India ‘our most consequential energy relationship’: Geoffrey Pyatt

Assistant secretary at the US Department of State, Geoffrey Pyatt has signalled growing recognition of the need for urgency in busting through “regulatory and policy impediments on both sides” of the country’s nascent energy alliance with India – “overall … our most consequential energy relationship in the world” – as it seeks to counter China’s global strategic minerals dominance.

Indicating it’s “going to take … senior level government direction” to help speed the mobilisation of private capital to create and scale strategic mineral value chains in India and the US, Pyatt said India’s recent decision to join the Mineral Security Partnership (MSP), its Quadrilateral Security Dialogue (QUAD) connection and the longer-standing United States – India Initiative on Critical and Emerging Technology (iCET) pact were all means to enabling vital high-level “critical minerals … policy conversation, but [also] practical collaboration”.

“The whole idea behind the iCET framework was to create an initiative led from the White House and the [Indian] prime minister’s office … which would drive our bureaucracy and help to identify the regulatory and policy impediments on both sides,” Pyatt said on a webcast hosted by the Washington, DC-based Centre for Strategic and International Studies (CSIS).
“In the US-India context both bureaucracies often compete with each other to see who can be more difficult sometimes in dealing with these issues.
“But what’s happened now is you have a directive from the prime minister [India’s Narendra Modi], from [US] president Biden, driven by the two national security advisors, basically saying to the rest of us in the bureaucracy, you guys figure this out, because it’s really, really important to our national security interests.
“Everybody knows we’ve got to make permitting happen faster and we have to generate significantly increased volumes of these materials. The option of saying we’re just going to leave it in the ground really isn’t there anymore.
“We have to figure out how to do this in a way that’s sustainable, that meets the test of our democracies, but also delivers the outputs that we need in order to escape this dependency on China.”

Pyatt pointed to the example of QUAD country companies Lynas Rare Earths of Australia and Japan’s JOGMEC of what could be achieved in the strategically important rare earths business, where Chinese state-backed enterprises control about 90% of global RE processing.

“The fundamental issue is the concentration of processing,” Pyatt said.
“This is where we see a much greater role that India could play … because many of these rare earths are both energy minerals, which is what I’m responsible for, but also products with extensive defence applications.
“We’ve got to think about cobalt, lithium, nickel, zinc, copper [and] rare earths the same way we thought about crude oil and gas as being an essential attribute of US national security, where we need to ensure that we are not vulnerable to the instrumentalisation of those resources by our adversaries.
“That’s what MSP is all about. That’s why the partnership with India on these issues is so fundamental.
“You can look at the example with Lynas in Australia and the investments made by JOGMEC ... It took the kind of patient capital that JOGMEC brought to the table to help Lynas work its way through the valley of death in the investment cycle.
“We need to figure out how to crack that problem in the US-India context.
“I can’t tell you who’s going to be the company that’s going to figure out how to scale rare earths processing in India but in an environment … where we are very much behind the eight ball, with the concentration of processing capacity in China, it’s going to take … senior level government direction to make it happen.
“Most importantly, how do we lay track for our companies?
“Everything that I work on in ENR [Bureau of Energy Resources] is going to be driven by the private sector, or it’s not going to go.
“All of our countries depend on the market driven decisions that our companies are going to make in terms of allocating capital and then mobilising our private sectors to deliver a value proposition for their shareholders, but also to advance our national security interests.
“What we’ve tried to do as the US government, and especially my team at ENR, is provide an enabling environment for that private sector led investment and private sector led growth.”

Pyatt’s long government career included a stint at the US embassy in New Delhi when bilateral trade between the two countries was, according to former ambassador Robert Blackwell, as “flat as a chapati”.

“It’s really exciting to see how it’s all puffed up now like a big poori,” Pyatt said.
“One of the largest line items in that overall bilateral trade relationship is energy products.
“That says a lot about both the huge energy demand that is expanding very, very quickly in India, but also the leadership shown by American companies.
“You have Indian firms making significant investments here in the United States in the energy transition, critical minerals [and] battery space, [which] is a really revealing indicator of how this conversation is changing. We see India not just as a partner in terms of what it's doing at home, but also as a country that is ideally suited to partner with the United States globally, as we seek to grow those supply chains.
“I was saying to one of my State Department bosses the other day that any time I get challenged by the bureaucratic impediments that we manage to place on the US-India relationship, both in Washington and Delhi, the cure for that is to go out to the states and see how fast things are happening [in] ... Mumbai, Hyderabad, Chennai, Bangalore, Ahmedabad.
“The thing that has changed most about India [in the past 15-to-20 years] is the rise of global Indian companies [such as] Tata, Reliance, Adani, who are present across the developing world, who behave just like American multinationals and are fantastic partners for US companies looking to achieve that kind of supply chain diversification.
“What's really interesting is so many of these Indian companies … weren't even on the map when I was living in Delhi [up to 2007] and are now worth billions of dollars. Almost all of these companies have a CEO who went to school in the United States, who has an MBA from Wharton or Stanford or went to MIT, then went home to grow their business.
“There’s a fundamental alignment between our countries, which means I do not see a likely scenario where Indian companies are head-to-head competitors with Americans; much more likely as they are going to be collaborators.”

US investment bank Morgan Stanley says power demand in India that has been growing at circa-5% compound annual growth rate (CAGR) over the past two decades could now be growing at c8%pa and “is set to remain strong over the next decade or so”.

“Importantly, generation companies have seen significant government support in terms of policy making and ease of doing business, with commodity price pass through featuring in contracts allowing risk mitigation for generators,” bank analysts said on the bank of an India tour last month.
“For power generation growth targets there has been a strong tilt towards renewables.
“Though thermal power demand is set to stay robust there is more focus on renewables, supported by the government’s decarbonisation goals.
“From our feedback India’s share of renewables should increase from 43% in FY24 to 65% in FY32. As such, renewables feature in growth plans for key construction-led sectors, with some players targeting more than 50% of power needs to be met by green energy by the end of this decade.”

Morgan Stanley said India’s nuclear power demand could grow from c8GW to c20GW by 2032.

Meanwhile, the country’s target of reaching 300 million tonnes per annum of steel production capacity by 2030 “is both achievable and sensible given current rates of growth being experienced in the nation”.

“India aluminium demand is expected to remain strong at high single digits, driving demand at about 9Mt by 2033 versus c4.5Mt currently, based on our feedback,” the bank said.
“India has built about 100,000km of roads in the past 10 years and the government is targeting another c100,000km of highways to be constructed within the next 6-7 years.
“We understand that the government policies are now much more supportive for private players' participation, including risk mitigation measures built into the contracts.
“Feedback suggests port capacity could move from c2600Mtpa now to c10,000Mtpa by 2047.
“Though small, our feedback suggests focus remains on privatising port capacity in the country: 500Mtpa done [so far]; another 500Mtpa expected over the next decade.”

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Geoffrey Pyatt
Assistant Secretary of State for Energy Resources
US Department of State

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