfall, temperature and weather systems, global warming will directly affect all countries. Millions would perish over the next century. Global warming, by all accounts, seems to be an exponential situation whereby the damage already done will make matters even worse. Even if we cease all carbon dioxide emissions as early as tomorrow, climate change would continue because of what has already been released, dumped and spewed into the ecosystem. This inertia built into the system means there is a long time lag between today's carbon mitigation and tomorrow's climate outcomes. The implications of this are overwhelming. Do you realise that successful human ecologies in the near future would have to be supported by intensively farmed agricultural hinterlands? Places that can't do this will fail. Any mega-structure - buildings that depend on huge amounts of natural gas and electricity for heating purposes and is an energy guzzler - may not be usable in the future. We may have to live a lot more locally and a lot more intensively on local level. We may even be envisioning creation of lifestyles in which, communities will produce and expand energy locally. The concept of energy from a wellhead to a car tank may be on the wane. As US President John F Kennedy once remarked - "The supreme reality of our time is our indivisibility and our common vulnerability on this planet." The spectre of climate change and global warming confronts all humanity with the threat of a twin catastrophe. The first is an immediate threat to human development as climate change affects all people in all countries. This first catastrophe is not a distant future scenario. The second catastrophe is located in the future. Climate change poses risks not just for the world's poor but also for the entire planet - and for the future generations. The effects of these changes are already grave, and they are growing by the minute. Ladies & Gentlemen, our generation has the means and the responsibility to avert that outcome. Evidently, humanity is living beyond its environmental means and running up ecological debts that future generations will be unable to pay. Climate change challenges us to think about human inter-dependence. The ties that bind the human community on this planet stretch across countries and generations. No nation, however large or small, can be indifferent to the fate of another, or oblivious to the consequences of today's actions for people living in the future. For an action on this front to succeed, in the short and medium term, the key factor would be the speed at which the political aims of the countries, continents and the world at large can be aligned with the energy stakeholders' and environmentalists' concerns and the objectives of a developed and sustainable green planet. In the long run, a boundary-less "one-planet-one-country" theme i.e. "everybody's-environment-is-my-environment" theory though may look like a utopian dream at present, but has to be adopted to save mankind. Before concluding, I wish to share a verse from the revered Indian scripture, The Bhagvad Gita. Spoken by Lord Krishna, to his disciple Arjuna, the Gita's seven hundred concise verses provide a definitive guide to the science of self realisation and also as a practical, self-contained guide to life. The 23rd verse in the third chapter of the Gita says, "Men tend to follow the path of leaders. This in turn, forces the leaders to engage in worthy deeds with meticulous care and concern." I chose to share this with you, as I believe, that all of you gathered here are leaders in your own right. Your actions and initiatives that address the collective concerns of humankind will contribute significantly towards achieving humanity's common collective good. And, the world is waiting to follow you Through this platform, I extend my heartiest wishes to all the distinguished speakers, invitees, delegates and participants of this International Petroleum Week. I also wish to place on record my deep appreciation for the members of the audience for lending a patient ear. I also thank the organizers for the opportunity to address this august gathering today. I would now welcome queries, if any, regarding my talk. Thank you.     © 2007 Indian Oil Corporation Limited. All rights reserved. Updated on February 19, 2008