1. Globoil India 2014 Conference 26-28 September, Mumbai. Recent Developments in West Asia: Implications for India's Energy Interests Talmiz Ahmad Former Ambassador of India to Saudi Arabia, Oman and the UAE 1

2. Global energy demand in 2035 (i)global energy demand will increase by one-third from 2011 to 2035; (ii)emerging economies will account for 90 per cent of net demand growth in 2035, with China, India and the Middle East constituting 65 per cent of the total increase; (iii)global energy trade will shift eastwards. from the Atlantic to the Asia-Pacific: by the early 2020s,China will become the world’s largest oil importer, while India will emerge as the largest coal importer; (iv)fossil fuels, which accounted for 82 per cent of energy supply in 2010, will constitute 80 per cent of the global total in 2035; each of the three fossil fuel types (oil, coal and gas) will converge around similar shares of about 26-27 percent; 2

3. (v)long-term oil demand will increase by 20 mbd over 2012-35, reaching 108.5 mbd in 2035; of this increase, developing Asia will account for 88 per cent; and, (vi)while rising non-OPEC output from North America and Brazil will reduce demand from OPEC suppliers over the next decade, OPEC will regain its role as the key source of oil supply growth from the mid-2020s. (vii) Saudi Arabia will remain a central player in OPEC and global energy scenarios: it plans to maintain its production capacity at 12.5 mbd, but will develop new fields and extend the life of old fields by lowering their production. 3

4. The long-term (2035) Asian energy scenario Asian primary energy demand will go from 4.2 billion tonnes oil equivalent (toe) in 2010 to 7.7 billion toe in 2035; in 2035, Asia will account for 40 per cent of global oil demand, going up from 31 per cent in 2010; Asia will also account for 60 per cent of global oil demand growth; and, China and India will represent nearly 70 per cent of Asian energy demand in 2035, with China accounting for 52 percent and India 18 per cent; Japan’s share will decline from 12 per cent in 2010 to 6 per cent in 2035. 4

5. During the next 10-15 years, even as the US reduces its oil imports, most of the Gulf production will shift to Asia: the Asian giants – China, Japan, Korea and India – will depend on Gulf supplies to the extent of 60-90 per cent, while around 90 per cent of Gulf production will go to Asia. The scenario relating to oil exports from the Gulf in 2035 is expected to be as follows: China: 6-8 mbd India: 5.0 mbd Japan and ROK: 4.5 mbd Europe: 2.2 mbd US: 0.2 mbd 5

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7. Projections In 2035, India will become the third largest energy consuming country in the world after China and the USA, when the Indian share in global energy demand will go up from 4 per cent in 2010 to 8.6 per cent; India’s energy demand is expected to increase by 3.8 per cent annually; fossil fuels will account for 90 per cent of incremental growth by 2035; demand for coal will be driven by the power and industry sectors and will retain its position at 52 per cent of the national energy mix; these sectors will also propel the demand for national gas; Oil demand will increase from 2.5 mbd in 2010 to 6.9 mbd in 2035; India’s import dependence will go up to nearly 90 per cent. 7

8. It can thus be safely concluded that the future of economic achievement and prosperity in Asia will be crucially linked to the security and stability of the Gulf. In short, the Gulf will be as important to Asia in the 21 st century as it was to Europe and the United States in the 20 th century, thus providing the principal Asian countries with the rationale for a legitimate role in ensuring that the region remains secure, and the robust and mutually beneficial connectivities in energy, economic and political areas that already exist between Asia and Gulf, are allowed to flourish in the coming decades. 8

9. West Asian Scenario A deep Saudi-Iranian divide, with competitions across West Asia on strategic and sectarian bases; The ongoing violence in Syria where the Saudi-Iranian rivalry is engaged in a fierce proxy conflict; The emerging US-Iran thaw; Saudi dissatisfaction with US policies in the Gulf and West Asia and deepening estrangement between them; of course, the ideological and geopolitical challenges from ISIS have brought the two together in a cooperative military effort against this new jihadi menace; Increasing fissures within the GCC itself on the question of ties with Iran and the Muslim Brotherhood. Continuing conflict in Iraq on sectarian and ethnic basis, which calls into question Iraq’s plans relating to increasing its oil and gas production; and, Above all, the implications of the Arab Spring that challenge the political and economic status quo in all the Gulf Sheikhdoms. 9

10. A New Gulf Security Paradigm End of the US hegemonic era Compulsions for a new order An Asian role in shaping a new Gulf security architecture 10

11. The Asian Quest for Energy Security could lead to Asian regaining its traditional place-a place it has held for thousands of years of recorded history and lost only in the last two hundred years or so – in the vanguard of the advancement of human civilization. The Asian renaissance brought us all to independence and liberation. Now, the Asian Resurgence depends on energy cooperation in Asia. The 21 st century will indeed be the Asian century only if Asian countries – buyers or sellers – join hands together in a continent – wide bid at bringing Asia together and keeping Asia together. I am confident that we will. - Mani Shankar Aiyar, Indian Petroleum Minister, Jan 2006 11