Rajesh Khanal
The country has embarked on a journey to achieve zero carbon emissions by 2045, through production and utilization of renewable energy at maximum. One of the state mechanisms, however, has stuck on promoting the use of fossil fuels. The government entity is after making it happen extending the existing petroleum pipeline for this purpose, even when the donor country, India, has announced its withdrawal from the grant. It will likely pressure the Government of Nepal to manage all necessary financial sources, specifically by assuming more loans.
It appears contradictory firstly that the state will have to assume excess financial liabilities to construct the pipeline to use more fossil fuels. Secondly, it will have to subside its aim to use more renewable energy to minimize carbon emissions.
Energy Cooperation & South Asia
Energy cooperation is the collaboration between two or more entities (countries, corporations, non-governmental organizations) aimed at ensuring energy security.
Energy cooperation stands as a pivotal cornerstone for global sustainability, enabling countries to collaborate on the development and sharing of clean, renewable resources. It fosters international partnerships that are essential for tackling climate change, ensuring energy security, and promoting economic growth through innovative technologies.
Cross-border energy cooperation can play a significant role in regional economic development. It is indeed a reality in a number of regions around the world. For instance, the interconnection of electrical grids through high voltage transmission lines across international borders in Europe. Likewise, in the US and Canada as well as in the Nordic countries, cross-border electricity cooperation exists for a long period of time. From a commercial perspective, it is being pointed out that there is considerable scope for expanding regional petroleum trade in South Asia.
There is a wide variation in commercial energy resource endowments and commercial energy demand among the South Asian countries. While India, Pakistan, and Bangladesh account for the major natural gas and coal resources, Bhutan and Nepal have large hydropower resources. All the countries have vast renewable energy potential and the sharing of these resources naturally leads to more optimal energy supply solutions for the entire region.
In case of land-locked nations in particular, cross-border pipelines provide the energy ‘lifeline’ to some extents. For instance, India-Bangladesh Friendship Pipeline is also under construction.
Prospects of Energy Storage
Energy reserve is one of the aspects of energy security. Energy reserves refer to the estimated quantity of energy sources (e.g. coal, gas, or oil) known to exist with reasonable certainty, and which can be recovered with presently available technology at an economically viable cost.
Energy storage can help enhance reliability and flexibility. Storage of oil and natural gas helps smooth out supply and demand discrepancies.
Energy security is a goal that many countries are pursuing to ensure that their economies function without interruption and that their people have access to adequate, reliable and affordable supplies of modern and clean energy. It is a pressing concern because the demand for energy is growing rapidly due to robust economic expansion, population growth, new uses of energy and income growth, and yet the supplies of energy resources required to power these needs are finite and, in most cases, non-renewable.
Citing its importance, many countries now adopt strategy to maintain fuel storage to support domestic market demand for at least 90 days. They are investing huge amount of money to construct oil storage system. The global oil storage market size was valued at $12.2 billion in 2020, and is projected to reach $18.4 billion by 2030, growing at a average growth rate of 4.3 percent from 2021 to 2030. The purpose for store fossil fuels is found relevant in the period like spread of COVID 19, trade embargo and economic sanction.
Governments require producers and refineries to carry a larger storage than they would otherwise for security purposes. Although in some countries, private sector and commercial companies stock the fuels, in the countries like the United States, the government stores the oil reserves.
Energy security is multi-dimensional in nature, and many countries regard it as a policy priority. In the short-term, energy security concerns focus on the ability of the energy system to react promptly to sudden changes in the supply–demand balance. In the long-term, energy security concerns have to do with timely investments in energy supply in line with economic developments and environmental needs.
Petroleum Pipelines and Storage Extension in Nepal
South Asia’s first cross-border energy pipeline was constructed between India and Nepal. It is a 69-kilometer-long petroleum product pipeline project. Compared to many other international pipeline projects constructed or being developed around the world, the one constructed across Nepal-India border is the modest and small in terms of size and scale.
The new agreement between two countries initially stipulated that the construction of the Amlekhgunj-Chitwan Petroleum Pipeline, Siliguri-Jhapa Petroleum Pipeline, and a Greenfield Terminal at Charali in Jhapa, all to be undertaken by Indian Oil Corporation (IOC) with subsidies. Additionally, plans included the construction of a Greenfield terminal at Lothar in Chitwan, funded by NOC with technical support from IOC.
However, India is reported to have refused to provide a subsidy of approximately Rs 17 billion for the construction of two petroleum pipelines and a fuel storage facility. The agreement reached with the Government of India even involved the government-owned entity the IOC, which has now hesitated to proceed with the project with subsidies.
A joint study conducted by IOC and NOC in 2020 estimated the construction costs of the Amlekhgunj-Chitwan and Siliguri-Jhapa petroleum pipelines at approximately Rs 4.38 billion and Rs 4.6 billion, respectively, with an additional Rs 8.3 billion earmarked forthe Greenfield terminal at Charali in Jhapa. These projects were slated for IOC investment, alongside the Greenfield terminal in Lothar, Chitwan, to be funded by NOC at an estimated cost of Rs 9.88 billion.
Additionally, in April 2023, the Nepal-India Joint Working Group on Petroleum and Gas met in Kathmandu and decided to conduct a study for the construction of a gas pipeline from Motihari, India to Amlekhgunj, Nepal. Another proposed gas pipeline will extend from Gorakhpur, India to Bhairahawa. Officials also discussed building a second oil pipeline from Siliguri, India to Charali in Jhapa.
The NOC has stepped up construction of storage depots at different places of the country to increase its storage capacity of petroleum products. It has been constructing fuel storage tanks with capacity of more than 9,000 kiloliters near the Rohini River bank in Rupandehi district of Lumbini Province. The storage facility will sustain petroleum demand of Lumbini Province for 20 days. According to the NOC, It is investing around Rs 3 billion for construction of the infrastructure.
In July 2023, the NOC constructed new diesel storage plant with a capacity of 10,000 kiloliters in Pokhara of Gandaki Province. The state-owned enterprise invested Rs 890 million for this purpose.
Relevance of Promoting Fossil Fuels in New Contexts
While environment groups have been lobbying the government to build charging stations for electric vehicles across the country, the bureaucracy and oil utility want to build a multi-billion-rupee pipeline to transport liquefied petroleum gas.
Petroleum products are Nepal’s largest import, accounting for 17.4 percent of its total import bill. Motor vehicles which burn fossil fuels and their spare parts come second,accounting for 6.5 percent of total imports. In this regard, the government must think for minimizing the trade deficit by cutting down the import of petroleum products. This will not only help reduce draining of foreign currencies but also helps the country fulfill its commitment towards minimizing carbon emissions.
While the refusal to carry out the project with a grant element by the Indian side has become an issue lately, there is question on the rationale behind proceeding with the pipeline projects altogether. Nepal in this regard should reconsider its priorities, shifting focus towards promoting electric vehicles (EVs) and developing necessary infrastructure such as charging stations in strategic locations across the country.
Initially, the Indian side committed to funding the project with a grant, responding to Nepal's stance that the project's progression hinged on such financial support. However, the issue has resurfaced with IOC officials now proposing that NOC shoulder the financial burden for the next 10 to 25 years.
It is also worthwhile to note that these costs of billion rupees projects may escalate further. Allocating such substantial funds for pipeline and storage facility construction appears incongruous, given Nepal's commitment to achieving carbon neutrality by 2045, alongside promoting alternative energy sources such as EVs.
Kul Man Ghising, managing director of the Electricity Authority, says if the government plans to invest in fossil fuels and cooking gas despite surplus electricity, it’s a flawed policy.
The government reveals dubious policy regarding energy security of the country. On one hand, it talks about promoting use of domestically produced hydroelectricity to minimize the ballooning trade deficit and taking credit for facilitating maximum use of the renewable energy. On the other hand, it plans for constructing pipelines and storage tanks through huge investment, even by taking excessive borrowing at a time when the country already has public debt of over Rs 2.4 trillion, more than double just in a span of few years.
According to energy expert Amrit Nakarmi, Nepal has promised to adopt green energy and reduce the dependency on fossil fuels at different international forums. “But the government is doing just the opposite. This shows that it lacks long-term vision and is abandoning the commitments made at the international forums,” he said. “The investment in the import of fuel will be a waste. Instead, the government should invest in increasing the reliability and quality of electricity and invest in infrastructure for electric vehicles.”
Reduction in use of petroleum products is also importance from the standpoint of achieving energy security in future. As Nepal is completely dependent on India for the fossil fuels, a halt to fuel shipments by the southern neighbor could lead to an acute shortage in the country. Not limited to whether India’s unofficial blockade in 2015 or an embargo in 1989, time and again Nepal has seen fuel shortages when India just made an inch of its policy change towards Nepal.
Amid the surging global warming, there is a growing call for measures to address energy security in new dimensions along with outlining a new range of policy measures that can be used to improve energy security by boosting the uses of renewable energy. These include more investments in energy production and transmission; promotion of energy efficiency in various end-use sectors; modernization of the grid to enable the integration of renewables such as wind, solar and geothermal energy into the energy system; undertaking reforms in energy markets to attract private sector investment in energy production, increase competition, reduce wastage and lower costs to energy users and fostering greater international collaboration on energy issues and regional energy trade.
Conclusion
The country’s policies must not be supply driven. Rather it must be judged on the basis of desirability of the outcomes in the line of maximizing welfare of the nation at present and even till future. Nepal must not have to consider obliged whatever be the clauses put forth by the donor side if they are not compatible with the national policies.
The state-owned NOC already operates storage facilities strategically positioned across the country, receiving petroleum products from IOC's depots near the border. Given the efficacy of these existing oil depots in meeting domestic demand through their supply network, investing heavily in new petroleum pipelines and storage facilities seems redundant. Instead, Nepal should pivot towards incentivizing EV adoption and reducing reliance on petroleum products wherever feasible. This shift necessitates investment in EV charging infrastructure nationwide. By doing so, existing infrastructures could readily support domestic petroleum product needs. Both the governments need to reconsider their plans regarding petroleum pipelines and prioritize the development of EV infrastructure to mitigate carbon emissions and foster a green economy.
Furthermore, greenhouse gases which are largely responsible to cause global warming and climate change, are the outcomes of production, transportation and utilization of energy. Therefore, it is an utmost urgency that the right decisions must be made towards meaningful production, transportation and utilization of energy.
