India - South Asia Regional Energy Trade: Potential and Prospects

Introducation

November 8, 2007 - South Asian Region is enjoying unprecedented economic growth. The growth, however, is becoming constrained by significant shortages in energy supply and unless corrective steps are urgently initiated and implemented it may be difficult to sustain this high growth rates. Key solutions to this problem involves fostering cross border energy investments and promotion of regional energy trade in order to take full advantage of the energy resources available within the region and its neighborhood.

A new World Bank report titled, Potential and Prospects for Regional Energy Trade in the South Asia Region, describes the potential and identifies the main opportunities for development of regional trade in electricity and gas. The report also identifies the policies that the governments should pursue to promote cross-border energy trade and describes the supporting role of the international financing institutions.

Challenges

• Regional cooperation can play an important role in addressing the problem of energy needs shortage in the region.

• South Asia lags most other regions in terms of trade in of electricity and gas.

• Energy endowments differ among the South Asian countries, but energy trade in the region is low.

• Only India, Bhutan, and Nepal currently trade electricity.

• The national energy systems—gas and electricity networks—in the South Asian countries are largely isolated from each other.

• There are no gas pipelines crossing the national borders, whether within South Asia or between South Asia and its neighbors.

• Consequently, optimal development of the region's internal energy resources is hampered and access to the significant energy resources in the neighboring countries denied, which increases the cost of energy supply and reduces energy security of the individual countries and of the region as a whole.

• The region produced only about 4% of the world’s electricity.

• The average annual electricity consumption per capita is only one sixth of the world average.

Opportunities

• Differing resource endowments, development needs, and demand patterns among the countries in the region and its neighborhood create significant opportunities for cooperation and trade in the energy sector and -- eventually -- for creating one of the world's largest integrated energy market.

• Pakistan and Afghanistan are gerographically well placed to play an important role as transit states for the rest of South Asia, as they provide the best route for access to Central Asia’s energy.

• Bhutan’s unexploited hydropower potential exceeds 23,000 MW and Nepal's exceeds 43,000 MW.

• Bhutan’s electricity export in 2007 is expected to be 25% of its GDP and 60% of its state revenues.

• Bangladesh has substantial natural gas reserves; a reserves-to-production ratio of over 104 years.

• Iran-Pakistan-India Natural Gas Pipeline (IPI) could supply 150 million cubic meters/day of gas to India and 60 million of gas to Pakistan.

World Bank support for Regional Energy Trade

The World Bank is uniquely placed to play the part of honest broker and facilitate the parties to reach theinitial Inter-Country Agreements articulating the specific interest of the parties, constituting high level decision making bodies and working groups to carry out and review further detailed analytical and technical work to arrive at key decisions. Examples of World Bank Group support for Regional Energy Trade »

Additional Resources

- South Asia: Regional Cooperation and Integration
The World Bank's strategy for South Asia is a region free of poverty. The efforts at the country level to reduce poverty can be complemented by regional cooperation and integration as an additional platform to unlock economic and social gains. (Read More »)

- South Asia: Development Data
A wide range of social and economic measures on South Asia, including links to the World Bank's most important online development databases. (Read More »)

- South Asia: Analysis and Research
Compilation of all the World Bank's publications on South Asia, with 'search' options and links to analysis and research on other South Asian countries. (Read More »)

- World Bank Program in South Asia
Launching pad to all information on World Bank activities in Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.(Read More »)