See Rohit Saran, India Today, 28 February 2005, from which I have refreshed my memory and used as the basis for this description. My grateful thanks to him.

Chapter 8: Footnote 5

Can Mani Shankar Aiyar make India a global hotspot for oil?Nine months into his job as petroleum minister, Mani Shankar Aiyar has launched a new Great Game to overcome India's growing energy insecurity. He is betting on...Expanding Exploration: Seeking out explorers from across the globe and India to come and hunt new oil and gas in India.

Pipe Dreams: Forming a network of transnational gas pipelines with oil-rich Asian neighbours, even the ones not-too-friendly.

Diplomatic Dividends: Letting oil interest influence - and override - traditional diplomatic ties. Acquire oil, gas fields abroad aggressively.
Commanding Heights: Attempt to create an Indian public-sector oil major that would be 34th on the Fortune 500 list.

The Bay of Bengal is Asia's North Sea, says Mani Shankar Aiyar, pointing to the map of India on a projection screen. He is addressing 150-odd investors in Houston, the energy capital of America.

Zeroing in on the east coast of India, the minister for petroleum and natural gas takes the investors all the way from the Palk Straits on the southern tip of India to the Myanmar coast pointing to all the existing and potential hotspots for oil and gas.

That includes the Krishna-Godavari basin where Reliance and Niko made the world's biggest gas discovery in 2002. Investors look interested.

Aiyar has only just begun. Moving on to the west coast of India, the minister calls the Arabian Sea the Gulf of Mexico in terms of its potential for petroleum reserves.

Coming to the mainland – onshore - the minister throws a new proposition at the foreign investors. "Much of India's oil is under the Deccan Trap - a thick layer of volcanic rock. Help us recover that oil." Investors seem enlightened.

Then comes the final call: India, says Aiyar, is like California in 1848. "Come join the oil rush to the country." For those finding comparisons to the Gold Rush lofty, the minister has some figures to share.

India has total prognosticated hydrocarbon reserves of 30 billion tonnes, spread across 26 sedimentary basins. Only 18 per cent of this estimated bounty has been explored so far. The remaining 82 per cent is up for grabs for those who will bid to explore.

Aiyar's hour-long speech - a heady mix of facts, fiction, history, geology and diplomacy - has investors impressed and entertained. Among them are some of the best and the biggest of global oil industry - Exxon Mobil, Chevron Texaco, Shell and a host of small- and medium-sized companies.

Houston was Aiyar's next stop. He refers to John Steinbeck’s Grapes of Wrath and draws parallels to his quest for western oil explorers with Dr Livingstone's exploration of Africa. If Aiyar is overselling India, the reasons are more fundamental than his self-confessed tendency to let his tongue run away with him.

In many ways it's the worst of times for India's oil economy. Till the late 1980s, India used to import only 30 per cent of its annual oil consumption. Today it imports 70 per cent and in 15 years its dependence on foreign oil will rise to 85 per cent.

Aiyar's challenge

This at a time when global prices and supplies of oil have been most volatile and domestic production has been stagnant (see graphic: Aiyar's challenges). Curbing demand for energy will be unthinkable, if not foolish.

Even after the demand spurt in the 1990s, an average Indian's energy consumption is less than a fifth of the global average. That will only gallop as economic growth picks up.

Curbing energy consumption will be gagging growth. Besides, oil is not all there is to energy. Total energy consumption in India comprises coal, oil, gas, hydro and nuclear. Of these five, the share of gas will rise the fastest in the next 20 years.

So the challenge is to ensure not just increased supplies, but also a changing mix of supplies. And do that in a country that has traditionally been considered deficient in hydrocarbons.

India's proven oil reserves - different from the prognosticated reserves Aiyar talks of - are less than 1 per cent of the world's total proven reserves.

A study done by McKinsey for Cairns Energy of UK 10 years ago found that the seven global oil majors had drilled 8,000 wells in South-East Asia, but only 12 in India.

With such odds,[a big thinker and big talker - Aiyar qualifies for both - and well versed in global politics may be a good bet to draw attention toward India and deliver energy security to the country.

The two obvious ways to increase oil and gas supplies is to explore more and acquire more. Thankfully, there are small but significant successes in recent times that Aiyar can build on.

Starting 2001, there have been significant discoveries of oil and gas, most of them involving private and foreign companies. Reliance Industries and Niko Resources of Canada made the world's biggest gas discovery of 2002 in the Krishna-Godavari Basin.

Only a few years ago, the Basin was declared as "failed" by British Petroleum. Cairns made oil and gas discoveries in Rajasthan and in the Cambay basin. The stock prices of Cairns and Niko rose 5-10 times as a result of these discoveries.

All this has caught the attention of global majors. "The role of Cairns and Niko is to be catalysts ... to demonstrate the success and start the bandwagon for investors," says Mike Watts, director (exploration), Cairns Energy.

"There was a perception that prospects of finding oil and gas in India are poor. But recent discoveries have changed that perception. In this industry when someone succeeds, others come in," says Dave Roberts, managing director, Asia and Middle East, British Gas Group.

Rightly then, the Petroleum Ministry has been showcasing the success of private companies in all its road shows. Presentations by private foreign and Indian companies follow the minister's speech.

"We (government) can only convey conviction. It's only the foreign companies operating in India that can convey credibility. We can't sell our case except with the combination of conviction and credibility," says Aiyar.

The minister has more to show foreign investors. Petroleum is also the most liberalised and open industry of the Indian economy. Though dominated by cash rich PSUs, it is one sector where there is 100 per cent foreign investment in exploration, pipelines and marketing.

The partial removal of price controls and hike in global oil prices has made the industry very profitable. At the end of 2003-4, oil PSUs were sitting over Rs 90,000 crore (about $20 billion) of reserves.
Interestingly, ONGC has drawn praise from most foreign companies as being a helpful partner. Aiyar has been selling the prospects of investing in India as joint venture partners of PSUs.

That reduces the risk for foreign investors. Much to the surprise of some, Aiyar ends his sales pitch to investors by pleading - even begging - for foreign companies to come to India. That a Left-of-the-centre politician is pleading in the heart of western capitalism for investment in India shows how the needs of the job can take precedence over long-held beliefs.

Aiyar's Modus Operandi

Aiyar, though, credits Prime Minister Manmohan Singh for that (see interview). Being a Nehruvian socialist, Aiyar claims he always looks at the world with clear and friendly eyes.

As long as foreign investors are coming to India on his, not their terms, what's the issue? One personality trait that lends a unique edge to Aiyar's job is his training as a diplomat.

Oil has always been as much about economics as diplomacy. That makes Aiyar a perfect fit - notwithstanding the fact that his appointment to the Petroleum Ministry was "temporary".

Panchayati Raj is the ministry he holds "permanent" charge of. Aiyar is trying to convince governments - his own and his neighbour's - that the quest for energy security should override political reservations.

He has had a coup of sorts by ensuring that the Cabinet mandates the Petroleum Ministry to talk to gas rich nations like Iran and Myanmar for the import of natural gas through a pipeline.

The ministry will also talk to Pakistan and Bangladesh whose territory will be used as a transit for the pipelines. This was earlier done by the Ministry of External Affairs (MEA).

Aiyar is also importing senior IFS official Talmiz Ahmed from the MEA for his oil diplomacy initiatives. Aiyar's efforts to bring together major Asian oil producers and consumers - China, Japan, Saudi Arabia included - in Delhi in January also had the world sit up and notice.

Even more significant was his success in getting the Chinese to accept that the two countries should cooperate, rather than compete, in their search for oil and gas abroad. China has been a spoilsport in acquisition of oil and gas fields by OVL abroad.

Aiyar is dreaming of an Asian gas pipeline network through which countries like India can draw or inject gas at strategic points. As a shared resource between India, Pakistan and China, it could well be a pipeline for peace.

Can Aiyar's grand talk and grander vision deliver those additional barrels of oils and extra cubic feet of gas? Right now, he has to be judged more on his attempts than on their outcome.

In the past NELP rounds, [the] number of bids has always fallen short of the number of blocks offered. Going by the turnout of investors at this round's road shows, the outcome should be better, though it is too early to bet on the participation of oil majors.

Most observers believe that it will take a longer demonstration of success and will be tougher convincing the oil biggies to look at India. But medium and small-sized companies should turn out in larger numbers.

One test of Aiyar’s success will be out on May 31, 2005 when bids for NELP-V close. There is also an agenda beyond exploration. Aiyar has to spell out a clearer future for OVL to ensure that there is no let up in India's search for oil and gas fields abroad, especially after China is believed to have edged India out of an almost certain acquisition in Angola.

Given Aiyar's obsession for gas pipelines, it will be a surprise if the Iran gas pipeline deal is not sealed in 2005. He already has a Myanmar gas pipeline deal under his belt.

Aiyar has to also end the internecine wars between oil PSUs. His answer to that so far has been a committee on Synergy in Energy. He dreams of creating a vertically integrated petro giant that will be 34th on the Fortune 500 list.

But then, he is quick to add, that he will be fine with the status quo among PSUs. A little clarity on the issue will help.

If Aiyar continues with the current zeal for the next six months and is able to reverse the dangerous rise in India's energy insecurity, he can call the prime minister to say that oil's well on the petroleum front. And then hope that Satish Sharma doesn't reclaim room No. 201 of Shastri Bhavan.