Even as it is certain that US and India are not going to sign up for a ‘big trade deal’ during US President Trump’s visit to Delhi, the stage of bilateral relations that these countries have reached at present is very fast, as noted by former India’s Ambassador to the US, Harsh V Shringla. Based on people-to-people interaction, this relationship has developed into a global strategic partnership through convergence of interests on trade, investments and economic activities. However, there is a huge potential of deepening their bilateral trade in a way that it is a win-win proposition for both the countries. While both the US and India through their respective trade representatives have agreed to go slow before sealing a trade deal, Piyush Goyal sought to iron out any disagreements between the two countries that has emerged, particularly after the withdrawal of the Generalized System of Preferences on Indian products by the US.
It may be reiterated that energy continues to play an important role in Indo-US bilateral trade and would be a key area to watch out for during President Trump’s visit to India. Appreciating the potential of cooperation in energy sector, Larry Kudlow, economic advisor to President Trump, ahead of his visit to India, agreed to meet India’s energy needs. He stated that, “When we had our bilateral meetings with the Prime Minister Modi, I said, you give me a number (to export energy from the US to India) and I’ll meet it”.
The US is looking for innovation driven energy dominance, even as it became a net-exporter of crude oil and petroleum products in September 2019 and is expected to be so for all of 2020, as noted by International Energy Agency. India should find ways to draw maximum benefits out of US energy supremacy, which goes beyond oil and natural gas exports.
While the US, resulting from shale boom, is better placed to export energy to India, both the countries should continue to seek for wider scope of energy cooperation across energy value chain, through accelerated clean energy innovation.
In this regard, the US should step on the gas to identify ways and means to help India pursue its gas-based economic vision, wherein the latter has set an ambitious target of increasing the share of natural gas from current 6.2% to 15% by 2030. In the past, some members of Congress has already shown interests in India’s natural gas plans to explore possibilities of US energy companies investments in India and vice-versa, India’s ability to combat global climate change and addressing issues related to local air pollution, including more liquefied natural gas (LNG) exports to India.
Both the countries would do well to revisit areas of cooperation in the natural gas value chain, optimizing the existing US-India Gas Task Force, that was formed as a first step in realizing the full potential of the Strategic Energy Partnership (SEP).
Earlier, after sanctions on Iran, the US has exported oil to India that replaced most of the Iranian oil imports. This resulted in oil imports jump 72% in the initial five months of current fiscal to 4.5 million tonnes (MT) from 2.6 MT in the corresponding period, during the last year. Gas Authority of India Limited has 20-year deals to buy 5.8 million tonnes a year (MTPA) of US LNG, split between Dominion Energy’s Cove Point plant and Cheniere Energy’s Sabine Pass site for 2.3 MTPA and 3.5 MTPA respectively. India received its first LNG shipment from the US in March 2018.
These developments have contributed towards reducing trade deficits of the US with India, while increasing its energy trade with India manifold. Identifying the great potential of Indo-US bilateral relationship, India’s ambassador to the US, Taranjit Singh Sandhu, stated that, “Our energy trade touched close to USD 8 billion last year. Mind you, this was zero, a few years ago.”
The origin of energy cooperation between the two countries dates to May 8, 1964, when both the countries signed a contract to construct the Tarapur Atomic Power Station in Thane. Despite couple of pauses consequent to peaceful nuclear explosions by India for around three decades after 1974 and four years after 1998, both the countries preferred to reap the true value of their bilateral relationship, in which energy had to play a crucial role. In this regard, both the countries identify key hotspots of energy cooperation which needed to be expanded across energy value chain.
This was further formalized in November 2001, when joint initiatives of former US President George W. Bush and Late Prime Minister of India Atal Bihari Vajpayee initiated a maiden India-US economic dialogue. Energy, which was one of the important pillars of this dialogue further formed the basis for a India-US Energy Dialogue in May 2005, wherein five working groups, namely, Civil Nuclear Working Group, Coal Working Group, the Power and Energy Efficiency Working Group, the Oil and Gas Working Group and the New Technology and Renewable Energy Working Group was formed. At the core of this sustained energy dialogue was a civil nuclear deal on July 18, 2005, between India and the US. This energy dialogue, which is now renamed as SEP, ranges from oil and gas to coal and alternative fuels to civilian nuclear energy. The newly formed SEP, on the other hand has four main pillars of energy cooperation namely, oil and gas, power and energy efficiency, renewable energy and sustainable growth and coal.
During President Trump’s visit to India, three key agreements are expected to be signed with respect to imports of oil and LNG and nuclear energy. India and the US may seal a large crude oil supply deal, which could offer oil imports to India at a discount of up to $4 a barrel over global benchmarks, making it attractive over Dubai crude. Besides, to make those import attractive than Iranian crude oil, freight discounts and higher credit period of 60-90 days could be offered, as indicated from diplomatic sources.
Further, to enhance, India’s LNG imports from the US, a Memorandum of Understanding was signed between US natural gas company Tellurian Inc. and Petronet LNG Limited (PLL) of India to import 5 MT of LNG last year. Trump’s visit would witness the signing of $2.5 billion agreement by these companies to pick up 18 per cent stake in Louisiana-based Driftwood LNG Terminal. The delivered price of the gas is expected to be in the range of $6-8 per mmBtu compared to earlier concluded deals which are as high as $9-10 per mmBtu, thereby reducing the cost of LNG imports significantly.
The third and not the least would be a pact signed between Westinghouse and state-run Nuclear Power Corporation of India for the supply of six nuclear reactors. While the agreement would lay out timelines and name the lead local constructor for building the reactors at Kovvada Nuclear Power Plant in Andhra Pradesh, it would also address India’s nuclear liability law concerns.
Therefore, US President Donald Trump’s maiden visit to India should not be viewed to expect too much in a short period of time but to strengthen their strategic partnership further to a sustainable level, where disagreements between the countries is viewed as opportunities, which can be created only through strenuous efforts. Looking forward to strengthening the Strategic Energy Partnership during Trump’s visit to Delhi would be a right step in this regard, as scope for incorporation of wider spectrum of energy cooperation, in the areas of Sustainable Development Goals and new energy sources, such as hydrogen energy, exists.
The views and opinions expressed in this article are those of the author.
The author is a Junior Fellow with Observer Research Foundation, having research interests in energy policy and geopolitics.