Trade and Energy Security
Shaheen Rafi Khan
June 22, 2009
Sustainable Development Policy Institute
Trade and Energy Security
Contents
 Energy context
 Demand-supply gaps
 Scope for energy trade
 Energy trade facilitation
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From energy trade to peace?
The clean energy-poverty nexus
Conclusion
Trade and Energy Security
South Asia’s energy context
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Accounts for only 5.9% of world’s energy consumption. Per capita
consumption is 26.2% of the world average
Energy consumption per dollar is highestn -- inefficient utilization
Energy generation sources


47% coal based, 33% petroleum based, 12% natural gas, 7%
hydropower, 1% nuclear
Country Reliance
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Pakistan – 43% oil and 38% natural gas
Bangladesh – 69% natural gas
Nepal and Bhutan – 90% natural gas
India – 55% coal
Sri Lanka – 76% oil
Maldives – 100% oil
Trade and Energy Security
Existing Demand Supply Gaps
Oil
Gas
Demand
MTOE
Import
MTOE
Demand
MTOE
124
107.1
28.00
Pakistan
15.21
12.3
27.39
Bangladesh
3.71
3.71
8.29
Sri Lanka
3.01
3.01
Bhutan
.04
0.04
Nepal
0.77
0.77
Maldives
0.27
0.27
SAARC
India
Import
MTOE
2.0
Trade and Energy Security
Existing Demand Supply Gaps
Coal
Electricity
Demand
MTOE
Import
MTOE
Demand
MTOE
Import
MTOE
(What units are
these?)
India
171
11.6
18
241 – Import
Pakistan
3.3
1.4
6.47
SAARC
Bangladesh
0.23
Sri Lanka
0.83
Bhutan
0.01
0.004
0.12
1,764 – Export
Nepal
0.17
0.17
0.14
111 - Export
Maldives
Trade and Energy Security
Projected demand-supply gaps

“South Asia’s strong economic growth has translated into
rapidly increasing energy demand and this growth is becoming
constrained by significant shortages in energy supply,” World
Bank Director for Regional Programmes in South Asia.

“Lack of adequate and reliable energy in South Asia is emerging
as a key constraint to sustaining recent strong economic
growth,”(World Bank Report, 2007)

Reflecting this growth, fossil fuel demand is expected to grow
annually in the range of 6.6 to 11.5 percent during the next 15 to
20 years. Concurrently, the demand for electricity is growing at
a rate of 7% per year in most countries except Afghanistan,
Bhutan, and Maldives, which expect growth rates of over 13% in
the first decade to meet rural electrification needs.
Trade and Energy Security
Projected demand-supply gaps
Coal
Prov. Res.
(million
tons)
Bangladesh
724
Oil
Gas
YA@CRoC
Pro.
Res.
YA@CRoC
Prov.
Res.
(Years)
(MTOE)
(Years)
(bm3)
724
0.96
578.3
Electricity
YA@CRoC
Prov.
Caps.
Used so
far
(Years)
(MW)
(%age)
36
775
30
50,000
1.4
301,000
10.2
42,915
1.2
40,000
16
2000
62.5
Bhutan
India
91,631
200
5
49
3,300
939
1570
22.4
1380
29
Maldives
Nepal
Pakistan
107
13
1284
23
Sri Lanka
YA@CRoC = Years available at current rate of consumption
Trade and Energy Security
Scope for Trade in Fuel & Energy
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Intraregional trade
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Hydro electricity exports from Nepal and Bhutan to India

Increased grid interconnections
Interregional trade
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Coal exports outside the region
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Oil imports into the region
Transit trade

Central Asian and Middle East gas pipelines through Pakistan to
India

Port of trade through Gwadar to China
Trade and Energy Security
Benefits and costs in energy trade
Exporters, importers, fiscal, environmental

Benefits
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Develop natural resources where local markets are small
Innovation and economies of scale in energy production
Increased diversification and security of energy supply.
Reduced prices
Reduced domestic pollution
Export revenues
Investment burden shifts to private and international players
Reduced costs will work in tandem with increased services,
private capital and access to management skills
Costs
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‘Dutch disease/resource curse’ due to poor natural resource management
Social/environmental impacts of large energy development
Dependence on global price volatility
Dependant on politically unstable suppliers
Subsidy policies unstable as energy prices increase
Trade and Energy Security
Energy trade facilitation
Energy infrastructure
 Energy pricing
 Energy trade protocols

Trade and Energy Security
Energy infrastructure – the hope

“In recent years we have witnessed greater interest
and enthusiasm in cross border electricity and gas
trade among South Asian political leaders and the
private sector,” Vladislav Vucetic, World Bank
Lead Energy Specialist

“A number of such regional projects are on the
drawing boards and some of them, such as the
Central Asia-South Asia electricity transmission
link, are already moving toward implementation.”
Trade and Energy Security
Energy infrastructure – the reality

Yet, the level of cross-border energy trade is very
low and the national gas and electricity networks
are largely isolated from each other.
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Significant electricity trade exists only between India and
Bhutan;
there are no gas pipelines crossing the national borders of
any South Asian country.
Dharmadhikary (2009) cautions that the benefits of
most energy generating dam projects in the
Himalayas will only be afforded by the wealthy.
Trade and Energy Security
Energy trade facilitation
 Energy pricing
Trade and Energy Security
Energy trade facilitation

Energy trade protocols
Can energy trade promote peace?
Intraregional trade

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Mahajan (2009) takes a benign view. Her study maps an energy
cooperation – sustainable development – peace linkage.
Yusuf (2009) embeds the outcomes in game theory. Generalizing
from a case study on Gwadar, he argues that energy trade is likely to
produce opportunities for both cooperation and confrontation in
South Asia;
Transit trade

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Fazal-ur-Rahman (undated) concludes that for China, the prospects
of Pakistan becoming an energy corridor (EC) in the short and
medium terms are remote due to internal and cross-border conflicts.
Sahira et al (2006) argue that the global and regional energy security
in future is not likely to be threatened as much by the shortage of
resources as it is likely to be endangered by the disruption of
supplies by growing terrorism and geopolitical conflicts.
Energy – Poverty Nexus
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Important environmental benefits from increasing regional energy
trade in hydropower and natural gas would reduce climate
shocks on the poor.
Energy trade would enable the management of regional water
resources, benefiting poor farmers
Renewables: Cooperation in the energy sector will help South
Asia chart a growth pathway that is sustainable and low-carbon,
by cutting supply risks, and facilitating fuel substitution and
shifting to off-the-grid renewables which can target poor
communities.
Overall need to reduce the cost of energy through regional and
bilateral trade – in light of increased consumption and demand –
which benefits the poor as well
Trade and Energy Security
Renewables potential
Trade and Energy Security
Strategic basis for recommendations
The strategic basis for the recommendations thus
has two elements:
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Continue to build the case for regional trade
Focus on the renewables market on environmental
and social grounds
Trade and Energy Security
Recommendations

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Develop a regional power grid for power
exchanges/trading within the region and
with neighboring countries around the
region
Develop a regional gas grid and promote
regional trade in natural gas
Trade and Energy Security
Literature sources
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Lama, M. (2005) ‘Integrating Stakeholders in Energy Cooperation,’
South Asia Journal, Issue 9:
http://www.southasianmedia.net/Magazine/journal/9intergrating_eng_co.htm
(Accessed 24 July 2008)
World Bank (2007) Potential and Prospects for Regional Energy
Trade in South Asian Region, South Asia Region: Washington
Sahira,M.H and Qureshi,A.H. (2006), Specific concerns of Pakistan
in the context of energy security issues and geopolitics of the region,
Energy Policy
http://www.pakistan.gov.pk/ministries/planninganddevelopmentministry/vision2030/Pak21stcentury/Chapter%20Wise/Ch%2011,Stat
e%20and%20Security.pdf.
Rahman, F., (no date) Prospects of Pakistan becoming a trade and
energy corridor for China, no printing citation