Topic: “Role of BRICS in Energy Security”
The oil price plunge since June 2014 may have been deemed as a boon for the global economy. But, that depends on where one stands, as a producer or user. BRICS economies also felt the impact.
Fiscal impacts have been negative where taxes on exports/ consumption of oil constitute an important source of government revenues as in the case of Russia. Though, it has been positive with respect to outlays with energy subsidies like in the case of India. The overall net impact on global GDP is expected to be positive. Besides a boost to global demand derived from the transfer of purchasing power from oil producers to consumers, lower oil prices have widened the space for (temporary) expansive monetary policies and enabled lower government spending with fuel subsidies.
Crisis for Russia as Exports Plunged
Oil and gas account for more than 70% of Russia’s exports and nearly half of its budget revenues. Russia’s economy has suffered a strong negative impact from lower oil prices. The energy sector is responsible for 17-25% of its GDP.
The oil price fall has come on top of economic sanctions from the EU, Japan and the US related to the Ukraine crisis. While balance-of-payments current account balances have remained positive, annual resident capital outflows were running at 4-5% of GDP as of December 2014.
Devaluation pressures on the Ruble stemming from geopolitical risks increased after the oil price fall gathered pace. As a result, not only has annualized inflation moved above 10% this year, but the US$600bn foreign debt of Russian banks and non-banking firms became an increased source of concern. Although large foreign reserves may still serve as a buffer against balance-of-payment crisis, real GDP is expected to slump by more than 3.5% this year, followed by another 1.5% in 2016.
China, India, and South Africa Benefit As Consumption Economies
According to World Bank estimate a 10% decrease in oil prices is expected to lift growth in oil-importing economies by something in the range of 0.1-0.5 percentage points, depending on the share of oil imports in GDP. Positive fiscal and current-account impacts are also expected. So clearly China, India, and South Africa are beneficiaries.
As per World Bank, China will experience an activity-boosting effect of lower oil prices in the range of 0.1-0.2%, given that oil comprises only 18% of energy consumption. A deflationary impact is also on the cards, although it will be limited as energy and transportation correspond to less than 20% of the CPI. Fuel subsidies amount to only 0.1% of GDP, so fiscal impacts will not be significant. On the other hand, as China remains the second-largest world importer, lower oil prices throughout 2015 and 2016 will likely raise its current account surplus by 0.4-0.7 percentage points of GDP.
Sweet Spot India and South Africa
India has an oil import bill of 7.5% of GDP and has derived high terms of trade gains from the oil price evolution. Furthermore, its challenges with fiscal deficits and high inflation have been made easier. The government has already taken the opportunity to phase out diesel subsidies and hike taxes on oil derivatives. Falling oil prices have also helped to bring inflation down to less than 4.5% a year last December, opening space for some monetary policy loosening ahead.
South Africa is also a net importer of oil and a beneficiary from lower prices, including by corresponding effects on inflation and the import bill. As far as current-account deficits and GDP are concerned, recent oil price developments have come as a relief after the previous decline of prices of metals and minerals that comprise a substantial chunk of the country’s exports and GDP.
Mixed Bag for Brazil
Brazil has a small deficit on its oil foreign trade — as compared to the other countries and that qualifies it for potential benefits of declining prices both on its current-account deficit and as a facilitator for an undergoing domestic price realignment of oil derivatives.
On the other hand, the new international price regime and levels have come at a moment in which strong bets on future oil-related investments had been made in previous years, toward an expected crossing of the threshold to the group of net-exporting countries. Together with the unfolding corruption scandals in state-controlled Petrobras, world oil price developments have prompted a full downward review of such investments. It has really hurt the country’s chances.
Road Ahead: Great Potential in Cooperation among BRICS Nations
Considering the recent crash in Oil and Gas market it become imperative for BRICS countries to come closer and increase their cooperation in Oil and Gas sector as Countries like Russia is a major exporter of Oil and Gas, whereas India, China and South Africa are the biggest importers and consumers of Oil and Gas.
BRICS Summit Should Facilitate
In such a situation, the Platform of BRICS Summit can be used as a facilitator for Policy Makers of all 5 countries to increase cooperation among nations in the field of Oil and Gas. Interestingly, India already has committed huge investments in Russia Oil and Gas blocks via National Oil Companies (NOC) like OVL, OIL, BPCL and IOC. On the other hand China is also keen on investing heavily in the country. All these countries should come together to form a consortium in the Oil and Gas space.
USP of Indian Oil and Gas Space
“Role of BRICS in Energy Security”
13 October 2016, Samrat Hotel, Chanakyapuri New Delhi
|1200–1330 Hrs||Inaugural Session:|
Energy security is the association between national security and the availability of natural resources for energy consumption. Access to cheap energy has become essential to the functioning of modern economies. However, the uneven distribution of energy supplies among countries has led to significant vulnerabilities.
Rapid deployment of renewable energy and energy efficiency, and technological diversification of energy sources, would result in significant energy security and economic benefits.
India is also taking various steps to bolster its energy security and recently to enhance the petroleum and hydrocarbon sector, Government of India has introduced initiatives like the Hydrocarbon Exploration Licensing Policy (HELP), Marketing and Pricing freedom for new gas production, grant of extension to the Production Sharing Contracts and assigning the Ratna offshore field award to Oil and Natural Gas Corporation (ONGC) for development.
BRICS Countries can surely contribute towards each other’s energy security. With the foregoing theme, attendees and Policy makers shall deliberate the ways and means for BRICS coordination so that better synergy can be developed in the Oil and Gas front.
Hon. External Affairs Minister Smt. Sushma Swaraj ji has only the last month endorsed the activities and the potential role PIOCCI can play in the business and trade engagement.
|Welcome & Setting the Context||Mr. Raj Kumar Bhatia, Mentor, PIOCCI|
|Special Address||Ambassador D.M. Mulay, Secretary (CPV & Overseaslndian Affairs), Ministry of External Affairs|
|Special Address||NOC Chief of a BRICS nation|
|Special Address||Amb. (Retd.) Virendra Gupta, Former High Commissioner of India to South Africa & President, ARSP|
|Special Address by Diaspora Representative||A prominent PIO / NRI or PIOCCI International Coordinator|
|Keynote Address||Shri Dharmendra Pradhan, Hon’ble MOS (IC) of Petroleum and Natural Gas|
|Vote of Thanks||PIOCCI President|
|1430–1600 Hrs||Panel Discussion I –|
Main Theme: “Opportunity and Challenges for Energy Security”
Energy Securities and successful global partnerships. Considering the recent crash in Oil and Gas market it become imperative for BRICS countries to come closer and increase their cooperation in Oil and Gas sector. Russia is a major exporter of Oil and Gas, whereas India, China and South Africa are the biggest importers and consumers of Oil and Gas. Session will highlight the Opportunities and Challenges for the Energy Security.
|Session Chairman and Moderator|
|Guest of Honour Remarks||Shri Santosh Gangwar, Hon. Minister of State for Finance (To be Confirmed)|
|Participant 2||R Dayakar, former ambassador to Iraq, Qatar and Jordon. Former Head of Gulf Division in Ministry of External Affairs. Has written extensively on Energy Security|
|Participant 3||CMD, ONGC|
|Participant 4||Head of RIL|
|Head of NOC (Foreign)|
|Open House & Vote of Thanks||PIOCCI President|
|1600 – 1630 Hrs||Tea Break|
|1630 – 1800 Hrs||Panel Discussion II –|
“Energy Security– Enablers and Barriers , global lessons and how these affect Indian Energy Security including Renewable energy programs. Role of Diaspora Business Leaders –”
Examine new trend in achieving energy security with respects to recent advancements in Science, Technology & Innovation. Indian Diaspora as Technology and Business Leaders and Indian Innovators synergize a partnership including perhaps come up with game changing solutions viz India which will largely work for the Developing Countries globally.
|Session Chairman and Moderator||Amb. (Retd.) Shashank, Former Foreign Secretary of India|
|Guest of Honour Remarks||Shri VK Singh Hon'ble Minister of State for External Affairs (To be Confirmed)|
|Participant 1||CMD, GAIL|
|Participant 2||CMD, BP|
|Participant 3||Representative, UNIDO|
|Participant 4||Indian Diaspora Representative|
|Open House & Vote of Thanks|
|1930 - 2230 Hrs||Networking Cocktail and Dinner|
List of Attendees:
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