Iran, which was exporting almost 3 million barrels per day, is now down to 0.3 million barrels or almost nothing because of the sanctions. There was unrest in Libya and Iraq, an attack on Saudi Arabia’s assets, then came the killing of Iranian General Qasem Soleimani. Despite all this, the prices remained around $60 a barrel.
I see the prices staying at the same level. Oil prices rising to triple digits, as some are people saying, is not something that I believe in.
Is there any reason for this belief?
One reason is that there is a huge amount of oil supply coming from the US, Canada, Norway, Brazil and others. And because of continuous production growth in these countries, there will be at least 1 million barrels per day of surplus oil in the market this year. Therefore, those geo-political tensions may have only a short-term impact on the prices and are not going to change the fundamentals of the oil sector and that is why there is no nervousness in the market.
You recently mentioned that there may be an increase in demand by March. Do you see that?
The production growth is very strong. We expect production of more than 2 million barrels a day. If the demand is slightly more than 1 million barrels per day, there will be a surplus of around 1 million barrels per day. One year ago, we said that prices are not expected to increase and that is exactly what happened despite all these developments.
Is this one of the biggest crises, after you took charge of the IEA in 2015?
Yes, it is and I hope it does not escalate. The world is becoming a dangerous place. Especially, West Asia, a region for oil and gas, is becoming more and more difficult. Countries like India, which imports a substantial amount of oil and gas from West Asia, will be vulnerable to the developments there. But the government is taking the right steps in the right direction to reduce the vulnerability.
The rate of growth of India’s oil consumption is expected to surpass China’s in the mid-2020s. How will this demand be met?
India recently became the third-largest oil market in the world, right behind the US and China. In terms of other fuel such as gas and solar, too, it is growing very stronger. In a report in 2015, we said India is moving to the centre stage of global energy affairs. That is exactly what happened.
Now, we are seeing that the demand is growing very strongly because India is getting much more modern, the economy is growing and, therefore, energy demand is growing. There are many methods by which India can meet that and I have to suggest three of them — it will be investment, investment and investment only.
These are the most important things for India and in order to get the investments, India needs reforms, it has to open up, and prices for consumers should be rationalised to meet the market realities. India should restructure and reform the energy markets. Otherwise, investments will not come and we will not get necessary infrastructural developments.
Do you think rationalisation of subsidy too is needed?
There may be limited areas where subsidy is needed. But if you look at the overall picture, it should be very well chosen and rationalised.
The report — India 2020 Energy Policy Review — talked in detail about the role that sustainability initiatives will play by 2050, that can help India save $190 billion a year. Can you elaborate?
Energy efficiency is number one. Using energy-efficient measures from air conditioners to trucks to electrical motors to industry and making much more use of renewable energy.
In terms of solar energy, India’s achievements are already very good. We need to increase the share — that means in addition to the utility kind of solar, we have to move to rooftop solar. Afterwards, it should be like mushrooms — for both homes, industrial buildings and commercial areas.
India also has to make more use of natural gas. It is easily available and abundant now. Exporters are competing with each other to find buyers and India should make the most out of it. India has to make use of its existing and planned — around 10 — liquefied natural gas terminals.
The most important thing is that as a country, you should have enough pipeline distribution to villages and the towns and the cities, so that everybody gets access to natural gas which will reduce coal-based cooking in parts of the country.