ENERGY SECURITY KAS Publication Series No. 32, New Delhi, 2011 ENERGY SECURITY Managing risks, balancing concerns and developing frameworks 5th TERI-KAS International Energy Dialogue 24-26 October 2010, New Delhi Published by: Office of the Konrad Adenauer Stiftung in India 2, Nyaya Marg, Chanakyapuri, New Delhi-110021 Tel: 91-11-26113520 Webpage: www.kas.de © Konrad-Adenauer-Stiftung Responsible: Ligia Noronha and Ravi K. Batra, TERI Printers: Anshah Publishing House, Delhi-110092 [email protected] Published in 2011 Foreword Foreword The politics of energy security has emerged as a key concern worldwide and national energy strategies are increasingly treated as part of the traditional security agenda. The global demand for energy is slated to grow dramatically over the next 20 years, with the most rapid incremental consumption becoming evident in Asia, particularly in China and India. All governments will therefore need to develop comprehensive policies to meet the challenges posed by the growing demand for energy globally. Access to cheap energy has become essential to the functioning of modern economies. However, the uneven distribution of energy supplies among countries has led to significant vulnerabilities. Threats to energy security include the political instability of several energy producing countries, the manipulation of energy supplies, the competition for energy resources, attacks on supply infrastructure as well as accidents and natural disasters. Energy security will thus become an increasingly important component of foreign and security policy agendas in the countries the world over. As the strategic importance of energy rises, both globally and nationally, the more it is going to be the focus of intense public and political debate. The 5th event in the TERI-KAS International Energy Dialogue conference series was part of this ongoing debate with specific emphases on the energy resource sector, the role of the states and markets and its impact on globalization. With this conference we conclude a successful series of five TERI- KAS international conferences on energy security which have created a fruitful dialogue between political decision makers, experts and other stakeholders. I would like to express my sincere gratitude and congratulate our partner organization TERI – especially Dr. Ligia Noronha and her team – Energy Security for the excellence of all their initiatives and efforts in conducting the conferences. The support of the Konrad-Adenauer-Stiftung for similar activities on related issues and our partnership with TERI will definitely continue in the future. Dr. Beatrice Gorawantschy Resident Representative, Konrad-Adenauer-Stiftung (KAS), New Delhi vi Energy Security Preface Preface This volume, fifth in the series, reflects the proceedings of the 5th TERI- KAS Energy Security Dialogue. The conference sought to engage and understand better the emerging concerns, changing interactions between states and markets, the reconstitution of traditional notions of authority and control and the multiple and competing pressures connected to resources and their development. It took forward the thinking that was started in the first of the series when the concerns were more with the external aspects of energy security – trade, foreign policy and security. In this conference, the focus was also inwards and sought to discuss the multiple pressures arising from concerns associated with the development of the resource as well as the impacts that this development gives rise to. Some of these concerns are intrinsic to the resource itself—for example concerns regarding increased GHG emissions from coal use or fears about nuclear terrorism and nuclear waste arising from the development of uranium resources. Other concerns, however, pertain to the governance of resources and their development, for example mining-related concerns, adequate compensation for displacement, the equitable distribution of benefits arising from development and so on. Given the globalization of these concerns, risks and of markets, conventional notions of control and ownership of resources are being reconstituted. There is now a greater demand for balancing these multiple concerns emerging from the local, national and global levels and for developing adequate and accountable frameworks that address these concerns better. The Conference had four substantive sessions: 1. Globalization and Sovereign Control over Energy Resources 2. Changing Roles of States and Markets in the Resource Sector 3. Risks and Challenges in the Energy Resource Sector vii Energy Security 4. Frameworks for Sharing Value and Avoiding Conflict in the Resources Sector This was followed by a concluding panel session in which each panelist reflected on a core idea that emerged from the conference. This publication seeks to make available to a wider audience the papers and the discussions at the 2010 conference. A policy brief was also circulated earlier in 2011. As this was the last in this dialogue series, we do hope all five dialogues have contributed to the global and national debate around energy and resources security. We are very grateful to the Konrad-Adenauer-Stiftung for their unstinted support of this Dialogue Series, and especially to Mr. Joerg Wolff and Dr. Beatrice Gorawantschy, the former and current Resident Representatives at New Delhi. Their encouragement and interest has been truly remarkable. We would also like to thank Mr. Pankaj Madan for his good cheer and help in all of the five dialogues. This series would not have been possible but for the enthusiastic support of the participants who have accompanied us through the five dialogues, the team at TERI, and especially Dr. Devika Sharma. Our grateful thanks to all of them. We would also like to thank Dr. R K Pachauri, the Director General for his support and encouragement of these dialogues through these five years. viii Energy Security Contents Contents Foreword v Preface vii Acronyms xiii I GLOBALIZATION AND SOVEREIGN CONTROL OVER ENERGY RESOURCES Chair: C Uday Bhaskar Global Energy Security Challenges: The Impacts of 3 Globalization and Sovereign Control over Energy Resources Frank Umbach Energy Resources and Energy Security: Caught Between 15 State Sovereignty and ‘State Responsibility’ Devika Sharma Discussant 27 Ligia Noronha II CHANGING ROLES OF STATES AND MARKETS IN THE RESOURCE SECTOR Chair: Moritz Lumma Coming into Reach: Energy Security for all 33 Inge Kaul State Control Over Energy Resources 43 Sudha Mahalingam ix Energy Security Global Energy Governance: Mapping a Rapidly Changing 49 Field Navroz K. Dubash and Ann Florini Discussant 57 Vijay Duggal III RISKS AND CHALLENGES IN THE ENERGY RESOURCE SECTOR Chair: Friedbert Pflüger Understanding Risks and Challenges in Nuclear Power 63 Ramendra Gupta Risks and Challenges in Coal 69 Partha S Bhattacharya Security of Energy Resources 75 Surya P Sethi Discussant 79 Ravi K Batra IV FRAMEWORKS FOR SHARING VALUE AND AVOIDING CONFLICT IN THE RESOURCES SECTOR Chair: Marianne Osterkorn Sharing Value and Avoiding Conflict: Working with Local 83 Communities Nik Senapati International Experiences in Sharing Value in the 87 Resources Sector Nitya Nanda Discussant 99 Dipankar Banerjee x Energy Security V CONCLUDING SESSION REFLECTING ON EARLIER THEMES Chair: C Dasgupta “Globalizing Energy Demand and Re-nationalization of Energy Supply” 105 Friedbert Pflüger “Legal Contract and Social Compact” 109 Manish Tewari “Domestic Compulsions Around Energy Consumption” 115 Prabir Sengupta “Africa as a Last Resource Frontier” 119 Daniel Bach “Challenges to the Common EU Energy Policy” 123 Frank Umbach Contributors 127 xi Acronyms Acronyms ABR Aboriginal Benefits Reserve BP British Petroleum DA Development Agreements E&P Exploration and Production ECT Energy Charter Treaty EITI Extractive Industries Transparency Initiative EPC Engineering, Procurement, Construction EREC European Renewable Energy Council EU European Union FDI Foreign Direct Investment GDP Gross domestic product GHG Greenhouse Gas GHGE Greenhouse Gas Emissions GRC Gulf Research Center IAEA International Atomic Energy Agency ICC Inuit Circumpolar Council IEA International Energy Agency IEPC Integrated Energy Policy Committee ILO International Labour Organization IOCs International Oil Companies JDZs Joint Development Zones KAS Konrad Adenauer Stiftung Energy Security LNG Liquefied Natural Gas MMSCMD Million Metric Standard Cubic Meter Per Day NELP New Exploration Licensing Policy NOCs National Oil and Gas Companies OECD Organisation for Economic Co-operation and Development ONGC Oil and Natural Gas Corporation OPEC Organization of Petroleum Exporting Countries PINBio Papua New Guinea Institute of Biodiversity PPAC Petroleum Planning and Analysis Cell PWYP Publish What You Pay R&D Research and Development SEMA Socio-Economic Monitoring Agreement TERI The Energy and Resources Institute TFT Nestlé recruited the Forest Trust UAE United Arab Emirates UNDP United Nations Development Programme UNGA United Nations General Assembly WEO World Energy Outlook WTO World Trade Organization xiv I Globalization and Sovereign Control over Energy Resources Chair: C Uday Bhaskar Global Energy Security Challenges Global Energy Security Challenges The Impacts of Globalization and Sovereign Control over Energy Resources Frank Umbach Overview of Global Energy Security Issues Traditionally, energy security has been described as ‘the uninterrupted physical availability at a price which is affordable, while respecting environment