Natural gas imports from the U.S. to India can significantly address the trade deficit concerns of the U.S. (Image: Wikimedia Commons, Left: Max Goldberg, Right: Narendra Modi) Photograph: (ANI)
Energy sector is crucial in overcoming US's trade deficit as well as help build PM Modi's vision for a new India
Last night Prime Minister Modi arrived in the U.S. Capitol on his three-day visit to the U.S. during which he would meet with President Trump at the White House for the first time. Deliberations on energy cooperation would hold the key in the Modi-Trump Summit. According to the White House Press Secretary Sean Spicer, “The President and the Prime Minister will discuss ongoing cooperation, including counterterrorism, defence partnership in the Indo-Pacific region, global cooperation, burden-sharing, trade, law enforcement, and energy. I think it's going to be a very robust discussion”.
While the U.S. lawmakers have already urged President Trump to raise the issue of growing trade deficit with India due to its failure to enact market-based reforms, Indians in the U.S. expects Modi to voice their concerns H-1B visa issue with Trump.
Besides these concerns, energy would be the key to any discussions on Indo-U.S. strategic ties. This is inevitable considering how well the U.S. fits into India’s Energy Security goals. Both the countries have established their energy relationship with the launch of India-U.S. Energy Dialogue in May 2005. Ever since then India and the U.S. has closely worked with each other on a vast expanse of energy-related issues, including trade and investments in hydrocarbons, electricity generation, cooperation in clean energy technologies, promoting energy-efficiency and renewable energy resources.
However, India-U.S. civil nuclear deal which formed the basis of India-U.S. Strategic Partnership continues to be a non-starter because of the recent bankruptcy of Westinghouse and the absence of a functional reference atomic plant.
In the current Modi-Trump summit too, signing of a nuclear reactor pact is unlikely, but a discussion would surely be on the current impasse. Another area of India-U.S. energy cooperation is natural gas imports from the U.S. to India, which can significantly address the trade deficit concerns of the U.S.
Persistently low global oil prices have resulted in a glut in the supply of LNG (Liquefied natural gas) in the international market. The U.S. which is expecting to become a net gas exporter in 2018, would like to see LNG as a means to address bilateral trade deficit. According to Daniel Yergin, Vice Chairman, IHS Markit, “The Obama administration was generally supportive of the development and export of LNG but did not see it as a crucial element in trade strategy…. The Trump administration, with its focus on bilateral trade deficits, sees LNG as a way to address them.”
Daniel Yergin, one of the delegations in a group of CEOs of top 20 American firms, who had a round table interaction with PM Modi, has already discussed matters related to the need for increasing LNG exports to India with Indian Petroleum Minister Dharmendra Pradhan during his Houston trip for the CERA Week. Moreover, Dharmendra Pradhan met with his counterpart Rick Perry to explore investment propositions in LNG and shale gas and should be seen as a groundwork to Modi-Tump Summit.
Earlier this month, as noted by Sean Spicer, Trump is expected to make U.S. produced LNG one of the key talking points when he meets Modi. According to Spicer, “U.S. energy and technologies, including natural gas, are helping to build Prime Minister Modi's vision for a new India in creating thousands of U.S. jobs in the process.”
From March 2018, the Gas Authority of India Limited (GAIL) is gearing up for its first LNG imports from the U.S. For the purpose, the Company is tying up for 2.3 million ton LNG supplies over 20 years from Cove Point in 2013. It has also signed a contract for 3.5 million ton of LNG with Cheniere Energy Inc's Sabine Pass project in Louisiana, US, the supplies from which will begin in December 2018.
LNG is the main component of India’s gas-based economic vision. The Indian government plans to increase the share of natural gas from 7 per cent at present to 15 per cent by 2030, the U.S. can emerge as a significant player to meet India’s natural gas demand. India is already one of the biggest drivers of global LNG demand and with flexible floating storage regasification unit (FSRU) coming up, the supply of LNG from the U.S. will provide flexibility on the supply side. This can be a beneficial solution for both the countries. Development of an integrated LNG market is key for unlocking the gas potential for India, and U.S. can work closely with India in this regard. India would like to take a clue from recently concluded LNG deal between the U.S. and China, wherein China would receive more LNG from the U.S., while jointly developing liquefied natural gas facilities and gas transport.
According to the Congressional Research Service report of the U.S., some members of the U.S. Congress are looking forward to bills related to India-U.S. energy cooperation but these bills were not enacted into laws as yet. The issues that are to excite the US Congress include prospects, such as natural gas exports from the U.S., U.S. energy companies’ investments in India and Indian investment in the U.S. energy sector. Both Modi and Trump would like to deliberate on some of these issues to deepen India-U.S. energy ties.
However, Trump’s pulling out from Paris Climate agreement would neither impact India’s march towards cleaner source of energy nor it has much impact on the U.S. India bilateral energy relationship. That the Paris agreement will be inconsequential for the bilateral relationship is clear from the announcement of $7.5 million financial aid from the Trump administration ahead of Modi’s visit to the U.S. The aid, as part of US-India Partnership to Advance Clean Energy (PACE), is meant to help advance India's power grid. It will deepen the collaboration between the U.S. Department of Energy (DoE) and India. Moreover, according to the DoE, the US-India collaboration for a smart distribution system with storage was selected as the new consortia for Smart Grid and Energy Storage under the US-India Joint Clean Energy Research and Development Center. This underlines the significant role that clean energy will play between India and the U.S. in future diplomatic relations.
Thus, Trump-Modi Summit would look forward to expanding the scope of energy cooperation with more deliverables and outcomes.