Note: All information contained in this report is the best available as of March 2001 and can change.
GENERAL BACKGROUND: The South Asian region (Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka) has a huge population (more than one-fifth of the world total) which is growing rapidly.
At this same time, and despite rapid economic growth during the 1990s, the region has among the lowest per capita incomes in the world. For 2001, Pakistan is expected to experience a growth rate of 2.3% , with India at 6.1%. India is by far the largest South Asian country, in terms of
population GDP, land area, energy consumption, energy production and carbon emissions. After India, Pakistan and Bangladesh are the next largest South Asian countries in these categories.
Overall, South Asia is in a period of transition as it strives to implement effective economic, political, social and legal structures to support sustained growth. The International Monetary Fund (IMF) and the World Bank have arranged several billion dollars worth of assistance to the region. With the IMF prescribing such measures as cuts in subsidies (including energy subsidies) deregulation, anti-poverty, efforts and increased privatisation.
THE SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION (SAARC): The South Asian Association for Regional Co-operation (SAARC) was created in 1985 to help promote economic and social development, plus economic co-operation in the region.
SAARC members are Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka. Ultimately, SAARC members envision a South Asian Free Trade Area (although intra-regional trade currently accounts for less than 5% of South Asia's total trade).
At the 10th annual SSARC summit held in 1998 in Colombo, SAARC members agreed to convert existing South Asian Preferential Trading Agreement (inaugurated in 1995) to regional free trade agreement by 2001. On March 17, 1999, prior to a meeting of SAARC in Sri Lanka, India said that substantial progress had been made towards this goal.
Following the meeting, however, SAARC ministers declared that complete regional trade liberalisation would most likely take 10-12 years as several of the smaller countries fear the full effects of freer trade.
Meanwhile, India and Sri Lanka declared their intentions to establish a separate bilateral free trade agreement. Currently, India maintains a large trade surplus with Sri Lanka.
Besides free trade SAARC also is considered a means to promote inter-regional energy co-operation.
The prospect of an inter-regional electricity grid has been one of the cornerstones of SAARC's agenda. The last SAARC meeting was scheduled to be held in November 1999 in Kathmandu. Nepal but was postponed due to the coup in Pakistan.
ENERGY OVERVIEW: Economic and population growth in South Asia have resulted in rapid increases in energy consumption in recent years - well above the rate seen in the OECD.
The Energy Information Administration (EIA) estimates that South Asia's primary energy consumption (NOTE: EIA energy statistics include only "commercial" energy sources, but not animal waste, wood, or other biomass, which accounts for more than half of the South Asia region's total final energy consumption) increased by around 50% between 1990 and 1999. In 1999, South Asia accounted for approximately 3.8% of world commercial energy consumption, up from 2.4% in 1987. Despite rapid growth in energy demand, however, South Asia continues to average amongst the lowest levels of per capita energy consumption in the world, but among the highest in terms of energy consumption per unit of GDP.
Not counting "non-commercial" sources of energy like animal waste, wood and other biomass, South Asia's commercial energy mix in 1999 was 43% coal 35% petroleum, 13% natural gas, 8% hydroelectricity, 1% nuclear and 0.2% other. There are significant variations within the region Bangladesh's energy mix, for instance, is dominated by natural gas (71% in 1999) while India relies heavily (51%) on coal.
Sri Lanka is overwhelmingly dependent on petroleum (75% in 1999), while Pakistan relies on oil (40% in 1999), natural gas (40%) and hydroelectricity (13%) and the Maldives is 100% dependent on petroleum.
The Himalayan countries of Nepal and Bhutan have high shares of hydroelectric power in their energy consumption mix. In recent years, natural gas has been growing in importance as a source of energy in South Asia, especially for use in power generation fertiliser and petro-chemical production.
The major energy issues facing South Asian nations today are keeping up with rapidly rising energy demand and beginning to promote cross-border energy trade. Already, South Asia is grappling with energy shortfalls usually in the form of frequent, costly and widespread electricity outages.
Given this situation and in particular its potential economic and political ramifications, improving the supply of energy in general and electricity in particular, is a major concern among regional governments.
In order to accomplish this goal, South Asia thus is faced with the challenges of diversifying traditional energy supply sources (and expanding the use of indigenous energy resources), promoting additional foreign investment for energy infrastructure development, improving energy efficiency, reforming and privatising energy sectors, and expanding regional energy trade and investment.
OIL: South Asia contains reserves of only 5.0 billion barrels of oil, around 0.5% of the world total. In 1999, the region consumed around 2.4 million barrels per day (bbl/d) of oil, and produced 0.81 million bbl/d, making South Asia a net oil importer of around 1.6 million bbl/d.
The vast majority (around 750,000 bbl/d) of South Asia's oil production comes from India, including its offshore Bombay High field (which accounts for about one third of total India oil output) The remainder (around 60,000 bbl/d) of South Asia's oil production comes mainly from Pakistan (and to a very small extent, Bangladesh).
Most South Asian crude oil imports come from the Middle East, and this is likely to remain the case for years to come.
South Asia's oil imports are expected to grow sharply as production remains about flat while demand soars. By 2020, the region could be importing as much as 5.2 million bbl/d of oil, more than triple today's import volume.
The vast majority of this oil is expected to come from the Middle East (located close to South Asia and also where more than two thirds of world oil reserves are concentrated), with only small volumes coming from other areas.
Growing demand for transportation fuels and increased industrial power demand have been major factors behind the growth in South Asian oil consumption in recent years.
Between 1990 and 1999. South Asian oil consumption - led by India - grew by about 64%, and EIA's International Energy Outlook 2000 projects India's oil consumption will grow another 40% by 2005, reaching 2.7 million bbl/d (up from 1.9 million bbl/d in 1999).
India's current Five year Plan (1997-2002) forecasts that the country will exhaust its crude oil reserves by 2011-2012, even if only 30% of demand is met through domestic production.
The Plan also envisions that India will need to increase its crude oil imports 70% by 2001-2002. The Plan emphasises and encourages domestic oil companies' pursuit of oil exploration opportunities in other countries, particularly in Asia and Central Asia.
Like India, Pakistan's net oil imports are expected to increase rapidly as domestic oil demand growth, much of it associated with the start-up of new oil-fired power plants, outstrips increases in oil production.
Sri Lanka imports all of its crude oil, which is used largely for electricity generation and transportation and has refining capacity of 50,000 bbl/d. in recent years.
Sri Lanka has increased its oil imports in an effort to diversify away from reliance on hydroelectricity, which varies depending upon rainfall amounts. Between 1990 and 1999 Sri Lanka oil consumption increased around 80%.