Speeches and Remarks 2006
May 18, 2006
As prepared for delivery
Address by
David Pumphrey, Deputy Assistant Secretary
U.S. Department of Energy
Indo-U.S. Conference
"Building Natural Gas Markets in India"
Hyatt Regency Hotel
New Delhi, India
May 17, 2006
Introduction:
-- Secretary M.S. Shrinivasan, India's Secretary of Petroleum and Natural Gas
-- Chairman Shri Proshanto Bannerjee, GAIL
-- Director General V S Verma, Bureau of Energy Efficiency;
-- Shri Anil Razdan, Additional Secretary, Ministry of Petroleum and Natural Gas
-- Prab Das, Joint Secretary, Ministry of Petroleum and Natural Gas
-- Distinguished participants from India and from the United States
Welcome to the Indo-US Conference on "Building Natural Gas Markets in India."
First, I would like to thank all those who have been involved in planning this conference, including my counterparts at India's Ministry of Petroleum and Natural Gas for their unstinting efforts in making this event possible and particularly our generous host for this event, GAIL.
I would also like to acknowledge the key behind the scenes role of Mark Stern of MT Energy Associates, and offer him a special "thank you" for all his hard work in both Washington and New Delhi.
I think we will see all of those efforts pay off over the next two days. Today's conference looks to be an exciting event that will advance our agenda for further U.S.-Indian cooperation on energy and to help build strong markets for natural gas in India. And tomorrow we will be having special government-to-government workshops on gas regulation during which we can build on what we learn today.
Ladies and gentlemen, the last twelve months have marked a period of perhaps the most significant progress ever in U.S.-India relations ever, thanks to the vision and engagement of President Bush and Prime Minister Singh.
During Prime Minister Singh's visit to Washington last July and President Bush's landmark visit to India in March, our two leaders announced a number of initiatives that collectively demonstrate the unprecedented scope of cooperation between our two great democracies. It is President Bush's conviction that our partnership with India will be one of our most important in the 21st century; a transformed U.S.-India relationship, premised upon a new strategic alliance for which energy security and energy cooperation play a key role.
Both the United States and India face many challenges in fueling its growing economy and satisfying the rising aspirations of their people. Recognizing that our mutual interests are best served by working together in a collaborative fashion to ensure stability in global energy markets, U.S. Secretary of Energy Samuel Bodman and his Indian counterpart, Indian Deputy Chairman of the Planning Commission Dr. Montek Singh Ahluwalia launched the U.S.-India Energy Dialogue in May 2005.
Building upon the broad range of existing cooperation, we believe that we can mobilize secure, clean, reliable and affordable sources of energy. A key objective of this Dialogue include promoting increased trade and investment in the energy sector by working with the public and private sectors to further identify areas of cooperation and collaboration.
Much attention has focused on the civil nuclear energy cooperation initiative, which is important, because of its potential to advance energy security, enhance the global nonproliferation regime, further environmental protection, and foster economic and technological development in both of our countries.
But the Energy Dialogue has produced several other initiatives that are equally critical to the energy security and environmental performance of both countries. They cover critical areas such as cleaner coal use, expanded use of renewable energy, and greater reliance on energy efficiency.
The U.S. India Energy Dialogue consists of five Working Groups, including:
1. Oil and Gas - which organized this conference
2. Power and Energy Efficiency - Which held a conference just two weeks ago on energy efficiency technology, which I serve as the U.S co-chair.
3. Civil Nuclear Energy
4. Coal
5. New Technology and Renewable Energy
The goal of the Oil and Gas Working Group, which is co-chaired by the Indian Ministry of Petroleum and Natural Gas and the U.S. Department of Energy, is to strengthen mutual energy security and promote stable energy markets to ensure adequate supplies of energy that will support desired levels of economic growth. To that end, the working group has focused on activities that facilitate the exchange information and develop lines of communication for policy, promote increased trade and investment in the oil and gas sector and examine steps to improve business climates and work with the private sector to identify areas of cooperation and collaborate with the business community on joint activities.
Our activities in this working group build upon a long tradition of cooperation on energy between the United States and India.
We have worked together with the Ministry of Petroleum and Natural Gas on two previous gas conferences, one in 1997 and one in 2002. Both of which were very successful.
We have hosted Strategic Petroleum Reserve (SPR) visits for our Indian counterparts in June and September 2002 and a CBM study mission in January 2003.
For the last five years we have sent speakers to the New Exploration Licensing Policy (NELP) Roadshows in Houston to encourage American companies to invest in India's upstream oil and gas sector.
In addition, in partnership with the United States Agency for International Development (USAID), the U.S. Department of Energy's Clean Cities program has trained over 300 technicians and policy makers on CNG and autogas vehicles and stations. They also completed a CNG station design and assessment in the city of Delhi and helped form the Indian autogas coalition, which is made up of U.S. and India company representative and government officials, to help bring product to market and develop codes and standards for autogas stations and vehicles. Currently, there is an engine demonstration project underway looking at ways to convert polluting diesel engine to cleaner fuels such as compressed natural gas and autogas.
We are also just starting to engage in joint research activities. For example, the Department of Energy is currently working with India on the first hydrate drilling offshore India. The scientific drill ship, Joides Resolution, which India has leased for a 100-day gas hydrate drilling expedition, departed Mumbai on May 3 with both Indian and American scientists on board. We hope that the cruise will produce a wealth of data that will enhance/expand basic understanding of hydrates that will aid both of our ongoing R&D effort and accelerate efforts to develop methane production from hydrates in both countries.
Today we are at another milestone in the partnership between our two countries - The Indo-U.S. Conference on "Building Natural Gas Markets in India." Not only is this conference is a demonstration of the closer, positive cooperation between the U.S. government and the Government of India in oil and gas, but it sets out to achieve some very concrete objectives.
First and foremost, we hope that this conference will help to mobilize private investment in India's energy sector and help to identify viable commercial opportunities for American companies. With the enormous capital requirements for India's energy sector, foreign investment is crucial for meeting India's future energy needs.
Secondly, we hope to continue the development of a domestic natural gas pipeline policy for India. India has shown great progress with the recent enactment of the Petroleum Regulatory Board Law which creates an independent regulatory body, and this workshop will assist the further development of the structure and procedure that organization. Following this conference, government participants from both the U.S. and India will participate in a regulatory workshop that will support India in developing a more competitive and transparent set of regulations.
The development of a natural gas pipeline policy and the recent enactment of the Petroleum Regulatory Board Bill will be significant steps in promoting both public and private sector investment in India's natural gas exploration and development, and infrastructure -- with the objective of improving energy supply security and expanding the importance of natural gas in India's energy mix.
Third, this conference will advance other aspects of our government-to-government cooperation. For example, we expect to sign, in the near future, a grant agreement between the U.S. Trade and Development Agency (USTDA) and the Petroleum Policy Analysis Cell (PPAC) of the Ministry of Petroleum and Natural Gas to cooperate on a feasibility study for planning the development of a viable natural gas infrastructure. USTDA has had an active program in the Indian energy sector for some time, providing grants for feasibility studies, technical assistance and orientation visits covering both upstream and refinery projects in oil and natural gas, and well as supporting CBM projects and initiatives.
You will hear more about these initiatives later today in the presentation from Carl Kress of USTDA.
I'd like to take a few minutes to talk about the importance of natural gas, particularly liquefied natural gas, to the United States, and mention some work we are doing in this area.
In the U.S., the goal of government energy policy is energy security - the provision of a dependable, affordable and environmentally sound energy for a growing economy and population.
Natural gas, by virtue of its abundance, relatively low cost and environmental benefits, fits exceptionally well into our energy policy goal and as a result the use of natural gas in the U.S. continues to grow at a steady pace. Today, natural gas supplies about 25 percent of our total energy requirements, and it promises to continue to grow, to perhaps 28 percent of total energy by the year 2025. That's an increase from today's consumption of roughly 23 Tcf a year to as much as 31 Tcf a year by 2025.
Beginning in the year 2000, increasing demand for natural gas and a tightening of supply from domestic resources, led to higher prices and volatility in the market. That new price environment, combined with cost-reducing technological advances for LNG operations, presented an opportunity for LNG to expand rapidly from a marginal contributor to a significant player in the U.S. gas market. These opportunities for growth continue to present themselves today.
We at the Department of Energy have been promoting the growth of a global market in LNG since the First International LNG Summit we hosted in 2003 attracted hundreds of representatives from nearly two dozen producing and consuming nations, and from industry.
Today we have five functioning LNG terminals including the four onshore terminals built back in the 70s, which have a total capacity of 2.5 Bcf a day, with planned expansions over the next couple of years raising capacity to a total of nearly 5 Bcf a day. In addition, the Gulf Gateway offshore terminal came online earlier this year with total capacity of .5 Bcf a day.
That comes to a total current annual capacity of 1.1 Tcf, increasing to more than 2 Tcf when planned terminal expansions are completed in a year or two.
Three new onshore terminals on the Gulf Coast are now under construction and scheduled to come on line in 2008. They will add another 5.6 Bcf capacity a day, or 2 Tcf a year.
The recently enacted Energy Policy Act of 2005 includes a provision that should help improve the procedures for the siting of LNG terminals by affirming FERC's exclusive authority to authorize new LNG import terminals while leaving intact the considerable authority states already enjoy in reviewing LNG import terminal proposals, and giving the states new authority to conduct safety inspections.
As we see it, the principal - perhaps the only - obstacle to the rapid growth of the LNG market is concern about the safety of LNG operations. Two obstacles are public acceptance over siting and concerns over safety.
We at the Department of Energy are working to address these concerns. For example, our Office of Fossil Energy will be hosting a third public education forum on LNG in Los Angeles, CA on June 1st, 2006. The purpose of these forums is to initiate constructive dialogue among community members, local, state, and federal government leaders on LNG issues. The first forum was held on March 10 in Boston, Massachusetts and the second was held on March 28 in Astoria, Oregon. So far these forums have been successful, with broad participation from a variety of stakeholders. Hopefully, these activities, along with the guidelines prepared by the Sandia National Laboratory, help ease the uncertainty and trepidation associated with LNG use in the United States.
Finally, I would like to stress that the United States is eager to promote the formation of partnerships in an expanded energy trade network. It is a key element in our overall energy policy and we are continually working to initiate and improve energy cooperation and trade relationships, both bi-laterally and multilaterally through regional agreements.
The importance of trade and the bonds of cooperation, understanding and friendship forged by the pursuit of shared interests cannot be overestimated.
Our growing friendship and strong partnership with India is one of our most important and powerful means for meeting these goals.
I wish you all the best success in your discussions this week. I hope that this conference can play an important role in helping India develop a framework for the development of a natural gas industry that will meet the needs of development and a cleaner environment.
Thank You.