Nepal invests billions in hydro, but new fuel pipelines will increase carbon footprint

India has agreed to implement a number of oil projects for Nepal on a subsidy basis, in a move seen as a sign of renewed ties between the two immediate neighbours.

But observers see the development differently. It could make Nepal more dependent on fossil fuels. This despite the fact that the country will have abundant renewable energy resources in the coming years, which will power the transport sector as well as energy-efficient electric stoves in its kitchens.

On the one hand, commitments are being made at various high-level global forums to switch to green energy, on the other hand, oil pipelines are being built.

Chandi Prasad Ghimire, spokesman for the Ministry of Industry, Commerce and Supplies, said Minister Damodar Bhandari met Hardeep Singh Puri, India’s Minister for Petroleum and Natural Gas, during the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) in New Delhi on Wednesday and shared information about the agreement on oil pipeline projects.

“We were not sure about the financing arrangements. But now it is clear that all three projects will be implemented by the Indian government on a grant basis.”

The agreed projects include an oil pipeline connecting the Indian city of Siliguri to Charali in Jhapa, a greenfield tank terminal at Charali and an extension of the pipeline from Amlekhgunj to Lothar in Chitwan.

The estimated cost of these projects is 17 billion rupees.

Nepal has also proposed building a cross-border pipeline for liquefied natural gas (LPG).

“The method of financing the LPG pipeline has not yet been decided,” Ghimire said.

An energy expert working on a government project, who did not want to be named, told the Post that building the LPG pipeline was another mistake. “Nepal will see a significant amount of electricity generation, which could replace cooking gas and reduce the trade deficit,” he said.

“Building new pipelines at no cost means Nepal has to sign a long-term fuel import agreement with India to raise construction costs.”

Nepal aims to increase clean energy production to 15,000 MW by 2030 and the implementation of this plan is on track.

Experts say these are double standards.

Ram Prasad Dhital, an energy expert, told the Post in December last year that billions of rupees spent on pipeline projects would go down the drain. He said there was an urgent need to decarbonise the transport sector, and most countries, including Nepal’s two closest neighbours, were already moving in that direction.

Experts wonder what is the logic behind investing in oil pipelines.

The Nepalese government has committed to achieving net zero emissions by 2045, but is currently building an oil pipeline.

Bhushan Tuladhar, an environment expert, said new pipelines and oil tanks would increase Nepal’s dependence on fossil fuels.

“This kind of policy discourages energy transformation. If we have the power of green energy, we should promote it. We should not rely on fossil fuels that we do not produce,” Tuladhar added.

Nepal imports petroleum products worth Rs 337.34 billion, which is almost 20 percent of the country’s total import bill.

Tuladhar said Nepal needs to replace fossil fuels with green energy to reduce the ever-increasing trade deficit.

He said that instead of investing in fuel pipelines, the government should invest in renewable hydropower, cross-border energy trade and installing electric vehicle charging stations.

To deliver on its commitment to achieve net zero emissions by 2045, the government has also unveiled an ambitious hydropower development plan.

In the transport sector, Nepal has implemented a strategy to increase sales of electric vehicles (EVs) to 90 percent of all private passenger vehicles sold, including two-wheelers, and 60 percent of all four-wheeled passenger vehicles sold to the public by 2030.

Large tax exemptions have been introduced for the import of electric vehicles to promote electricity production and reduce fossil fuel imports.

Even if the oil pipeline project is accelerated, it could take five to six years to complete.

It is estimated that by then, electricity production and electric vehicle sales will have taken a huge leap forward.

In the first 11 months of the current fiscal year, sales of electric vehicles overtook sales of combustion engine vehicles.

Nepal imported 11,466 units of electric vehicles worth 29 billion rupees in the first 11 months of the current fiscal year, up to mid-June, according to the Customs Department. During the same period in the previous fiscal year, imports stood at 3,870 units worth 11.23 billion rupees.

In 2019-20, Nepal imported 10,310 fossil fuel-burning passenger vehicles worth Rs 9.24 billion. Four years later, in the first 11 months of the current fiscal, imports of conventional combustion vehicles fell to 3,537 units worth Rs 4.21 billion.

Tuladhar said the private sector in Nepal is actively investing in the hydropower sector and government investment in oil infrastructure could prove to be a failure for him and the country as a whole.

The government has also set a target to install 500,000 improved cookstoves, mostly in rural areas, as well as an additional 200,000 domestic biogas plants and 500 large-scale biogas plants.

Nepal’s strategy aims to make electric stoves the primary cooking method in 25 percent of households by 2030.

It is estimated that to achieve this goal, Nepal would need to invest $25 billion.

Nepalese politicians make many promises to switch to clean energy.

In December last year, then-Prime Minister Pushpa Kamal Dahal attended the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 28) in Dubai and spoke about climate finance that Nepal is seeking from the international community.

In his speech at the summit, Dahal said, “Nepal is fully committed to the Paris Agreement. We have committed to achieving net zero greenhouse gas emissions by 2045, five years ahead of the global target. We will fully utilize our hydropower potential to secure clean energy and maintain 45 percent of our forest cover.”

Ahead of COP28 in May, Dahal and Indian Prime Minister Narendra Modi agreed to build two cross-border pipelines and one crude oil storage facility with grants from the Indian Oil Corporation during Dahal’s visit to New Delhi, India.

In New Delhi, the two ministers discussed the construction of the Motihari-Sarlahi LPG pipeline, Ghimire said.

“The agreement for this project will be finalized soon. We have approached the Indian government with a request to construct the LPG pipeline on a subsidy basis.”

Ghimire said the projects would help reduce transportation costs.

Construction work could start within 2-3 months.

“Our commitment to reducing carbon dioxide emissions in international forums and building oil pipeline projects do not match. But we have no alternative to meet our energy needs right now,” he said. “So we need some oil projects.”

Experts, however, wonder what the country will do with the hydropower that the government and the private sector are producing, investing billions of dollars. The pipeline project could take 5-6 years to complete, and there does not appear to be a plan to replace oil imports.

“The government’s policy is to increase electricity consumption, but the supply is unreliable,” Ghimire said. Experts, however, questioned whether electricity supplies would remain unreliable even after five years.

“Something is going on here,” they say.