In-Depth: India-Russia Pipeline

There is an old idiom, 'an arrow in the quiver', which means deploying multiple resources to achieve a set goal. Given the war between Russia and Ukraine, it is not surprising that Russia is deploying all means to achieve its end goal of maximum energy export. Russia is fed up with the sanctions placed on it and is now pushing back. With energy supply from Russia at an all-time low, Europe battling its worst energy crisis. With the winter set to arrive, energy shortage can play havoc if not addressed. Europe is also proactively diversifying its imports to reduce its dependence on Russia.

Earlier, Europe imported 40 percent of its gas from Russia, which has now fallen to 9 percent. This has diverted its focus to Asia, where much of its expenditure is on energy and food. At the recent SCO Summit, Power of Siberia 2 was under discussion, which will supply China with energy from Russia and Mongolia. It is estimated that by 2023, it will pump 38 Billion cubic meters of gas from Russia to India.

Russia's expansion toward Asia can prove to be a win-win situation for India, which is looking to expand its energy portfolio. India is already facing the brunt of US sanctions on Iran. Given that India is a growing economy, its energy demands are expected to increase from the current 5.05 million barrels per day to 10 million barrels per day by 2030. We also need Russia for its natural gas support if our clean energy targets are to be achieved.

Given this backdrop, the India-Russia pipeline can be a game changer. In 2016, MoU was signed during the India-Russia annual summit at the 8th BRICS Summit. The agenda was to conduct a joint study on the pipeline from Siberia to India. It is expected to cost a whopping 25 Bn USD and will stretch across 6000km approximately.

India is one of the largest consumers of oils in the world, with demand outpacing the demands. As per some estimates, we are expected to import 90 percent of our oil imports by 2040. Energy security has now assumed center stage. We are already engaged in LNG deals, purchase of oil and gas spot market, and acquisitions of oil and gas fields. The initiatives highlight the exigency of the situation we are in.

Is it even possible?

Cross-country trade with elaborate routes has always been a part of human civilization. When it comes to the Russia-India pipeline, the shortest route is via the Himalayas. Given the complexity of the terrain, this is not the best option. The other pathway is via central Asia, but this will be very expensive. Third is via China to North East. All the countries this pipeline is expected to pass through have a bone to content with India. The second factor is cost. As per Engineers India Limited, the cost will be 25 Bn USD. Some experts believe the cost of transportation will be USD 4 per Metrics Million Billion Thermal Units (MMBTU). Given its one-time investment, it might actually be a possibility. 

Why is it a good idea?

In simple words, it is cost-effective as compared to other modes of transport. For example, the existing cost of a petroleum pipeline is 54 paise per ton per km. Road freight charges are Rs 5 per ton per km. In this scenario, natural gas via pipelines can play a crucial role. It is not just clean, but a cost-effective fossil fuel as well. It is also in line with India's target of increasing the share of natural gas in India's consumption from 6 to 15 percent. It will help achieve the 450GW target of renewable energy. India had also pledged 500GW by 2030, and net zero emissions by 2070 at the Glasgow Climate Summit. 

A major drawback to this aim is the fact that India only houses 0.6 percent of proven natural gas in the world. If we can import 86 percent of our crude oil from outside, then why not natural gas? As per some estimates, half of the global natural gas demands are expected to stem from the Asia Pacific region, of which India forms a critical part. Adding to this is the fact that recently sanctions on Russia have decreased the price of natural gas by 29 percent for Indian firms. This will help them cut losses and increase their inventory.

The benefit is not one-sided. Like any major trade deal, the benefit will be for both parties in question. We can say this with confidence because Russia has made $24 Billion by selling energy to China and India in just three months. Interestingly, India and Russia have been trading in gas even before the war or any proposal was finalized. This deal was going on between GAIL in India and Gazprom in Russia. The latter has to ship 2.5 million tons of LNG per annum to India. We should also consider that this is not unchartered waters for India, as we already have the Middle East to India Deepwater Pipeline (MEIDP) which India is looking to revive. This gives some solace that we are not stepping into a road less traveled. 

Lastly, and most importantly, the pipeline will provide relief to the common man who is struggling with growing fuel prices, while also increasing India's bargaining power with energy-rich countries. Given these factors, it is only fitting that the world's largest oil producer, Russia, and World's largest oil consumer, India's tie-up is a win-win situation for all.