Russian companies have potential to be long-term partners to aid India’s energy transformation
India has been at the forefront of global energy transformation and efforts to diversify its trade ties. With its abundant energy sources and appetite for trade diversification, Russia could be an ultimate long-term partner. But the bilateral relationship needs more support from both government and corporate leaders to realize its potential in this area.
In September, at the 6th Eastern Economic Forum (EEF) in Vladivostok, Russia, Indian Prime Minister Narendra Modi said in a virtual address, “India-Russia energy partnership can help bring stability to the global energy market.”
Indian and Russian Energy Ministers announced that companies from the countries are pushing for cooperation of over US$ 32 billion already invested in joint projects in the oil and gas sector. India’s Minister of Petroleum and Natural Gas Hardeep Singh Puri described Russia as the largest investor in India’s energy sector.
going green
The novel coronavirus pandemic is still not over, but an economic recovery is underway. Asia’s third-largest economy, India, grew over 20% in the June quarter on a year-on-year basis and is expected to grow around 9% by the end of 2021. This rate is expected to be higher than this. China’s 8.5%, assuming effective suppression of COVID-19.
The distinguishing feature of this recovery is that it is advanced by the exploration of energy transformation and environmental concerns. Since the start of recovery, India has been marching towards a green transition, and its appetite is increasing.
One of the examples of cooperation between the two countries in energy transformation is the joint venture between India’s Reliance Industries Limited and Russia’s Sibur, the country’s largest petrochemical producer. Established in Jamnagar, Gujarat, the enterprise now leads the first butyl and halogenated butyl rubber production facility in South Asia. The facility became operational in 2019 and achieved total throughput within the first year, establishing itself as a significant supplier of butyl rubber to the Indian market, which was earlier completely dependent on imports. A joint venture will produce up to 120 ktpa of butyl rubber, of which 60 ktpa can be further converted into halogenated butyl rubber to meet the growing demand from domestic tire manufacturers.
overcoming supply chain risk
In an interview, Sibur Member of Management Board of Plastics, Elastomers and Organic Synthesis Division Alexander Petrov said in an interview, “Reliance Sibur Elastomers is not only supplying most of the butyl rubber consumed in the country, but also exporting its products. is also doing. He further added, “Sibur is bringing unique technology to India, which is not commercially available in the market and is the most advanced technology. [an] ecological footprint. The project will tremendously support the growth of India’s auto industry by securing an uninterrupted supply of critical raw materials. This is of particular importance in the current pandemic, which is increasing the risks of disruption in the global supply chain.”
Apart from accounting for most of the Indian butyl rubber market, Reliance Sibur Elastomers exports its products to Asia, Europe, United States of America, Brazil and other countries. The enterprise is also promoting halogenated butyl rubber, which is a more premium product.
The project is a clear manifestation of the “Make in India” and “Atmanirbhar Bharat” initiatives, representing a practical example of technology transfer from Russia to India.
main component
India is one of the fastest growing markets for butyl rubber and halogenated butyl rubber due to the rapidly growing car manufacturing industry for electric vehicles. In addition, India is emerging as an important refining hub in Asia to boost its petrochemical potential. Currently, the country has an installed capacity of over 249.36 MTPA, with local companies planning to expand the capacity by investing over US$27 billion by 2021.
In past years, India’s refineries have been expanding to petrochemicals to gain added value, the International Energy Agency wrote in India Energy Outlook 2021 Reported in February the agency estimated the country’s ethylene production is set to increase by two-thirds over the 2030 period.
Russia’s Gazprom and India’s ONGC Videsh Limited (OVL) and Indian Oil Corporation signed separate MoUs in Vladivostok. Mr. Puri also met Dmitry Konov, Chairman of the Management Board of Sibur, at the event.
renewable nuclear energy
In its efforts to transition to green energy, India recently achieved a significant milestone of completing a nationwide installation of 100 GW of total installed renewable energy capacity, excluding large hydro. Now it aims to achieve 175 GW renewable energy target by December 2022. If achieved, it would be close to half of India’s current total installed power capacity. In addition, according to a government survey in New Delhi, “additional investment in renewable energy by 2022 will be around $80 billion”.
Commitment to net zero emissions can have a positive impact on the country’s growth trajectory. A recent Deloitte report has predicted that India could achieve an economic value of US$11 trillion over the next 50 years by limiting rising global temperatures and realizing its potential for ‘export decarbonisation’.
However, unknown climate change and the dangers of a new pandemic suggest that the country must accelerate its energy transition. Russia, one of the major global players in the energy market, may emerge as an essential partner for such a transition. Notably, the two countries have an extensive record of bilateral cooperation in the energy sector.
Russian companies have been involved in the construction of six nuclear reactors at the Kudankulam Nuclear Power Project in Tamil Nadu. Of these, Unit 1 and Unit 2 are operating at total capacity. Unit 3 is currently under construction. Earlier, Russian President Vladimir Putin had claimed that Russia is ready to build a dozen reactors in India in the next 20 years. In addition, India and Russia secure the ability to design a nuclear reactor specifically for developing countries, a promising area of cooperation.
India’s nuclear power generation capacity of 6,780 MW could increase to 22,480 MW by 2031, contributing to the country’s efforts to switch to green energy.
A few years ago, Rosneft invested US$12.9 billion in India’s second largest private oil refiner, Essar Oil, which was renamed Naira Energy, marking it as one of the most significant foreign investments in years. does.
In September, almost all of Russia’s major energy companies were interested in projects in India, Russia’s Energy Minister Nikolai Shulginov said at the Vladivostok Forum in September, adding that he sees potential for energy cooperation in all areas.
However, the current bilateral exchange rate needs to be accelerated for India to realize its potential from the energy transition.
still coal concentrated
Despite notable progress, coal remains the most important source of electricity generation in India, and this is not good news for the environment.
To meet its growing energy demand and succeed in green transition, India needs an investment of around US$ 500 billion in wind and solar infrastructure, grid expansion and storage to reach the 450 GW capacity target by 2030. Therefore, more efforts are needed to expand cooperation. With partners such as Russia.
Dmitry Frolovsky is a political analyst and consultant on policy and strategy in the Middle East and Central Asia, and has written about Russia’s foreign policy.. His writings have been featured in Foreign Policy, The Hill, Carnegie Moscow Center Blog, Al-Jazeera and other outlets.
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