The first has to do with people. It is well accepted that superior performance, in the public realm or in a private corporate, rests not simply on the availability of talent but also on the match between such expertise and the task at hand. An oil exploration and production (EP) company needs, for instance, a preponderance of specialists (geoscientists, engineers, etc) rather than gifted generalists.

Our energy security policy rests on two planks — the enhancement of domestic supply and the management of demand. Its success hinges on the continued availability of relevant technocrats. The fly in the ointment is the word ‘continued’. We do not face a shortage of skilled professionals today but it looks like becoming a major bottleneck in the future. This is because of the ‘graying’ of energy professionals worldwide. The consultants, Cambridge Energy Research Associates (CERA), have projected that 50 per cent of the technocrats in the oil/gas industry will retire by 2015 and 80 per cent by 2020. They have also pointed out that the industry is not doing enough to recruit and train new resources and that the consequential erosion in the industries’ knowledge base will impact major projects, operational performance and growth plans.

We must recognise that as the global market for talent tightens, the international companies will turn to India (and possibly China) to meet their requirements. This will, no doubt, be a positive for the individuals. But it will make the attainment of energy security more difficult. This is because EP of hydrocarbons is becoming technically and logistically more difficult and because the commercialisation of solar, wind and biofuels requires a technological breakthrough. A deficit in our technical human resource base will compound an already major supply side challenge.

The second explanation has to do with the utilisation of technology. Gregory Clark has in his book A farewell to Alms shown that while a necessary condition for sustained performance success is the availability of technical expertise and technology, the sufficient condition requires that technology be efficiently utilised. Clark has gathered a wealth of information on the comparative performance of countries and industries over the 100-year period since the Industrial Revolution. One set is of particular interest. It highlights the performance of the cotton and railway industry across several countries, rich and poor, over the period 1870-1913. The data shows that the divergent performance of these two industries was not on account of lack of capital or technology. It was because of differences in the efficiency with which local management utilised the technology.

All countries had access to broadly similar cotton technology. This was because England, which had made the greatest advancements in cotton production, was not hesitant to export the latest technologies, including the machines that embedded the innovation. All countries had also access to relevant technical expertise and there was no constraint of capital. In such circumstances, poorer countries like India with access to abundant low wage labour should have replaced England as the leading low cost producers of cotton and yarn. They had similar machines and a wage cost advantage. This did not, in fact, happen. The major competitive challenge to England came, in fact, from other high wage nations like Japan, Italy, France and Germany. Clark’s data shows that the reason for this somewhat counter-intuitive outcome was the comparative efficiency in the utilisation of technology. The Indian cotton industry was miserably inefficient. The extra labour that they had hired because of the low wages generated no extra output. Their initial wage cost advantage was soon wiped out by the higher wage bill. The situation was the same with the railways.

The reason I believe Clark’s research has relevance for our energy security policy is because it highlights that performance success depends not just on technology and technical expertise but also on how effectively organisation and management can bring these two together. A scan of the EP industry will show that notwithstanding access to similar technology and expertise, companies have hugely divergent performance metrics. Take, for instance, the recovery rates of oil/gas from our producing fields. It is only 28 per cent of the discovered resources. The recovery rate internationally for fields of similar geology is over 40 per cent. Indian companies are not shortchanged by technology or technical expertise. So why the difference? It is (partly) because we are not comparably ‘efficient’ in the utilisation of enhanced oil recovery technologies.

I draw three conclusions for our energy security policy. First, it is not enough to access ‘state of the art’ technology. We must also put in place systems and processes and the equipment to effectively utilise this technology. Second, we must review the organisational and management structure of our leading energy companies. The objective must be to ensure the most productive use of our technocrats, capital and technology. And third, we must forestall an ‘energy brain drain’ through a radical overhaul of the existing monetary and career prospects of the energy professionals.

The ingredients of supply enhancement and demand conservation are people and technology. Our energy security policy must not underestimate the importance of the interface between the two. For it is in the effectiveness of this interface that the success of our efforts to arrest and then narrow the current energy demand-supply gap will rest.

The writer is chairman, Shell Group in India. Views are personal