Electricity Generation Through Natural Gas in Pakistan

7/31/2019 Electricity Generation Through Natural Gas in Pakistan

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STUDENT NAME 1:

AND

STUDENT NAME 2:

INSTRUCTOR NAME:

BUSINESS ECONOMICS

FINAL PROJECT

ELECTRICITY GENERATION THROUGH NATURAL GAS


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ABSTRACT

We are dependent on oil as the prices of oil increases in Pakistan then it will affect the whole economy

and prices will increases this is fact as I mentioned that we are dependent only on oil even though the

prices of gold will increases when the oil prices increases.

So, that regarding my topic about natural gas and thermal power project which is very valuable for

everyone to understand that how we can grow the country in the modern era and how people will get

benefit in the very expenses era when they pay the minimum amount of product and it is possible when

there is cheap prices of electricity in Pakistan I must have to elaborate the reason when the electricity bill

provided then people are shocked just because of corruption and more expenses prices and people are

not able to pay their electricity bill therefore Government should take the step against the expenses price

where common people cannot afford. If we talk about the natural resources in Pakistan so this is how that

there are availability of many resources in Pakistan we proudly say that Pakistan is richest in natural

resources one of them is natural gas where we can produce the electricity and people will get more

benefits from this resources.

Major Reasons for Power Crisis

Planning:

Lack of long term sustainable roadmap of power generation

Technical Losses:

Waste of energy due to line losses (technical and theft).

Up -gradation of distribution network.

Alternate Energy:

Lack of utilization of alternative energy sources like coal, solar, wind,

Gas and nuclear

Less emphasis and awareness regarding use of renewable sources of

Energy (wind, solar, waste to energy, etc)

Availability and supply for natural gas for power generation


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ABOUT NATURAL GAS

INTRODUCTION:

Energy sector issues and developments continued to severely constrain Pakistans economy in 200910. Against a

backdrop of a sharp increase in the international price of oil through calendar 2009, which put enormous upwardpressure on the cost structure in the power generation (and transport) sector, in particular, large domestic supplyshortages of electricity and gas occurred. Lower accumulation of water reserves in dams compounded the severity.The cumulative effect of the energy crisis on the economy is estimated at upward of 2 percent of GDP during

200910 alone.

Developments outlined above engendered a negative feedback loop in the electricity sector, giving rise to the

intercorporate circular debt issue in the entire energy supply chain. The lower availability of hydel resources forgeneration, and a higher than normal shortage of gas, skewed the fuel mix of the electricity generation sectortowards fuel oil. Since this occurred at a time of a doubling of the international oil price, the effect on the coststructure of the utilities was amplified greatly. With no change allowed in the electricity tariff between 2003 and2007, the compounded effect on the viability of the energy sector has been devastating. Some idea of the viabilitygap that had built up in the electricity generation sector can be had from the fact that, prior to the most recent tariff

increase, the gap between average generation cost and recovery was close to 30 percent.

Despite hefty increases in enduser electricity tariffs over the past two years, a significant gap still exists betweengeneration cost and recovery, due in large part to the adverse developments outlined above. This imbalancebetween cost of generation and distribution, and the final tariff, is the root cause of the circular debt issue, with eachdownstream player in the energy chain being forced to delay payments to upstream entities (for fuel supplies). Thenet effect is a declining effective utilization of available generation capacity in the system.

The cumulative effect has been that the growth rate of Pakistans primary energy supply, which began decelerating

in 200708, has turned negative in 200809 and 200910 (JulyMarch). The fall in energy supply during currentperiod can be attributed to inter co-operate circular debt problem.

NATURAL GAS

Natural gas is generally considered a nonrenewable fossil fuel. (There are some renewable sources of methane, the

main ingredient in natural gas, also discussed in this factsheet.) Natural gas is considered a fossil fuel because most

scientists believe that natural gas was formed from the remains of tiny sea animals and plants that died 300 to 400

million years ago.

When these tiny sea animals and plants died, they sank to the bottom of the oceans where they were buried by layersof sediment that turned into rock. Over the years, the layers of sedimentary rock became thousands of feet thick,subjecting the energy-rich plant and animal remains to enormous pressure. Most scientists believe that the pressure,combined with the heat of the Earth, changed this organic mixture into petroleum and natural gas. Eventually,concentrations of natural gas became trapped in the rock layers like a wet sponge traps water.Raw natural gas is a mixture of different gases. The main ingredient is methane, a natural compound that is formedwhenever plant and animal matter decays. By itself, methane is odorless, colorless, and tasteless. As a safetymeasure, natural gas companies add a chemical odorant called mercaptan (it smells like rotten eggs) so escaping gascan be detected. Natural gas should not be confused with gasoline, which is made from petroleum.

According to OGJ, Pakistan had 28 trillion cubic feet (Tcf) of proven natural gas reserves in 2006. In light of thecurrent onshore exploration activities and resource outlook, the Pakistani government expects minor increases innatural gas production in the short-term. However, natural gas production is expected to decline over the next 15-25year period, while natural gas demand is expected to increase. The Pakistani government is currently developingplans to import additional natural gas (see "Proposed Pipelines") in order to satisfy increasing demand. According to


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the Pakistan Energy Yearbook, natural gas is currently the countrys largest energy source, making up 50 percent ofPakistans energy mix in FY (fiscal year) 2004/2005.

Sector Organization

Pakistans state-owned PPL and OGDCL produce around 30 percent and 25 percent, respectively, of the countrys

natural gas. The two companies are the countrys largest natural gas producers. OMV is the largest foreign naturalgas producer (17 percent of total countrys production) in Pakistan. Pakistani government has enacted numerous

policies to encourage private sector leadership of natural gas development, including privatization of state-run

businesses, regulation that encourages competition and tax incentives geared towards increasing exploration and

production.

Exploration and Production

Pakistans largest natural gas production occurs at the Sui field, which is located in the Southern Indus Basin. PPL

operates Sui field. In the past few years, the country discovered seven new natural gas fields. The Pakistani

government expects the development of these new fields to add an additional 1 Bcf/d to Pakistan's natural gas

production.

Proposed Pipelines

Pakistans government is working on plans to build a pipeline that spans from Irans massive natural gasreserves to Indian markets across Pakistani territory. Iran has offered to cover 60 percent of the constructioncosts of the pipeline and Pakistani officials have stressed their ability to safeguard the pipeline. Pakistan couldearn about $70 million annually in transit fees from the pipeline.

A second natural gas import possibility that has been considered is an eventual link to the Dolphin Project inQatar. This plan would supply natural gas from Qatar's North Dome field to Pakistan via a sub sea pipelinefrom Oman. Even though Pakistan has signed a preliminary agreement to eventually purchase natural gas fromQatar, it remains to be seen if further action on the project will be taken.

A third natural gas pipeline option that has been discussed is a line from Turkmenistan to Pakistan viaAfghanistan. Pakistan faces various hurdles with this option, which include the security situation in Afghanistanand the price.

Liquefied Natural Gas (LNG)

In addition to natural gas import pipelines, Pakistan is pursuing liquefied natural gas (LNG)

import options to meet energy needs. In October 2006, United Arab Emirates signed a MoU to

build an LNG import facility. The facility would be completed in 2010 and would be located at

Port Qasim, near Karachi.

USES OF NATURAL GAS
http://www.eoearth.org/article/Energy_profile_of_Omanhttp://www.eoearth.org/article/Energy_profile_of_Qatarhttp://www.eoearth.org/article/Energy_profile_of_Afghanistanhttp://www.eoearth.org/article/Energy_profile_of_Afghanistanhttp://www.eoearth.org/article/Energy_profile_of_Qatarhttp://www.eoearth.org/article/Energy_profile_of_Oman


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NATURAL GAS PRODUCTION

NATURAL GAS CONSUMPTION

The supply of gas has exhibited an increase of 1.6 percent during JulyMarch 200910. The increase in supply owesto higher production of 1.6 percent in natural gas during the period under review. Due to this increase in availabilityof natural gas, the overall consumption of gas remained higher during the period. Furthermore, the sector wiseconsumption of gas suggests that the household, commercial, fertilizer and transport sector witnessed positive

growth in consumption of gas during 2008 09.


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Literature Review:

As we know that the importance of natural gas and how it impacts the current situation for produce the Electricity. According to this

article it elaborated theoretical and as well as practical base. This is very informative for everyone that once the thermal power

project completed then people will be pay their electricity bills very cheap in price and the writer of this article said that when there

was deficiency of gas in cars and buses then people pay the prizes of petrol very lofty therefore nowadays most of people uses gas

in cars because people are not able to pay the lofty prizes so that if they will produce the electricity through natural gas then it will be

advantage for everyone. Govt has started the Thermal power project. Recently the delegation of foreigners met with official person

for promoting and they are ready to invest in thermal project.

The delegation was also informed that flexible regime for foreign investment exists in the country and no procedural problem would

impede them investing in power sector which would provide a win-win situation to the investors.

on the other hand A Japanese company, Marubeni Corporation has shown keen interest in four thermal based projects including

450 MW Uch-II power project at Kashmore, 400 MW at Faisalabad and 350 MW at Chichokimalian being processed through

International Competitive Bidding (ICB) by Private Power Infrastructure board (PPIB)and another 450 MW Thermal power plant at

Chichokimalian by WAPDA.

The Company is also interested to increase its exports of electrical equipment like generators, turbines and other machinery in

Pakistan.

The power sector in Pakistan as the growing demand of power has been registered as 10-12 percent in the country.

Natural gas production is at a relatively high level and remaining reserves are estimated to be about 885.3 billion cu m (1 January

2009 est.). Pakistan's gas fields are only expected to last for about another 20 years at the most due to heavy industrial usage.

The Sui gas field is the biggest natural gas field in Pakistan. It is located near Sui in Baluchistan. The gas field was discovered in the

late 1952 and the commercial exploitation of the field began in 1955. Sui gas field accounts for 26% of Pakistan's gas

production. Remaining reserves are estimated to be at about 800 billion cubic feet (tcf) and the daily production is around 660

million cubic feet (19,000,000 m3) of natural. The operator of the field is Pakistan Petroleum Limited. A minor pip-line was bombed in

southern Baluchistan, by a group related to the Baluchistan Liberation Front and/or Baluchistan Liberation Army in the year 2000,

with no fatalities.

The natural resources are land which may be mountainous, hilly, including snow, glaciers, forests, mountainous animals and birds.Others are oil, gas, minerals, nuclear minerals, gemstones, coal, water of sea & river, fishery and offshore sea crude oil; sun light,rainfall, wind, atmospheric gases. There are at present there are 223 countries as surveyed by UNO. With exception of a few, manyof these countries have land, water and sea. It means they have their own natural resources. It is not necessary that all the naturalresources can be explored easily. It needs money and man power for exploration. In this perception, let us examine the naturalresources of our country-Pakistan.

The majority of produced oil comes from proven reserves located in the southern half of the country. The country's two gas distribution

companies in north by SNGPL and in south by SSGPL have been investing over 200 million US $ a year to increase the capacity of the

existing distribution network of 80,000 kilometers. However, still only 20% of the population has access to natural gas. Natural gas is found

whenever oil and gas occur together. Natural gas largely contains 80% methane gas along with small quantities of ethane, propane, butane,

carbon dioxide, and occasionally helium. Gas is a prime source of energy in Pakistan as it provides 65% of the natural energy requirements.The share of gas in fuelling the economy is followed by oil which provides 29.4%. The other minor sources are hydro providing 12%, coal 5%

and nuclear only 1.2%. Gas is the prime mover of Pakistan's economy. Natural gas is piped from gas wells for use as fuels in the homes,

industries, institution, and into thermal electric power stations in the different parts of the country. The biggest consumer of gas is the power

sector which uses it for generating electricity throughout the country. Nearly 50% of the gas fuels is used in the power sector. Industry uses

another 20%. Fertilizer industry which uses 16% as feed stock for producing urea. The domestic consumption is only 18% followed bycommercial use of 2% and CNG for cars amounts 10%. There are 173 gas fields in the country, of them 140 are located in Sindh, 22 in

Punjab, 7 in Baluchistan and 4 in NWFP.

Natural gas is mainly methane with some small amount of ethane, propane and butane. Heavier components, carbon dioxide and

hydrogen sulfide are removed before distribution to users.

Natural gas is a naturally occurring hydrocarbon gasmixture consisting primarily of methane, with up to 20 %of other hydrocarbons as well as impurities invarying amounts such as carbon dioxide

Internationally focused on thermal project:


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Swicorp Joussour Company announces signature of SPA for exit from Uch Power Limited thermal power plant in Pakistan.

List Of Coal Gas companies in pak

National Gases Ltd.

Ciana Engineering

Zetco(Zahid Engineering &Trading Co.)

Natural gas - proved reserves (cubic meters)

Country 2002 2003 2004 2005 2008 2010

Pakistan 695,600,000,000 695,600,000,000 695,600,000,000 759,700,000,000 792,800,000,000 840,200,000

This entry is the stock of proved reserves of natural gas in cubic meters (cu m). Proved reserves are those quantities of natural

gas, which, by analysis of geological and engineering data, can beestimated with a high degree of confidence to be commerciallyrecoverable from a given date forward, from known reservoirs and under current economic conditions.


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LITERATURE REVIEW

SOURCE: ARTICLES FROM CURRENT AFFAIRS NEWSPAPERS

[SOURCE: BUSINESS RECORDER]

Debt repayment to banks: nine IPPs default (APRIL 09, 2012)

Deeply concerned over the deteriorating power sector's financial affairs, nine IPPs that had invoked GoP guarantees,

have defaulted on debt repayment to banks due on March 31, 2012, well-informed sources in the Ministry of Water

and Power toldBusiness Recorder. The nine IPPs are: Atlas Power, Liberty Power Tech, Nishat Chunian, Nishat

Power, Orient Power, Sapphire Electric Company, Halmore Power, Saif Power and Rousche Power.The sources said

that total payable amount to lenders from nine IPPs on March 31, 2012 is an estimated Rs 7.5 billion."IPPs have not

received money from the Power Purchaser ie NTDC and they do not have adequate balances in their accounts to

make such payments," the sources added. "There is no doubt that non-payment to the IPPs is now hurting the

banking industry as banks maintain that their exposure to the power sector has already reached 30 per cent of total

investment and are refusing further exposure," the sources maintained.Recently, the GoP had been served fresh

notices of default by the nine IPPs for not paying outstanding liabilities of Rs 42 billion."The IPPs have invoked

guarantees because they have not received any payment and secondly all IPPs had informed GoP in advance that

they will miss March 31 deadline," the source continued.These IPPs claim that their operational capacity has

massively been hit by non-availability of credit to purchase fuel to run plants.The government has injected Rs 1trillion in the power sector during last three years on account of subsidy and line losses which the power sector

analysts portray as incompetence of policymakers and executers as well.

SSGC cuts gas supply to KESC, others on shortage (APRIL 09, 2012)

The Sui Southern Gas Company (SSGC) has cut the supply of gas to industrial, fertiliser and power generation

sectors, including KESC, citing a shortage of gas.The KESC, which was being supplied 200mmcfd by SSGC, willnow get 155mmcfd.

Golen Gol Hydropower project bidding: Wapda to save Rs 84 million (APRIL 09,

2012)

Pakistan Water and Power Development Authority (Wapda) will save about Rs 84 million in procurement ofelectro-mechanical equipment for the 106MW Golen Gol Hydropower project by awarding the contract to thelowest technical responsive bidder. It is pertinent to mention that Golen Gol Hydropower Project is beingconstructed on the River Golen Gol, a major tributary of the River Mastuj in Chitral district of Khyber Pakhtunkhwaprovince about 380 kilometres from Islamabad.On its completion, Golen Gol Hydropower Project will generate

about 436 million units of electricity (Gwh) to earn revenue of about Rs 3.7 billion annually.Responding to aquestion, Wapda Chairman said that Wapda was implementing 18 projects under its least-cost energy generationplan to increase the ratio of hydel electricity in the National Grid, and help stabilise electricity tariff in the country.Under the plan, the 969 MW-Neelum Jhelum, 4500 MW-Diamer Basha Dam, 1410 MW-Tarbela 4th Extension,740-MW Multipurpose Munda Dam and 84MW-Kurram Tangi Dam are under implementation to name a few, headded.

Consensus reached only on electricity: there will be equitable loadshedding

across country (APRIL 10, 2012)


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Prime Minister Yousuf Raza Gilani on Monday announced equitable loadshedding of electricity, not gas, across thecountry.Further, he said, street lights would be lightened up on alternative basis to save 250MW electricity; closureof commercial plazas by eight in the evening would save another 250MW, followed by five days a week office workin public sector would save 700MW.He said subsidy to the solar energy tube-wells through easy loans would bearranged by the finance ministry. Prime Minister said the conference has also decided to stop power supply tobillboards and neon signs during the summer season. Campaign for replacement of energy saver bulbs wouldcontinue to save electricity, he added.

He said that the energy crisis was affecting every sector of the country and

vowed to overcome it with the co-operation of all stakeholders. "We will have to make collective and individualefforts to boost electricity generation through various means to get rid of load shedding," he added.Prime MinisterGilani said that as a result of measures taken by the PPP-led government a total of 3400MW electricity has beeninducted in the national grid. He felt people would have to play their part by consuming less power as energyrequirements in the country are increasing by seven percent every year. Gilani added that the power tariff had beenincreased due to increase in petroleum products' prices in the international markets.

Gilani for due provincial role to overcome energy crisis (APRIL 10, 2012)

Prime Minister Syed Yousuf Raza Gilani has emphasised upon the provinces to also play their due role in efforts

towards generating power to help overcome energy crisis. The Prime Minister said the federal government was

committed to energy security for the people of Pakistan and "our strategy is to ensure sustainable power supply at

competitive prices to all sectors."He elaborated that the government strategy was geared towards further exploitationof hydropower to reduce cost of inputs; developing coal reserves for power generation and to convert the plants

from oil to coal in the interim, as the Thar Coal alone has 175 billion tonnes and is suitable for power generation of

around 100,000 MW annually; developing and encouraging use of renewable energy resources (Solar, wind and

biomass); increasing emphasis on nuclear energy resources; accelerating exploration and production of oil and gas

reserves including off-shore drilling; targeted subsidies for the lowest slab users; encouraging use of LPG (Liquefied

Petroleum Gas) and import of LNG (Liquefied Natural Gas) to meet gas requirement; recognizing the role of

provinces in power generation, and energy efficiency and conservation. "We remain a victim to shifts in the oil

market until we evolve a national consensus on long-term policy for secure, affordable energy future and then

execute it. Gilani said that through effective steps, the present government had managed to add 34000MW to

power system over the last four years, besides changing the energy mix and shifting towards hydel and coal."Forthis, we have accelerated the work on Neelum-Jhelum power project; finalised financing for more turbines in

Tarbela with the assistance of World Bank; starting work on Diamer-Bhasha Dam; design is under way for Dasu

Dam; rehabilitation of Jabban hydropower Malakand; Jaggran-II with the assistance of France; Gomal Zam and

Satpara Dam with the US assistance and Patrind Hydropower (AJK) in the private sector by a Korean Company," he

maintained.The Prime Minister said the government was also building Chashma-III and IV, and 747MW Guddu

combined cycle with the assistance of China; improvement of transmission and distribution system as well as

building new grid stations with major assistance of the Asian Development BankPrime Minister Syed Yousuf Raza

Gilani said on the institutional reform side, the Discos (Distribution companies) and Gencos (Generation

Companies) Board of Directors have been reconstituted by bringing more private sector professionals, besides

providing over Rs one trillion from the budget to resolve the circular debt issue and swapped Rs 150 billion debt toprovide liquidity to power sector. The government has also approved Petroleum Exploration Policy, LNG Policy,

Low BTU Policy to attract investment in the gas sector, he said adding, the government was also pursuing a multi-

pronged strategy that included: 300mmcft through new exploration, securing 800mmcft through imported LNG and

obtaining 300mmcft through LPG Air Mix Projects. Experts estimate that energy efficiency measures can generate

25 percent energy savings and can reduce approximately 50 percent oil imports. It needs to be recognised thatinefficiencies of Discos in the collection of bills and non-payment of bills by consumers, including government

departments in time, clogs the system. It leads to non-payment to IPPs and oil companies resulting in less


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generation, and hence the power crisis.The Discos and the provinces need to play a vital role in improving thesystem.The role of regulator is crucial in this entire spectrum. They need to look beyond tariff determination.Theymust ensure regular mandatory energy audits of plants and equipment, review cost efficiency, return on equity,

return on assets and develop a fair system balancing the interests of both the consumers and investors. We firmlybelieve that the private sector is the engine of future growth in power generation and gas exploration in Pakistan.For

this, we will continue to push forward all alternates for investment in the sector: public, private and public-private

partnership.We need to forge a national consensus on pricing of petroleum products, electricity and gas in a mannerthat should put least pressure on the budget and not harm macroeconomic stability. It will reinforce partnershipbetween Pakistan, the domestic and international investors, other stakeholder and the consumers.

KESC, ABAD sign MoU (APRIL 10, 2012)

Karachi Electric Supply Company (KESC) has, in line with its vision to use maximum daylight and avoid undue

lights, on Monday signed a Memorandum of Understanding (MoU) with the Association of Builders and Developers

(ABAD) over taking joint steps towards energy conservation.Under the agreement, KESC would provide the

builders with technical expertise and guidelines for developing energy efficient architecture in their future projects.The idea is to increase the number of green buildings which would require less energy on sustainable basis which is

the need of the hour under current circumstances of decreasing energy resources and increasing demands. The

Energy Conservation Team of KESC earlier had held interactive session with office bearers and members of the

association and gave them briefing on Energy Conservation cause and how it could be addressed through the forum

of builders and developers to yield greater magnitude of results. KESC has been making long term efforts on this

front since the utility is generally held responsible for nearly all electricity supply issues, even though most of times

the responsibility of energy conservation rested with architects, builders, developers, users and consumers.

The point at which the demand-management and supply-management responsibilities of KESC converge call for the

need of Energy Conservation and Efficiency by KESC, its Consumers and other stake holders. Given the energy

crisis in Pakistan, KESC gives immense importance to Energy Conservation and Efficiency as it aids in the

reduction of energy consumption and energy demand per capita, offsetting the growth in energy supply needed to

keep up with rising population growth in its licensed territory. KESC promotes Energy Conservation and Efficiency

because it reduces the rise in energy costs, and reduces the need for new power plants, and energy imports.

Byco Oil Pakistan Limited (Clarification)

APRIL 10, 2012New refinery having a capacity of 120,000 barrel per day is owned by Byco Oil Pakistan Limited. Byco Petroleum

Pakistan owns old refinery of 36,000 barrel capacity.

Hascol launches first LPG Autogas Station in city (APRIL 11, 2012)

Hascol Petroleum Limited launched Pakistan's first LPG Autogas Station at Shahrah-e-Faisal, Karachi. This is one

of the key steps taken by Hascol to make sure that LPG becomes the fuel of choice in the coming years. Dr Asim

Hussain, Federal Minister for Petroleum and Natural Resources was the chief guest. He said that with the LPG

Policy 2012 to be released shortly, new policy changes suggested by Chairman Hascol will be incorporated. Since

the LPG Policy will be designed with careful inputs from all stakeholders, Dr Asim promised that the mistakes of


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the previous government will not be repeated as regards to the CNG policy and subsidies on duty and taxes is also

underway on the import of LPG kits and equipment.

Power shortfall jumps to 4,800 megawatts (APRIL 12, 2012)

The power crisis in the country has further deepened as on Wednesday shortfall again jumped to 4,800 MW duringthe last 24 hours. According to the daily load management report, the total generation was recorded as 10,326 MW

against the demand of 15,126 MW during the said period. The hydel generation stood at 2792 MW, WAPDA

thermal 1691 MW and IPPs 5,843. As much as 670 MW electricity was supplied to Karachi Electric Supply

Company (KESC), the report further said.

20,000 megawatts hydropower projects under way: WAPDA chairman (APRIL 12,

2012)

The Pakistan Water and Power Development Authority (WAPDA) is working on hydropower projects with

cumulative generation capacity of about 20,000 MW.

Oracle coal fields of UK to initiate ground work for coal (THURSDAY, 12 APRIL 2012

,21:27)

Chief Minister Sindh, Syed Qaim Ali Shah, held a meeting with CEO of Oracle Coalfields of UK, Shahrukh Khan,

at the CM House here on Thursday and said the government is fully committed for development of Thar Coal which

has the potential of turning the country's economy around. The CEO Oracle Coalfield of UK announced that the

Mining Lease for the Development and exploitation of the 66 sq.km Block VI of the Thar Coalfield has been

awarded while Oracle plans to invest up to US$ 610 million for development of open cast coal mine with the annual

production of 5 million tons per year. He added that Oracle has entered in to an MOU with KESC to develop

initially a 300 MW mine mouth power plant by 2015 to be scaled up to 1100 MW. The Pre-development ground

work for coal mine will commence from May 2012. Shahrukh Khan further informed that after above motioned

works the Open-pit coal mine development is expected to start in early 2013 with initial production of coal in 2014

with full scale 5 million tons per annum coal production in 2015. The work on Community and Social

Responsibility (CSR) is also planned to commence form May 2012 which will be part of a long-term sustainable

development for local communities and includes job creation and training for local workforce, establishing a

medical center, provision clean water and electricity to local communities, veterinary services for the health of

livestock for the community and sanitation. In the discussion with the Chief Minister, Chief Executive of Orcale

Coalfield, Shahrukh Khan, outlined the Company's strategic plans and timeline for the early development and

operation of the Block VI Coal Mine. Shahrukh Khan emphasized that following the issuance of the Mining Lease

the Company will implement a programme of site construction works including a mine site office complex, accessroads, water and power generation units a healthcare facility as well as creating job opportunities for the local

communities.

Energy moot decisions being executed (APRIL 12, 2012)
http://www.brecorder.com/pakistan/business-a-economy/52960-oracle-coal-fields-of-uk-to-initiate-ground-work-for-coal-.htmlhttp://www.brecorder.com/pakistan/business-a-economy/52960-oracle-coal-fields-of-uk-to-initiate-ground-work-for-coal-.html


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The government has started implementation on the decisions taken by the Energy Conference on April 9, 2012.

As per decision, an equitable load management has been started in all the provinces from today without any

discrimination and the instructions have already been issued to Discos and other concerned departments.

Uninterrupted power supply is being provided from today to the industrial sector only in those areas where they

have independent industrial feeders. Load Management Advisory Committees have been set up at Discos level with

the representation of the respective provinces in order to take decision on load management keeping in view the

availability of electricity for all sectors.

Decisions at Energy Conference repetition of past mistakes: PEW

(APRIL 12, 2012)

Pakistan Economy Watch (PEW) on Wednesday said the Energy Conference was a step initiated by the government

to stop long march planned by frustrated masses and dismayed business community of Punjab. The decisions taken

to conserve electricity were nothing but a repetition of the past mistakes which will never help anyone gain

anything, it said. It is amazing that conference focused on energy conservation while power production tooksecondary position, said PEW President Dr Murtaza Mughal.

One RPP files review petition

(APRIL 12, 2012)

Pakistan Power Resources (PPR) LLC on Wednesday filed a petition seeking review of Supreme Court judgement

in Rental Power Plant (RPP) case that declared all the power plants illegal and non-transparent last month.

A two-member bench led by Chief Justice Iftikhar Muhammad Chaudhry had declared in its judgement that

Pakistan Power Resources (PPR) (Piranghaib, Multan) did not generate electricity at all although a down payment of

US $14.58 million was made to it, "which has not been returned".

Bill clearanc: power sector now owes Rs 192 billion to PSO

(APRIL 13, 2012)

Pakistan State Oil's (PSO) receivables have surged to Rs192 billion after its outstanding dues against the power

sector increased by Rs6 billion in just one week. According to official data available with Business Recorder, PSO's

total liabilities were Rs185.94 billion a week ago. PSO is learnt to have requested the government for the release of

Rs50 billion on an emergent basis so that it could clear its outstanding liabilities, which currently stand at about

Rs170 billion. Of the total, over Rs83.7 billion is payable to local refineries and around Rs86.3 billion to Kuwait

Petroleum Company (KPC) and other international fuel supplying companies. Sources said that local oil refineries

were still unable to operate at full capacity because of distribution and generation companies' failure to clear bills,

adding that if dues were not cleared, local refineries would default. Total PSO receivables are estimated at

Rs192.007 billion, which include: Rs 53.059 billion from Wapda, Rs93.4 billion from the Hub Power Company

(Hubco), Rs18.601 billion from Kot Addu Power Company (Kapco), Rs3.57 billion from Pakistan International

Airline (PIA), Rs289 million from Oil and Gas Development Company Limited (OGDCL), Rs5.18 billion from

Karachi Electric Supply Company (KESC), Rs488 million from National Logistic Cell (NLC) and Rs1.36 billion

from Pakistan Railways. PSO is owed Rs1.4 billion on account of audited price differential claim of High Speed


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Diesel (HSD), Rs3.4 billion on account of price differential on Low Sulphur Fuel Oil & High Sulphur Fuel Oil

(LSFO/HSFO), Rs1.35 billion on account of price differential on imported PMG and Rs8.61 billion price

differential under GLMP. PSO total payables to local refineries stands at Rs83.7 billion at present, including

Rs28.629 billion to Pak-Arab Refinery Limited (PARCO), Rs15 billion to Pakistan Refinery Limited (PRL), Rs9.26

billion to National Refinery Limited (NRL), Rs27.25 billion to Attock Oil Refinery Limited (ARL), Rs2.64 billion

to Bosicor and Rs952 millions to others. Overdue payments of local oil refineries against PSO are also said to have

soared to Rs79.2 billion. If LC payment of Rs86.3 billion, which PSO has to pay to Kuwait Petroleum Company

(KPC) and other international fuel supplying companies, is included, total liabilities of the company swell to Rs362

billion, out of which Rs79.22 billion is overdue.

OLP mulling over financing of solar power panels, gas generators (APRIL 13, 2012)

Orix Leasing Pakistan (OLP) Chief Executive Officer Teizoon Kisat has informed business community that the

company is examining possibilities of financing of solar power panels and gas generators. Speaking at a meeting of

Korangi Association of Trade and Industry (Kati) on Thursday, he said the country facing acute power shortage and

financing of solar panels and gas generators might be a ray of hope for general public to overcome power crises to

some extent. He said OLP focused Small and Medium Enterprise (SME) sector for financing and added that it was

one of the best pay back sector. About the company, he said OLP was established in July 1986. "It is a member of

the Orix Corporation, the largest non banking financial company of Japan." He said that OLP was now largest

leasing company of Pakistan with total assets of Rs 21.8 billion having 66 percent of total market share. Kisat said

that his company apart from corporate financing auto loans microfinance business was offering Islamic financing as

well. Replying a question, he said that though leasing companies' mark up was little higher than banks but the more

important factor was the availability of credit in leasing sector as compared to the banking sector.He praised theservices of Orix for the SME sector in Pakistan.

Lifeline consumers'' quota raised by 10 0percent: power rate cut notified

APRIL 13, 2012

The government has extended the lifeline electricity consumers' quota from 50 units per month to 100 units per

month, effective May 2012. According to a notification issued by the Ministry of Water and Power on Thursday, the

government has reduced the electricity rates for lifeline consumers by Rs 2.67 per unit. According to officials,

nearly 4.7 million power consumers are using up to 100 units of electricity per month and about 7 million are

consuming 50 units per month. After the decision, power consumers falling in the lifeline category will be 11.7

million. Officials told Business Recorder that the government will have to pay an additional subsidy of about Rs 65

million on the provision of cheap electricity to consumers. Sources in the Ministry of Water and Power said in fact

the government has changed the definition of lifeline power consumers and after the new definition; the lifeline

consumers would be given a relief of Rs 2.67 per unit. Before this decision, Rs 1.87 per unit was being charged from

the consumers using 50 units and Rs 4.75 from consumers using 100 units. The decision has been taken inaccordance with the decisions at the energy conference held in Lahore. Sources added that the reduction will only

facilitate the domestic consumers and the new tariff will be implemented from the next month's electricity bills.

"In order to provide maximum relief to domestic consumers and following the directions of the Prime Minister of

Pakistan, the lowest slab for lifeline consumers has been increased from 50 to 100 units. The new slabs will be

introduced in next month electricity bills to be issued by Discos," said a press release issued by the Ministry of

Water and Power. It added only the lifeline consumers using 1 to 50 units were exempted from tariff increase and


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imposition of General Sales Tax. Now, the domestic consumers using up to 100 units will be treated as lifeline

consumers and will enjoy the benefit of exemption from tax and tariff increase. The tariff rate of consumers under

the new slab will automatically reduce and they will get good benefit.

Power shortfall hovers around 5,000MW

(APRIL 13, 2012)

The country is facing a 5,000-megawatt shortfall in power generation after hydel generation declined as the Tarbela

Resrvoir hit dead level, Pepco officials said on Thursday. Hydel gebneration units are currently producing just

2,767MW, followed by 1,618MW by thermal units and 5,573MW through IPPs. Meanwhile, KESC was supplied

760MW during the past 24 hours. Both domestic and commercial consumers faced power outages lasting between

six and eight hours in urban and 12 to 14 hours in rural areas.

Turkmenistan gas pipeline: Tapi nations to ink GSPA deal

(APRIL 14, 2012)

The Economic Co-ordination Committee (ECC) of the Cabinet has been informed that the participating countries in

the Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline project would sign the general sale purchase

agreement (GSPA) on Monday, it was learnt on Friday. There is yet no agreement on the transit fee between

Afghanistan, Pakistan and India. Sources said that the gas price formula approved by the ECC was based on base

price, agreed risk sharing formula and gas price review mechanism. The sub-committee later approved the basis ofthe transit fee and negotiation of Tapi transit fee alongwith a suitable indexation mechanism

Khyber Pakhtunkhwa cabinet to take decision on two-day weekly off: Rahim Dad

(APRIL 14, 2012)

"The government realises the losses faced by trader communities of Khyber Pakhtunkhwa due to energy crisis,

terrorism and militancy," he remarked.The provincial government respects the opinion of traders' community abouttwo weekly holidays and would take only those decisions which are in favour of the masses. Earlier, Secretary

Department of Energy Zafar Iqbal informed the participants of the meeting that 700Mw of electricity could be saved

if the working hours are reduced to five days in a week, adding that if the commercial markets are closed by 8pm at

night it would help save 250MW additional. Speaking on the occasion, Chief Engineer PESCO Latif Khan noted

that unnecessary use of electricity is contributing to more power loadshedding. He said the company is observing 8

hours loadshedding in Peshawar, 10 hours in other cities of the province and 14 to 18 hours in rural areas. PESCO is

struggling to meet 928MW shortfall by observing 8 to 18 hours of loadshedding, he said and added that sometime

RCC Islamabad shuts down the power to reduce the load. He said the loadshedding could be reduced if the

consumers use the electricity responsibly. The representatives of trader community and Chamber of Commerce and

Industry said that their businesses are declining day by day due to inordinate loadshedding. He said keeping in view

the suffering and losses of the trader community due to terrorism, the provincial government provided 18 million to

compensate the traders.Copyright Business Recorder, 2012

Business

Independent power producers in hot watersour correspondentSunday, April 15, 2012
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KARACHI: The government has miserably failed to address the concerns of the independent power producers

(IPPs) as one of them called the sovereign guarantee, which the government could not honour, sources said.

All the IPPs were accorded sovereign guarantees by the government of Pakistan to ensure returns and protection to

their investment. Industry sources said that the circular debt had reached Rs400 billion and the country is suffering a

daily loss of Rs1 billion due to the inefficiencies and corruption in the entire power generation, distribution and

collection system.

KESCs 560MW combined cycle power plant starts productionM. Waqar Bhatti

Tuesday, April 17, 2012

KARACHI: The newly-built, state-of-the-art combined cycle power plant of Karachi Electric Supply Company

(KESC), having the maximum power generation capacity of 560 megawatts started power generation on Monday

and was expected to optimum generation capacity within the next 24 hours, officials said.

The Bin Qasim Power Station II (BQPS-II) was completed at a cost of $450 million in record three-year period and

with its completion and start of power production, the indigenous power generation capacity of the utility stands at

over 2,000MW. The power plant has three gas-powered turbines, each having the power generation capacity of

producing 125MW electricity, while a steam turbine that would be powered from the heat generated from gas

turbine, would add around 185MW to the power generation capacity of the plant, the KESC officials told newsmen

during a visit to the power plant. The power-stricken residents of Karachi, however, were unlikely to get any respite

from the daily loadshedding of eight-nine hours after KESC claimed that they had diverted gas from other

inefficient power plants to the newly-built one, which means that KESCs overall power generation almost

remains the same. Currently, we are getting 200mmcfd gas and for the newly-built combined cycle power plant, we

need an additional 130mmcfd gas so that we could produce electricity up to our maximum capacity, Arshad Zahidi,

power utilitys director generation and transmission, told a news briefing at the site of the newly-built power plant.

Zahidi termed the completion and start of power production by the BQPS-II a milestone in the power generation in

the country and said they were proud of the facility that was completed within a record period of time. The KESC

official, however, claimed that the power utility is not getting adequate gas volume to run the newly-built power

plant as promised by the government at the time of signing an implementation agreement with the KESCs

management. We have diverted the gas supplied to our other power plants, B in Qasim-I and other gas turbines to

run this plant as it was more efficient than the old ones, he added. This means that commissioning of the newly-

constructed combined cycle power plant made no affect on the overall power generation capacity of the KESC and

citizens would have to continue enduring eight-nine hours of daily outages. The KESC official claimed that the

Abraaj Capital, after taking over KESC in 2008, increased the power generation capacity of the utility from

1,376MW to 2,052MW in 2012 by investing millions of dollars. In addition, the new KESC management improved

the existing fleets efficiency, added eight new grid stations, increased 32 kilometre-long transmission network,

while it was also working to establish two more grid stations, he added. Zahidi also claimed that the KESCs

management also brought down the line losses of the power utility that were 4.19 percent in 2008 and now stood at

1.45 percent. Responding to a question, he said, the KESCs management is aware of the issues associated with the

gas availability in the country and keeping that in view, it had almost completed the feasibility of converting two of
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its 210MW plants on coal and hopefully in the years to come, 420MW would be produced with coal.The KESC

official appealed the government to provide adequate gas to the power sector instead of providing it to individual

industries for power generation and the fertiliser sector so that domestic and industrial demands of the electricity

could be effectively met.

Improved water flows: hydropower generation begins improving

[APRIL 17, 2012,RECORDER REPORT]

Hydropower generation in the country has started improving which on Monday reached around 2,800 megawatts

against its capacity of about 6,500MW because of improved water flows in the main rivers.

At present total power generation of the country from all sources is around 10,000MW

against total demand of 14,900MW

In big cities like Lahore, Faisalabad, Gujranwala, Multan, Rawalpindi supply of electricity has forced managementto suspend power for 8-10 hours a day and in the rural areas power remains suspended up-to 16 hours.

According to officials Pakistan has the capacity to immediately resolve energy crisis, as its installed power

generation capacity is about 23,000 megawatts of which 19,000 megawatts is available

against country's peak demand of 17,000 megawatts.

Islamabad to seek $10bn energy infrastructurefund

Khalid Mustafa

Wednesday, April 18, 2012

ISLAMABAD: In the upcoming crucial meeting of the Pak-China Joint Energy Working Group (JEWG), authorities

in Islamabad intend to ask Beijing to establish a $10 billion energy infrastructure fund.

The moot is scheduled for May 2-4 and will be a follow up to the JEWG meeting held in Beijing in August last year.

At that meeting, China had conditioned its investment in the water and power sector on the suspension of Public

Procurement Regulatory Authority (PPRA) rules. The Chinese interlocutors had then insisted that Beijing would

fund entirely only those projects that were handed over to its companies without International Competitive Bidding

(ICB). China had also sought guarantees against exchange rate variation from Pakistan. Beijing insisted that since

the dollar is on a downward slide vis-a-vis the yuan, the loan should be renminbi-denominated.

However, officials privy to behind-the-scenes developments in Islamabad say, both demands have been shot down.

At the upcoming meeting, the government is to tell the Chinese delegation headed by its energy minister that

Pakistan cannot suspend PPRA rules for fear of scaring off Chinese investment. Instead, the Pakistan authorities

hope to persuade Beijing to take part in the bidding process in key water and power sector projects. The bid -
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winning Chinese company should use the $10 billion energy infrastructure fund instead of arranging finances itself,

said the official. This will ensure speedy commissioning and construction of the projects.

Further, said the official, the finance division has also refused to authorize renminbi-denominated deals. As such, he

said, the upcoming dialogue is bound to fail unless President Asif Zardari or Prime Minister Yusuf Raza Gilani step

in to sanction both Chinese demands.

During the three-day moot, Pakistan is hoping to pitch key projects that require Chinese assistance such as Sindh

Engro Mining and Power Project, Sonda Jherruk Coal Project, AES Imported Coal Project, Diamer Basha

Hydropower Project, Neelum Jhelum Hydropower Project, Kohala Hydropower Project, Bunji Hydropower Project,

Suki Kinari Hydropower Project, Kotli Hydropower Project, Madian Hydropower Project, Nandipur Combined

Cycle Thermal Power Project, Chichoki Mallian Combined Cycle Thermal Power Project, 500 KV Transmission

Line for evacuation of power from 747 MW Guddu Power Project, 220 KV Transmission line to transmit power

from 404 MW UCH- II Thermal Power Project, 500 KV Transmission Line Project for dispersal of power from

Sindh Engro Thar Coal Power Project, 500 KV Transmission Line Project for Neelum Jhelum Hydropower Project,

500 KV Transmission Line Project for evacuation of power from Tarbela Hydropower Fourth Extension Project,

mapping of renewable energy resources (such as wind, solar, biomass, waste, geothermal, small and micro hydel

projects) in new geographical areas of Pakistan, technology transfer for wind and other renewable energy projects,

support, technology transfer, standardization, of off-grid and decentralized renewable energy applications and

geothermal mapping of Pakistan, and the Geological Survey of Pakistans project to geologically map Pak-China

border areas at a 1:50,000 scale.

IPPs plan to stop production on non-payment of dues

Javed Mirza

Wednesday, April 18, 2012

KARACHI: The ongoing power crisis is likely to get even more severe as some of the independent power producers

are on the verge of shutdown due to non-payment of their dues amounting to Rs34 billion, industry sources said.

They said IPPs have extended the final deadline till April 28, 2012 for payment of outstanding dues following they

will shut down their production facilities which might result in additional shortfall of 1800 megawatt.The IPPs were

of the view that they were facing severe liquidity crunch and were not able to purchase fuel for their plants, besides

in case of non-payment of dues they would not be able to retire banks installments that would further deteriorate the

situation, sources said.

Discos to be handed over to provinces soon: power secretary tells National

Assembly bodyAPRIL 18, 2012

NAVEED BUTT
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While briefing the Committee about projections of demand and supply position, Thair Bashrat Cheema said that

there was 14,660MW generation and 18,383MW demand in May, 15,451MW generation and 19,564MW demand in

June, 15,200MW generation and 19,300MW demand in July, 15,210MW generation and 19,322MW demand in

August, 15,181MW generation and 19,300MW demand in September. He said that the generation last year never

exceeded 14,800MW.

Copyright Business Recorder, 2012

Standby mode: KESC's right to disconnect supply to industrial units upheld

APRIL 18, 2012

In a judgement on several injunction applications, Justice Munib Akhtar of the Sindh High Court upheld KESC's

intrinsic right to disconnect industrial consumers who changed their purposes and shifted KESC connections to

standby mode.

Gas price to be renegotiated with Iran

[APRIL 20, 2012,MUSHTAQ GHUMMAN]

Pakistan will renegotiate gas price with Iran under the (IP) gas pipeline project as the price of Turkmenistan-

Afghanistan-Pakistan-India (Tapi) gas is cheaper, sources close to Petroleum Secretary told Business Recorder.This

was disclosed at a meeting of Economic Co-ordination Committee (ECC) of the Cabinet held on April 12, 2012

under the chairmanship of Finance Minister Dr Abdul Hafeez Shaikh. The IP gas price was $11 per mmcfd while

Tapi was estimated at $13 per mmcfd. However, a week ago in a meeting in the Ministry of Petroleum and Natural

Resources it was revealed that Turkmenistan has agreed to reduce the price from 55 percent price parity withinternational crude price to 45 percent. In addition, Pakistan would also earn a transit fee from Tapi while India is

not party to IP anymore. Official documents available with Business Recorder reveal that the ECC was informed

that matter for signing of Gas Sales Purchase Agreement (GSPA) with regard to TAPI gas pipeline project, during

the visit of the Turkmen President on 14th November 2011, was placed before the ECC in its meeting held on 11th

November 2011. However, the ECC decided that, instead of signing GSPA at this stage, a single-page document

containing the intention of both the governments of Pakistan and Turkmenistan, may be signed during the visit of

the Turkmen President and the draft GSPA be annexed to that one-page document, for subject approval of the

government. The ECC also constituted a committee for drafting the proposed one-page document. The committee

prepared the requisite one-page document (Joint Declaration), which was accordingly signed by both sides on 14th

November 2011. Subsequently, the matter of TAPI GSPA including gas price formula, agreed base price, risksharing mechanism with regard to transportation cost, transit fee and gas price review mechanism was considered by

the ECC in its meeting held on 20th January, 2012. The ECC constituted a committee headed by the Minister for

Water and Power to examine the details concerning price and pricing formula for gas to be imported from

Turkmenistan and submit its recommendation to the ECC. Qamar-led committee in its meeting held on 6th April,

2012 examined the gas price formula, agreed based price, risk sharing mechanism with regard to transportation cost,

transit fee and gas price review mechanism and recommended it for approval of the ECC. Based upon the foregoing,

the ECC was requested to approve the draft GSPA for execution by Inter State Gas Systems (Pvt) Ltd with


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Turkmenistan (Turkmengaz) including gas price formula, agreed to, risk sharing mechanism and gas price review

mechanism. During the ensuing discussion, it was explained that gas to be imported from Turkmenistan will be

cheaper than the gas to be imported from Iran. Resultantly, Pakistan will be able to re-negotiate the gas price with

Iran. On a query, the ECC was informed that penalty clauses in TAPI GSPA are similar to those contained in Iran-

Pakistan GSPA, where-under Pakistan will be liable for payment towards cost of gas even if no gas is imported.

These conditions will be effective after construction of pipeline. The ECC was further informed about different

stages of approval of TAPI project, which included approval of the Board of Directors, steering committee set-up by

the ECC, the ECC itself and finally by the Cabinet. The project will not go through the CDWP and Ecnec. A

concern was expressed that Minister for Finance is included as a member of the steering committee, but he is not

aware of any meeting of the committee. It was explained that the meetings were previously attended by the then

Minister of State for Finance. However, the last meeting held in October 2011 was attended by the Finance

Secretary due to other commitments of the Minister for Finance. It was opined that TAPI being an important project,

meetings of the steering committee should be held more frequently to discuss the details. Another point was made

that different aspects of the TAPI project have been brought before the ECC and as such it would be appropriate to

make a comprehensive presentation to the ECC on the whole project. Besides it was inquired if there was a cost

sharing formula with India as India is also a stakeholder in this project.


Energy crisis, inflation discouraging investors'


Non-availability of electricity and gas, absence of long-term policies and fluctuation in prices has discouraged the

foreign investors and they are exploring new avenues for making investment, said President of Multan Chamber of

Commerce & Industry (MCCI), Mian Anis A Sheikh while talking to journalists on Thursday. Expressing deepconcern over 65 percent decline in Foreign Direct Investment (FDI) and Portfolio Investment during July-March

2011-12 as revealed by an official report and urged the government to tackle it on war-footing basis through a

comprehensive policy approach by involving all chambers of commerce in the country. MCCI President said

Pakistan's investment rate was only 13.4 percent at the end of last fiscal year, which was the lowest since FY74. The

low saving rate, coupled with wary foreign investors led to record low investment rate in the country. He said that

worst-ever energy shortfall, unclear economic policies, a serious law and order situation and institutional fragility

were the major factors keeping the foreign investors away. He suggested if the country was losing charm for foreign

investors then the government would have to take extraordinary measures to avoid its effects on local investors and

country's economic growth. He said the slow government response to deal with aggravating energy crisis was also

spoiling not only the local investment scenario but also sending a very negative signal to potential foreign investors.Sheikh said a special committee comprising private sector members should be formed to identify the solutions to

attract foreign investment that was a prerequisite for economic growth. He said that the proposed committee should

also be asked to look into the existing policy framework and if there was a need to redesign new policies and the

committee should immediately initiate work on them. Sheikh said that all the developed countries accord special

importance to economic issues and the challenges. But in Pakistan the situation is the other way round and the

economy is on the bottom of government to-do list. He said that the key issues including power shortage, poor

infrastructure, law and order situation and other vital factors, should be addressed on priority basis to put the country


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on track of economic growth and development. "At the same time, the government should ensure that all institutions

remain immune to any sort of undue interference as this will help improve quality of governance without which

foreign investment cannot be attracted. "A number of sectors in Pakistan including infrastructure development, coal,

energy, agriculture, livestock, textiles and pharmaceutical offer and lucrative investment opportunities to foreign

investors but unfortunately due to absence of a proper marketing strategy these opportunities are unattended even

today.


Power generation: SNGPL suggests suspension of gas supply to fertiliser plants


The Sui-Northern Gas Pipelines Limited (SNGPL) has recommended the government to suspend gas supply to four

fertiliser plants operating on SNGPL's system so that the gas could be diverted to power plants for generating an

estimated 8,00 megawatts of electricity. Sources in the Petroleum Ministry told Business Recorder here onWednesday that all the four fertiliser plants on the SNGPL network, Pakarab, Dawood Hercules, Engro's new plant

and Agritech had already been the biggest victims of chaotic gas situation. They added that the suspension of gas

supply to fertiliser plants would save over 200 million cubic feet per day (MMCFD) gas, which could be used to

generate 8,00 MW of electricity. The government preferred to import over one million tons of urea by spending a

hefty amount of $783 millions from precious foreign exchange. In addition to this, the government also paid huge

subsidy of Rs 54 billion on the imported urea to keep its price equal with the locally produced urea. Agriculture

contributes around 24 percent of the GDP and it also provides raw materials to all the major industries of Pakistan

including, textiles and sugar. If the government accept the recommendations of SNGPL it would cause problems for

Kharif Crops, as due to non-availability of fertiliser production of rice, cotton, sugarcane, maze, tobacco and other

major crops would be affected. During last season, SNGPL-based fertiliser plants were badly hit and hardlymanaged to achieve 31 percent of fertiliser production against their installed capacity, due to unavailability of gas.

In the past winter all the four fertiliser plants on SNGPL network faced a complete shutdown, which resulted in a

huge production and financial loss to these fertiliser plants. Dawood Hercules plant produced only 39 percent of

urea, which stood at 199,000 tons against a production capacity of 513,000 tons. Pakarab Fertiliser plant only

produced 27 percent of urea, which stood at 29,000 tons against a production capacity of 106,000 tons. Agritech

plant produced 34 percent of urea, which stood at 146,000 tons against a production capacity of 428,000 tons and

Engro's new plant produced 27 percent of urea, which stood at 347,000 tons against a production capacity of 1.26

million tons.


TAPI gas pipeline project: India, Afghanistan agree on transit fee

[APRIL 21, 2012,ABDUL RASHEED AZAD]

Petroleum Minister Dr Asim Hussain announced that Afghanistan and India have agreed on a transit fee of 49.49 US

cents per MMBTU for Turkmenistan- Afghanistan-Pakistan-India (TAPI) gas pipeline project, and the final


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agreement in this regard will be signed on May 24. Addressing a news conference here on Friday, the minister said

that the price agreement between India and Afghanistan was made possible due to Pakistan's efforts, adding, "We

played a major role in convincing both the countries." The minister said that Pakistan will be charging the same

transit fee from India as agreed with Afghanistan. He said that all the downstream issues of the TAPI pipeline were

settled and the upstream issues will be settled at the steering committee of the project on May 24 when final

agreement will be signed by the four participating nations. When asked about the price of imported gas, he said that

it could not be shared with the media and said that it was less that the price for Iran Pakistan (IP) gas pipeline.

He said Pakistan will be negotiating a revision in gas price with Iran as there is a price renewal clause in the

agreement, adding that it will result in saving $1 billion. The minister said the engineering, procurement and

construction (EPC) contract for IP will be awarded next week. He said that Pakistan's stance is very clear on the IP

gas pipeline. He said orders have been issued to the Pakistan State Oil for setting up 100 LPG auto stations across

the country at its outlets within next three months, adding that the dealers will be bearing all the construction cost.

PSO will ensure LPG supply to the dealers and its price will be totally deregulated, the minister added. He said that

the motorists will enjoy LPG, as it contains more hi-octane than CNG, adding that there will be no significant

difference in LPG and CNG prices as estimated LPG mileage is Rs 6 per km, while that of CNG is Rs 5 per km as

compared to petrol's Rs 9.50 per km. About ending of the energy crisis, the minister admitted that it would require at

least three to five years in overcoming the crisis. However, he said that the government has taken decision to put the

energy sector on the track again. About LNG, he said that the suppliers want long-term agreements of up to 10 to 15

years instead of 3 to 5 years duration. The cost of short-term supplies will be double than the long-term supplies. He

said that he has already visited Algeria and talks were held on LNG supply, which they assured could be provided if

an agreement on government to government basis was signed. He said that a summary was being moved to ECC for

final decision. Replying to a query pertaining to the violation of rules in appointment of Chairman Oil and Gas

Regulatory Authority (OGRA), the minister said that the question should be asked to the Cabinet Division that made

the appointment. Prime Minister has approved appointment of a retired bureaucrat Saeed Ahmad Khan as Chairman

OGRA even though the post required 20 years experience in oil and gas sector. About the high unaccounted for gas

(UFG) losses, he said the Sui companies have reduced it from 15 percent to less than 10 percent, but these should befurther brought down to below 5 percent.



24/63

HYPOTHESIS:

1. If we reduce dependence on oil and gas from 90% to at least 40% that is the generation

mix be altered towards cheaper sources (like hydro, wave tidal, coal and renewable

energy), there would be cheaper and sustainable levels of energy generation.

2. If energy transmission is improved reducing line losses and improving bill recovery rates,

than energy sector would be self-sustaining.

3. Within thermal energy mix, if we move our dependence from expensive oil to cheaper

and indigenous coal and biomass, cost of production of electricity generation would

decrease.

4. No money to finance maintenance and repair of generation power companies,

management is unable to improve efficiency of power plants.

[no money due to inadequate tariff, expensive fuel ( Residual furnace oil), RFO damages

power plants, Govt. subsidizing tariff( inflation increases, increase in the financialburden to the state subsidy bill)]

5. Resolution of circular debt can unlock capital for new generation projects.


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INTERVIEW: THAR COAL IS ESSENTIAL FOR ENERGY SECURITY

KHALID MANSOOR-CEO, ENGRO FERTILIZER

SOURCE: BUSINESS RECORDER RESEARCH

ENERGY CHALLENGES

Q1) BRR: Engro has been a classical example of being at the receiving end of the ongoing

energy crises in Pakistan. What is your take on that?

Answer: Khalid Mansoor

Natural gas is a precious resource and we should use it judicially. You have to maintain your

supply and demand in the country. If you want to distribute it judicially, than you must have an

eye on the supply side as well. You have choked the supply side for a variety of reasons.

First, people occupied the areas where the gas fields were located. Secondly, the petroleumpolicy needs review- if you dont incentivize the companies then how will you maintain the

supply side? Thirdly investment fell due to the law and order situation. Fourthly, when political

governments came, you generously said that we will provide gas to every one for every day

use- how can you do that at the cost of depriving the industries of this energy source they

depend on? More than half a billion of the current gas produced is unaccounted for.

Gas is being used in transport-in cars (where people can afford petrol) and not in motorcycles

(that is owned by the less affording class). Then, at homes, we are running geysers on 20

percent efficiency.

Our gas policy still states that the number one priority users are domestic. The users are

domestic, then textile, than general industry and then the fertilizer. It makes sense for the

equitable distribution.

Q2) BRR: How would the situation improve?


For Pakistans energy revival, we need thermal power plants for base load and renewable for

peaking. Peaking is whenever you have a renewable energy resource and you can have cheaperelectricity produced, for example hydel, which is available whenever there is water.

Hydel capacity is 6500 MW. If there is low water, it may fall down to less than 1000 MW. Then

you may need thermal plants for base load.

Thermal works with three things- the fuel mix will revolve around gas, furnace oil or coal. You

dont have gas and if you import it, it will cost $ 16/mmbtu. You have to look the price in


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Europe and the US. Gas price in the US after the discovery of the shale gas has fallen to $

3.5/mmbtu.

The other option is to run it on the RFO. If I tell you the figures of 2009-2010 and 2010-2011, it

will show that our dependence on furnace oil is 25%. That means you have to import more oil.

Thermal power plants are a must if we want to bridge the gap between supply and demand.

One solution that seems feasible and is not vulnerable to the changing crude oil price is the

coal.

For just power generation, $ 4 billion worth of oil is imported in Pakistan. And if it goes on like

that, it will cross $ 8 billion by 2020. If you transfer those inefficient furnace oil plants to coal,

imported coal to begin with, then your tariff is reduced by half. This is the only visible solution

to bring energy security in the country.

Q3) BRR: Engro has long been working on Thar coal power project. What is the currentstatus?


We are trying to develop the Thar coal project since 2009. We hired international consultants,

did all the planning work, and for the first time we have demonstrated that the Thar

proposition is technically, socially, economically and financially viable. We have even purchased

the construction bids from China.

We have to know embark on the financial activity. There are two issues. On the one hand weare saying that if we have to solve the countrys energy crises, Thar is the only solution. Next is

that if you want to execute the project, you need a financing of $ b3 billion. Now if we go to the

lenders, they will tell us what happened to their previous investments.

Than if you take out coal and generate power, to whom will you sell? It will be sold to the

national grid. With circular debt issue- who will come forward and want to invest? We made a

forum in Pakistan Business Council. We gave a comprehensive plan to deal with circular debt.

Q4) BRR: What needs to be done in the short term as the Thar coal is definitely a long term

solution?


At any point in time, 3000 MW is sitting idle; you need to transfer it on coal. In the short term

you have to go for multiple strategies. There are hardly any wind projects in the country.

Although it is a drop in the ocean but we can say that there is a potential of 50.000 MW.


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Q5) BRR: What is the gas potential, do we have more gas? What are the major issues?


The petroleum policy needs to be re- addressed. On the bright side, Pakistan is considered one

of the very few countries where the E & P (energy and exploration) success rate is outstanding.

There are two views there- we have already plucked the low hanging gas fruits and now there is

only distant fruit which is tight and shale gas, that has some potential but it is an expensive

proposition.

Q6) BRR: What is the rationale behind that?


It is the lack of political will. We gave a documented plan of how to get out this mess. And we

didnt just talk about energy, we also stressed on education as the intellectual capacity is also

lacking. But there is no political will.

A country that doesnt have energy security has nothing. And if we want to achieve that

security in this country, then Thar is the only solution.

Q7) BRR: Tell us more about Thar coal and its potential?


185 billion tons are the total coal reserves in Pakistan, of which 175 billion is in Thar. This is

more than 50 billion tons of oil equivalent, which is more than Iran and Saudi Oil put together.

It is equivalent to more than 2000 trillion cubic feet of gas. This is more than 68 times, all the

reserves discovered in Pakistan.

Our joint venture with the government is in block2, which we got through an International

Competitive Bidding.

We were told that the block has 1.6 billion tons of coal. When we did additional geological

survey and additional drilling, we confirmed 200 billion tons from just that block, which is more

than what was earlier estimated.

That is just 1 percent of the total reserves and it can generate 5000 MW power. Not only it will

meet the current demand, it is 25 percent of our current installed capacity.

All this requires an investment of around $3 billion, 100,000 MW electricity for 200 years can be

generated if we use the full Thar.


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Q8) BRR: By when should we expect Thar coal power generation to be optional?


The project needs time to develop. Its tariff is going to be competitive with imported coal and

LNG. We are just getting ready to start exploring and financing of the project. We have threelimitations. One, as part of the joint venture agreement, government has to bring the

infrastructure at the same readiness level on which we have worked.

In that, four infrastructures components are critical; water supply, taxation line, disposal

system and road network. Of these, the government has been very co-operative with us in the

three. A very attractive fiscal package has been approved by the government. 20 percent dollar

IRR has been approved in mining and exploration.

The government has to bring the infrastructure at the readiness level, solve Engros gas

problem and resolve the circular debt issue because otherwise the financial close is notpossible.

The good news is that we will get some financing from China. Chinese PM signed a MoU with

the PM Gilani when he came here on 2010. In that, they made a joint energy working group. In

that group, Thar is the flagship project. So before the financing activity starts, you have to

resolve these issues to avoid any hurdles in the process.


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MAIN REPORT TOPICS COVERED

ELECTRICITY GENERATION THROUGH NATURAL GAS

INTRODUCTION

Key Players in the Energy Sector of Pakistan:

To better understand the phenomena of circular debt, it is important to briefly review the profile of the key players in

the energy sector:

Suppliers of primary energy:a. Oil/gas exploration Companies (e.g., OGDCL and PPL)

b. Oil refineries (e.g., ARL, Parco)

c. Gas Distribution companies in gas (e.g., SNGPL, SSGC)

d. Oil and Petroleum Marketing companies (e.g., PSO, Shell)

All companies in this segment are involved in the supply of primary energy to power generation companies.

Power generation and distribution companies:e. Power distribution companies i.e. DISCOs like Karachi Electric Supply Corporation(KESC)

f. Independent Power Producers (IPPs) (e.g. EPQL, Hub Power Company and Kot Addu Power

Company)

g. Captive power producers

h. Rental power producers

i. Pakistan Electric Power Company (PEPCO)

Power Consumers:j. Industries

k. Individuals

l. Government Sectors

[SOURCE: ENGRO POWERGEN REPORT ON CIRCULAR DEBT ISSUE IN PAKISTANS

POWER SECTOR]


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[SOURCE: ENGRO POWERGEN REPORT ON CIRCULAR DEBT ISSUE IN PAKISTANS POWER

SECTOR]


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THEORETICAL FRAMEWORK + MODEL USED

1) POWER GENERATION

The importance of natural gas to the country has been increasing rapidly. As on January 1st 2010, the balance

recoverable natural gas reserves have been estimated at 28.33 trillion cubic feet. The average production of natural

gas during JulyMarch 200910 was 4,048.76 million cubic feet per day (mmcfd) as against 3,986.53 (mmcfd)

during the corresponding period of last year, showing an increase of 1.56 percent. Natural gas is used in general

industry to prepare consumer items, to produce cement and togenerate electricity. In the form of CNG, it is used in

transport sector and most importantly to manufacture fertilizer to boost the agricultural sector. Currently 28 private

and public sector companies are engaged in oil and gas exploration & production activities. Company wise total

natural gas production is presented in Table 13.8.

(i) Liquefied Petroleum Gas (LPG):

Liquefied Petroleum Gas (LPG) contributes about 0.7 percent of the countrys total energy supply mix.The main objective to enhance the use of LPG is to stop deforestation in the areas where the supply of

natural gas is technically not viable. As a result of governments investor friendly policies, LPG supplies

have gradually increased. The corner stone of LPG Policy is to ensure enhanced availability of LPG at a

competitive price to the end consumer. LPG marketing companies have imported around 62,920.3 MT

of LPG during JulyMarch, 200910.

(ii) Compressed Natural Gas (CNG):In an effort to reduce dependency on other fuels as well as to improve the environment, the use of CNG


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in vehicles is being encouraged. Due to existing price differential between CNG & Petrol, vehicles are

being converted to CNG and approximately 2.0 million vehicles are using CNG in the country. The number of CNG

Stations is ever increasing with an increase in the vehicle conversion rate resultantly there are about 3,116

established CNG Stations operational in the country. With an investment of over Rs.70 Billion, Pakistan at present is

the largest CNG user country in the world. In addition, the Government has recently approved the project of

PrivatePublic Partnership Based Environment Friendly Public Transport System for Major Urban Centers of

Pakistan which is being actively pursued with the provincial governments leading to gradual phase out of diesel

operated intracity urban transport to achieve import substitution.

(ii) Liquefied Natural Gas(LNG):

The Government is encouraging LNG import by the private sector. Accordingly, Pakistan Mashal LNG Project

(PMLP) was conceived to cater for the energy need of the country as envisioned in the 25 year National Energy

Security Plan and identified in the Energy Gap Coverage Strategy. PMLP is to be set up on an integrated basis

whereby a private sector project developer will manage the entire supply chain including procurement and shipping

of 3.5 million tonnes per annum LNG, construction and operation of an onshore LNG receiving terminal, and

delivery of 500 MMCFD regasified LNG to the SSGCs system in Karachi. Mashal (Phase I) will be based on

Floating Storage and Regasification Unit (FSRU).[SOURCE:ENERGY REPORT 2010]

2) MODELS

[ SOURCE: WORLD BANK PAKISTAN ENERGY TEAM REPORT]


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3) INVESTMENT IN PARTICULAR SECTOR

Drilling ActivitiesDuring JulyMarch 200910, altogether 50 wells have been drilled, including 16 wells in the public sector and 34 inthe private sector as against 60 in the same period last year registering a decrease of 16.67 percent. Total investmentof $ 888.80 million has so far been made in the current financial year in the upstream petroleum sector. Table 13.9

provide the details of drilling activities of the public and private sector companies, engaged in the exploration anddevelopment of wells, with achievement during July March 200910 and corresponding period last year.


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4) RESOURCES IN PAKISTAN FOR NATURAL GAS


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[SOURCE: PAKISTAN ENERGY YEAR BOOK 2011]


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5) FOREIGN INVESTMENT IN THE PARTICUALR SECTOR

Despite conditions in Pakistan, world lenders like International Finance Commission and

Asian Development Bank, also a local banks consortium had trusted the performance

and credibility of KESC and had released their long held up loan facilities for the project.

KESC has achieved Gross Dependable Generation Capacity of 2050 MW with thecompletion of 560 MW Bin Qasim Power Station -2 that generates electricity through

gas.

[Source: Business Recorder news]

Funds are also taken from Islamic Development Bank, Saudi Development Bank, Abu

Dhabi Fund, Kuwait fund for the required funding in the energy sector.

[Source: Business Recorder]

The Pak-China Joint Energy Working Group (JEWG), authorities intend to ask Beijing to

establish a $ 10 billion energy infrastructure fund.

[Source: Business Recorder]

6) DEVELOPMENT


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[SOURCE:ENGRO POWERGEN PRESENTATION ON INDIGENOUS FUEL IS THE KEY TO ENERGY

SECURITY OF PAKISTAN]

7) CRISES IN ENERGY SECTOR

The main crises faced by the energy sector are:

I. Circular debt problem

II. Rising fuel cost

III. Subsidy that Govt. offers to relief consumers ( imparts negative impact on economy and power sector) +

low consumer, commercial and industrial tariff

IV. Greater contribution of expensive fuel (oil, gas) in the generation (thermal) mix.

V. Financial gap of subsidy that Govt. had to pay also increased

VI. Line losses, Transmission and dispatch losses.

VII. Non- recovery of bills

VIII. Crippled cash flows and increased amount of Account receivable and bad debt (bad debt written off).

IX. Gas shortage ( more reliance in Residual furnace oil that is expensive)[ALMAS UNERSTANDING]

DEFINITION OF CIRCULAR DEBT

Circular debt occurs when one entity facing problems in its cash inflows holds back payments to its creditors and

Electricity Generation Through Natural Gas in Pakistan

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