Energy Cross Roads in Pakistan
Pakistan’s business and industry benefited from the economic peak from 2004 to 2007 with GDP growth even exceeding 7% in one year. But with no major additions to the Energy basket in the same period, the Energy Planners complacency has now come home to haunt them. While electric power consumption grew 7-8% on a ACGR basis gas demand has also increased 5-6% annually over the years. Consequently the perceived excess in power generation and gas production in the earlier part of the decade has now turned into acute shortages, both in power and gas. Massive load shedding is commonplace as shortages rise to as much as 4,000 MW in the high demand summer months. This has resulted in 30% or so of the small and medium industry shutting down and the common citizens suffering in the sultry summer months.
In winter there is an excess domestic load of about 800mmcfd of natural gas. The indigenous production of 4,100 mmcfd also cannot cope with this peak. Under the gas load management plan the utilities restrict supplies to power plants, industry and CNG. This has caused a furor in the public, while lines at CNG stations are seen exceeding a kilometer in some locations.
The new government in April 2008 made an attempt to cover the electric power gap on fast track basis by launching a dozen or so Rental Power Plants (RPP’s) on the model of the previous governments plan. However they failed to realize that such short-term, high tariff plants, are only a stop gap measure and should not exceed about 5% of the power generation mix on a short term basis.
The current situation on the progress of the RPP’s continues to be unclear. As reported, apparently only six (6) RPP’s from a total list of fifteen (15) have received the 14% advance payment (in lieu of the 7% in the RFP Terms). These are projected to come on-line in Quarter 1, 2010. These are (i) Karkey – Barge Project, Korangi, Karachi, (ii) Techno 1. Samundri Road, Faisalabad, (iii) Gulf Diamond Faisalabad, (iv) Guddu Rental, (v) Reshma Power and (vi) Ruba Energy. However it is doubtful if the Karkey Project will be operational, since the requisite connection to the 132 KV/220 KV grid has not been finalized. Some additional projects also now appear doubtful. Even this full addition in first Quarter 2010 the total new projected RPP’s contribution would be only 674MW. This is only 29% of the much touted 2250MW of RPP’s. Other approved plants will probably not mature due to financial limitations of the sponsors and/or unfeasible configuration/technical issues and costs which are much higher than international bench marks.
Even so, the promised 2250 MW from these RPP’s which was expected between mid 2008 to mid 2009, not a single MW has come on line todate, amidst a controversy of high costs, kick backs, and inability of the sponsors to arrange financing. So now with the RPP’s much delayed completion and their utility in question, the immediate Energy Crisis has attained disastrous proportions while public and industry continues to suffer.
The government and its Energy Planners appear at a Cross Roads, and clueless on how to move ahead, either in the immediate short or medium term. Ad-hoc measures are being initiated, such as the Winter Gas Management Plan to shut down industry and CNG stations which has motorists and industrial users up in arms. There is no evidence of a suitable “Crisis Management Plan”, and no new IPP’s, hydel, or coal based power projects have been launched to cover the impending gap in 2011 and beyond. It appears that the comprehensive Power Plan put in place by the author, in January 2008 has been mostly fragmented by the MW&P , without putting in place a suitable and doable new plan.
The government continued to harp on adding 3,500 MW by December 2009, mostly based on the ill planned RPP’s and on-going projects and IPP’s finalized in the 2005-2007 period. Out of these IPP’s also only 575 MW has been completed and at most another 975 MW will come on-line by Quarter 1, 2010, before the advent of the high summer load. The actual total new generation addition (RPP’s + IPP’s) thus only comes to about 2174 MW vs. the projected 5750 MW resulting in a continuing shortage of about 3576 MW. Clearly the claims for an end to load shedding by December 31st 2009, were made without proper planning, review of project status and without consideration of availability of gas. For that matter end to load shedding even by December 31st 2010, is wishful thinking. A delayed winter, early snow-melt or milder summer would alleviate the short fall in the relevant period, but then who can predict nature, and definitely Energy Planning cannot be made “Subject to Nature”.
What is of even more concern is the alarming fact that the GOP has not formulated a doable plan for the foreseeable future to utilize the vast Thar Coal resources, or for additional gas production. Plans for import of gas thru various Transnational Pipelines (Iran, Turkmenistan, Qatar) are also in stalemate, which will result in a larger shortfall in gas supplies 2010 onwards.
The situation while presenting such a grim outlook, somehow appears to have generated support of the USA, which in its eagerness to present itself as a supporter of the democratic government has assessed the short and medium term plans as suitable; without carrying out a technical review or due diligence of the fuzzy and outdated plans presented by MW&P and MP&NR. Such misplaced optimism is bound to further aggravate the situation.
Recently President Obama’s Energy Team led by Mr. David Goldwyn, arrived in Pakistan. The importance of the Energy Mission was escalated with the Secretary of State Ms. Hillary Clinton announcing her six (6) point “Pakistan Signature Energy Programme” on October 28th, 2009. However the Pakistan Energy Experts are somewhat puzzled at the scope and direction of the US Energy Programme. The emphasis is on supporting the electric power sector mostly, and a few power projects in the private sector. The USA experts have expressed their inability to support new projects in Public Sector, terming it as inefficient and counter productive to the Mission’s objectives. This does pose a dilemma for the government as 70% of the overall Energy Sector is in the public sector.
Further the Mission’s emphasis mostly on the electric power sector appears misplaced. The factual position is that “Energy” constitutes, coal, hydel, solar, wind, nuclear, gas, oil, biomass etc. The US “Signature” energy programme of $ 125 million is centered around short term efficiency fixes for various generation facilities and aims at recovering about 350 MW of de-rated capacity. A meager contribution of $16 million for spare parts for Tarbela Hydel Power Plant has been much touted as a “big” contribution to Pakistan’s largest hydropower plant. The USA Energy Team would be well advised to undertake a technical assessment of the programme as it aims to recover capacity from some plants as old as 30 years. Also, the limited programme of “Performance Improvement” of the Power Distribution Companies will be a long an arduous task in the face of poor governance, political interference and lack of technical skills and systems. .
It may be of interest that the share of electricity in the end-use energy in Pakistan is only about 18-20%. So why the USA focus only on the electric power sector. And what about the gas sector which is rapidly becoming a more serious problem with talks on the Iran Pipeline stalled (under US pressure) and the governments indecision in finalizing the Mashal LNG project. The question that evades the planners and the US Energy Mission is how will the much needed electric power be generated? What will be the primary fuel, and where will it come from and at what cost. Will the cost of such Electric Power, ostensibly based on high cost imported fuel oil, or LNG be affordable for the common man? In the face of this worrisome scenario, the USA policy makers have now publically advised Pakistan to drop the IPI gas pipeline, which was planned to provide as much as 1.5 – 2.0 mmcfd gas at reasonable prices to Pakistan in phases from 2012 – 2015.
Clearly unless Pakistan first resolves its need for Primary Energy, it cannot even hope to fill the demand-supply gap in the electric power sector. Also, as is now becoming obvious, the lack of development efforts in the past few decades, for other primary energy sources, such as coal, hydel and oil/gas has become the root cause of the Energy Crisis.
The question to answer is, where will the primary energy come from to generate electric power? Can we keep dreaming of our vast hydel potential? Do we have a robust methodology and development plans for our Thar Coal (the worlds 2nd largest coal reserves), and are we doing enough to bring into production discovered gas fields (600 mmcfd)? And what about new exploration for oil & gas both on-shore and off-shore?
As even a student of Energy Economics 101 would tell you, it is essential to have a balanced Energy Mix, with imported resources being kept to a reasonable level. Why then does the government continue to propose and promote oil based power plants when already our share of oil based generation (most expensive & environmentally disastrous) is between 35 – 40% as compared to a world average of less than 6%. Pakistan’s oil import bill in 2008 topped at $12 billion. With the current path of increased reliance an imported oil as well as gas (as planned), the countries energy import bill is projected at $ 52 billion by 2022. Clearly a this is undoable as economic and export projections do not support such a massive out-lay in foreign exchange for energy imports.
The US Energy Team needs to check the US power generation based on oil (estimated at about 3%) before they go about supporting projects which are contrary to their own Energy Policy. Has the USA Team studied the USA National Coal Councils (NCC) Coal strategy? Are they aware that coal constitutes about 24% of USA Energy Mix and provides for more than half for electric power generation. The NCC 2030 strategy also calls for doubling USA coal output from 1.2 billion tons to 2.4 billion tons and contributing more than a trillion dollars to the USA economy, generating 2-3 million jobs, and reducing the cost of energy for the American people by 30%. Pakistan on the other hand has only 9% of coal in its energy mix and only 0.1% as a source for power generation. So the million dollar question for the US Energy Team is, what is the USA going to do about developing Pakistan Coal Resources and to achieve objectives similar to USA’s own coal strategy.
The USA Energy Support Program could very well provide technical and financial support for the six (6) Wind Form Projects which are in a “ready to launch” stage. The Asian Development Bank is also considering support in terms of power purchase guarantees for some select/mature projects. Considering the fact that for Pakistan Wind Power is a new field, grass roots support would greatly benefit the implementation of the select projects which could add about 300MW in the next 1 – 2 years. The Wind Corridor in Gharo – Sindh near Karachi has earlier been identified by a USAID support study, as having “good” potential for wind farms. The estimated quantum is about 12,000MW which when fully implemented in the medium to long term scenarios could provide peaking and cost saving capacity to the overall power generation mix.
As would be clear to the readers, 2010 does not bode well for the overall Energy situation or electric and gas load shedding in Pakistan. While it was essential that major decisions be made and timely intervention be done by the government and its energy organizations, their inaction and muddled thinking, is to say the least, leading to an even more acute crisis. Requisite planning for the Short Term (2009 – 2012) or Medium Term (2013 – 2020) has not been adequately done, as is evident from lack of new projects, be it in the Power Sector, Oil/Gas, Coal, Hydel or Primary Energy Supplies. Even the developed projects such as Mashal LNG import (500mmcfd), new gas fields production plants, (550mmcfd) Guddu replacement power plant (750MW) have not been finalized or contracts awarded. Such a situation will further increase the supply – demand gap in the Primary Energy Supply – Demand as forecasted by the Petroleum Institute of Pakistan PIP in its annual Energy Outlook 2008 (Fig 1).
The supply gap for natural gas will attain alarming proportions (Fig II) as the projected increase in supply based on new local production (550mmcfd) and Natural Gas import projects, (Mashal LNG, IPI Pipeline etc) will not materialize in the requisite time frames. On the Electric Power Sector, the current deficit of about 4,000MW in the summer and 2,000MW in the winter months will only show a slight improvement, as many of the planned RPP’s, IPP’s, Public Sector and Hydel Projects are either delayed, or will not materialize, while the demand, specially in the domestic sector continues to rise.
Such a situation required forceful implementation of the Crisis Management Plan by the government, which unfortunately was side-tracked in May 2008, amidst the new found fast-track approach for RPP’s, which itself has fizzled out as outlined above. Now the people can only hope that the Pakistan Energy Planners are not drowned in dubious projects, and apart from quick fix solutions, or focus on projects which suit short term goals, they prepare and implement a robust and comprehensive Energy Plan for Pakistan for the Short, Medium and Long Term scenario to provide the Nation with Energy sufficiency, sustainability and sovereignty.
Published in “Petro-News”
By: Munawar B. Ahmad, P.E (PTI Spokesperson on Energy)
CEO – EMR-Consult
(Former MD PEPCO, MD SSGC)
