India must be able to quickly attract global oil firms: Rystad Energy CEO

India's energy future hinges on decarbonising electricity first, boosting oil and gas exploration, and weighing nuclear SMRs against cheaper renewables

A “Guyana-like” moment in oil discovery requires that countries offer transparent fiscal terms, quality geological data and allow global firms to take the risk involved in oil and gas exploration, says Jarand Rystad, Chief Executive Officer (CEO) of Rystad Energy. In an interview with Sudheer Pal Singh, Rystad says India is still 10 years away from the point when focus on electrification would make sense after enough decarbonisation has occurred. Edited excerpts:        

 

Is the global energy transition dead?

 

The energy transition is about how new technologies like solar, wind, batteries, or electric vehicles will come into the energy market and substitute existing technologies. The most important technology is solar which is alone going to mitigate 11 Gigatonne of the current emissions of 38 Gigatonne globally. So, the energy transition is not dead. It is, in fact, going faster than anticipated. Three years ago, we estimated that solar power capacity will grow from 1,000 to 1,900 Gw, while it has actually grown to 2,400 Gw today. Onshore wind is on track, growing as expected. Offshore wind capacity addition is slightly slower than expected. It is the same story for Carbon Capture, Utilisation and Storage (CCUS) and Hydrogen. Battery capacity has also grown faster than expected.

 

What are the biggest threats to the global energy transition?

 

The energy transition is about three things — decarbonisation of the electricity system, electrifying everything possible, and getting rid of the rest of the emission with measures like CCUS and biofuel. These tasks will remove emissions to the extent of 40 per cent, 40 per cent and 20 per cent, respectively. For India, the first task is the most important. Since India has a very brown footprint of the current electricity mix with a lot of coal, it does not make sense to electrify everything. It is more important to do the first task first and focus on decarbonising the system rather than electrification, until a critical threshold is reached.

 

For India, that threshold could still be 10 years down the road. Around half of India's power capacity is low carbon but because that capacity has few operational hours, only 23 per cent of the generation is low carbon.

 

How do you look at India's ongoing efforts to boost oil and gas exploration and production (E&P) activity, announce a new discovery and ramp up production?

 

It makes a lot of sense. There is a race to attract oil companies to focus on each country's basins to get competitive oil and gas resources. Oil & gas will remain an industry for another 100 years or more but gradually it will transition from being an energy industry to a material industry. Oil will see its peak in the early 2030s and then decline. Gas will witness a peak in the last 2030s or early 2040s. Today, many governments are requesting large oil and gas companies to come and invest in their basins.

 

What should India do to make its E&P sector even more attractive?

 

India needs to be able to quickly attract large and small international oil companies with competence to produce efficiently. The increased competition leads to better dynamics and the national oil companies also learn from international partners. Generally, governments should be able to provide stable conditions and an attractive fiscal environment for companies. Norway, for example, gave a cashback on exploration. That means a negative tax of 78 per cent on exploration. That kind of a regime incentivises companies to take risks and explore.

 

Do you think India could strike a "Guyana-like" oil discovery in the Andamans?  

 

It is tough competition to attract the attention of international independent oil companies. Many governments are claiming the same. That has to be combined with good transparent fiscal terms and incentives, good exploration data and allowing them to make the bet. Then companies will come and do the exploration and then there will be some likelihood that yes they can have a Guyana-like moment, because India has great sedimentary basins.  

 

India is facing criticism from the West for its oil purchases from Russia amid the ongoing Russia-Ukraine war. How should India manage its Russian oil imports?

 

I will be careful in giving any strong recommendation because India has been able to do a balancing act quite well in this context. India is facing pressure from China, Russia and the OECD countries and it is trying to balance that pressure and find a way that suits both commercially and politically. That balancing act is at times very successful.

 

Another area where India is trying to bring about major change quickly is nuclear power. That effort also includes amending the local laws governing key issues like supplier liability to attract companies and technology. How do you look at it?

 

It should be welcomed. And, there should be evidence that the providers of these technologies can produce competitive electricity. However, I would be a bit hesitant on this aspect. This is because when you look at the actual projects happening, there is just one SMR that is decided to be built, only one plant in the whole world, at Darlington in Canada. They made an investment decision in May this year. That plant is the first of the four 300 Mw plants and the first plant's cost is $5.5 billion already for 300 Mw. This will add up to more than $18 billion per Gw. Compare that with solar where the cost is less than $1 billion per Gw. So, the providers of nuclear SMRs need to be convinced that they can build projects at a competitive price. As compared to other technologies, the levelised cost of electricity in case of nuclear power is very high. The basic problem is that the supply chain of nuclear power plants has been either very dominated by the Chinese or the Russian players or non-existent. And that has driven costs up. The philosophy of SMRs is mass production. But it could end up being too late, too tiny, too expensive. The nuclear power industry will find that the competition with solar, wind and batteries is getting harder and harder to beat.