India should simultaneously prioritise domestic exploration and production of more oil and gas in the country and ensure we retain diversified suppliers for imports, points out former foreign secretary Ranjan Mathai.
The optics of the meetings between the leaders of India, Russia and China at the Shanghai Cooperation Organisation summit led to many instant analyses about geopolitical realignments.
They overshadowed the Russian announcement of an energy agreement of global importance -- on the 'Power of Siberia 2' pipeline, for supply of 50 billion cubic metres (bcm) of gas per annum to China for 30 years.
The planned pipeline, from the Yamal peninsula in Western Siberia to China via Mongolia, will be one of the largest and most capital-intensive energy projects in the world, according to Alexei Miller, the chief executive officer of the Russian gas company Gazprom.
The Chinese side is yet to confirm the Russian statements, but not because of any concerns about western sanctions.
The price of gas and other technical aspects of the deal (discussed for over a decade) are still to be finalised.
But when concluded, the agreement will mark a geopolitically significant tieup between China and Russia in a Eurasian continental energy nexus, which could also impact the global seaborne trade in liquefied natural gas (LNG).
The Power of Siberia 1, built in 2018 and now being expanded, along with pipelines from Sakhalin, can raise Russian pipeline deliveries to China from 38 bcm to around 48 bcm.
Adding supplies from Power of Siberia 2 could thus increase Chinese pipeline imports from Russia alone to almost 100 bcm.
To put that figure in perspective, it may be noted that China's total imports of gas in 2024 stood at about 180 bcm -- 107 bcm as LNG and 72 bcm by pipeline -- mainly from Russia, Turkmenistan and Myanmar.
LNG suppliers that expected continuing expansion of sales to China may have to revise their calculations.
Some United State LNG projects being planned on the basis of projections of growing Chinese demand could be hit.
For Russia, the conclusion of a long-term supply contract with China will help offset some of the loss it faces in the drastic reduction of its European market.
Russian gas exports to Europe have fallen from around 155 bcm in 2021 to about 39 bcm; and the European Union plans to stop all imports after 2027.
The giant Nordstream pipelines, sabotaged in 2022, themselves had the capacity to transport 110 bcm of gas from Russia to Germany.
That is why they had become such a potent geopolitical symbol, and a target for powers opposed to Russia-Germany continental synergy.
China benefitted greatly by getting bargain prices in earlier pipeline contracts, and the continuing negotiations on commercial aspects of Power of Siberia 2 suggests it is seeking the same now.
However, while Russia's need to clinch the contract may be more pressing, China too may find it beneficial as a signal to the US that it would not require more LNG from the latter; and to keep its main supply lines free of risk at maritime chokepoints.
US companies supply only about 5 per cent of China's LNG, but they had been planning to double exports to China before the tariff war led China to curtail LNG purchases from the US.
China's price-setting power for gas imports will now be greater.
In addition to retaining industrial competitiveness, it could even use gas to replace coal, if required, to achieve its commitment of reducing greenhouse gas emissions by 7-10 per cent by 2035, which President Xi Jinping dramatically announced at the United Nations recently.
(The US achieved 17 per cent reduction in emissions this way between 2005 and 2020.)
India's plan to increase the share of gas in the energy basket to 25 per cent by 2035 is vital for economic reasons, and also to ensure we do not become an outlier on global efforts towards decarbonisation.
This will call for a huge increase in gas availability at affordable prices.
At present, LNG imports from Qatar, the US, United Arab Emirates, and others including Russia, account for 50 per cent of India's gas requirements.
Increased LNG offtake will, however, depend on global prices remaining affordable for our cost-sensitive market.
The US' LNG sales to the EU more than doubled (to 51 bcm) between 2021 and 2024; they are set to go up further, as the EU-US framework trade deal announced in July commits the former to importing US energy worth $750 billion by 2028.
To get anywhere near that unrealistic target, the EU's annual LNG imports from the US ($20 bn at present) -- along with other products -- will have to rise very sharply.
India and other Asian countries also plan to buy more LNG as part of trade agreements with the US.
The US' domestic demand for gas, to generate electricity to feed booming data centres for artificial intelligence (AI) industries, also remains elevated.
However, the impact of these upward pressures on prices is not clear at present, as new LNG export capacity is being built in Russia, Mozambique, Qatar, Canada and other countries, and increased pipeline supplies will moderate China's LNG imports.
It is also not clear US President Donald Trump's proposed ambassador to India is also designated as special envoy for Central and South Asia.
If this appellation has an energy dimension, and the old, geopolitically driven strategy - of building a gas pipeline from Central Asia to India via Afghanistan and Pakistan -- is revived, we have to be wary.
The takeaway for India is that we should simultaneously prioritise domestic exploration and production of more oil and gas in the country, and ensure we retain diversified suppliers for imports.
We should even keep open the option of undersea pipelines from the Gulf for importing natural gas into India.
Feature Presentation: Aslam Hunani/Rediff