energy crisis in pakistan


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energy crisis in pakistan

  2. 2. 2 IPRI Factfile C ONTENTSPreface v1. Pakistan: Power Crisis Feared by 2007 12. Major Energy Crisis Feared 33. Pakistan’s Quest for Energy Security 44. Waste to Energy is Needed in Pakistan 75. Type of Energy 106. Thermal Energy 107. Hydel Energy 128. Wind Energy 139. Rising Oil Prices 1510. Pakistan Coal Reserves be Explored 1711. Pakistan Iran Agree on Gas Pipeline Project 1712. ECNEC Approves Energy Projects 1813. Energy Crisis in Pakistan-I 1814. Energy Crisis in Pakistan-II 2115. Pakistans Energy Crisis to Worsen in Next Two Year 2216. Wind Power: Solution to Energy Crisis 2317. Energy Crisis may go from Bad to Worse 2618. Asian Development Bank Considering Loan for Small Hydro Projects 2719. US Advise Pakistan to Purchase Electricity from Central Asia 2720. Energy Strategy 2821. Pakistan Urged to Import 4,000MW from CARs 3022. Fuel Shortage may Worsen Power Situation 3223. Energy Crisis: Serious and Worsening 3324. Energy Crisis in Pakistan is Growing Rapidly 3525. Efficient Household Appliances to Mitigate Energy Crisis 3826. Coping with the Energy Crisis 4027. Iranian, Pakistani Presidents Resolve Pipeline Issues 4328. Ties with Iran 4429. Power Crisis & Alternate Energy Technology 4530. Government Calls IPPs Meeting to Tackle Power Crisis 4731. Competing Firms Complete Feasibility Reports 4832. Government to Invite Businessmen to Discuss Power Crisis 50
  3. 3. Energy Crisis in Pakistan 333. Entangled in Energy Web 5134. Meeting Held to Discuss Pakistans Energy Crisis 5435. Government Taking Steps to Overcome Energy Crisis 5536. Energy Conservation Plan to Combat Shortage 5637. Demand-Supply Gap Increases Dramatically 5738. Pakistan Facing Acute Power Shortage 5839. Renewable Resources Must to Counter Energy Crisis 5940. Load Shedding: Part of Conspiracy 6041. Coal Power Plants to Help Overcome Energy Crisis 6242 Government to Ensure Indiscriminate Load Shedding: PM 6343. Pakistan Puts Clocks Forward, Hopes to Save Electricity 6444. The Option for Solar Power 6545. Advancing of Clocks Creates Confusion 6846. Iran can Help Pakistan in Energy Sector 7047. SAARC Members Asked to Sign Energy Treaty 7048. Subsidy on Use of Up to 200 Power Units Stays 7249. Load Shedding becomes a Nightmare for Karachiites 7250. Severe Fuel Crisis Hits Frontier 7451. Shortage of Fuel at Petrol Pumps Causing Concern 7552. Shortage of Petrol Products Tormenting Consumers 7553. No End to Electricity Meter Shortage 7654. Peshawar Transporters Threaten to Besiege Oil Depots 7755. Diesel Shortage Affecting Operation of Tube-wells, Tractors 7856. Load Shedding Increases as KANUPP Trips Again 7957. Fuel Stations Run Short of Diesel 8058. Frequent Power Shutdowns Bringing Grades Down 8159. New Energy Order 8360. Power Plants Top Gas Supply Priority List 8561. Resolving Power Crisis a Priority 8662. Authority Set Up for Thar Coal Mining 86
  4. 4. 4 IPRI Factfile P REFACEPakistan is presently facing a serious energy crisis. Despite strong economicgrowth during the past decade and consequent rising demand for energy, noworthwhile steps have been taken to install new capacity for generation of therequired energy sources. Now, the demand exceeds supply and hence “load-shedding” is a common phenomenon through frequent power shutdowns.Pakistan needs about 14000-15000MW electricity per day, and the demand islikely to rise to approximately 20,000 MW per day by 2010. Presently, it canproduce about 11, 500 MW per day and thus there is a shortfall of about 3000-4000MW per day. This shortage is badly affecting industry, commerce anddaily life of people. All possible measures need to be adopted, i.e., to conserve energy atall levels, and use all available sources to enhance production of energy. Itseems that the government is considering importing energy from Iran andCentral Asian Republics and using indigenous sources, such as, hydel, coal,waste, wind, and solar power, as well as other alternate and renewable energysources, besides nuclear power plants for production of energy. Needless tosay that if the country wishes to continue its economic development andimprove the quality of life of its people, it has to make serious efforts towardsframing a coherent energy policy. The Factfile includes selected articles and news items on the subjectappearing in the media from 2nd July 2004 till 10th July 2008.July 10, 2008. Noor ul Haq
  5. 5. Energy Crisis in Pakistan 1 P AKISTAN : P OWER C RISIS F EARED BY 2007The country may plunge into energy crisis by the year 2007 due to risingelectricity demand which enters into double digit figure following increasingsale of electrical and electronic appliances on lease finance, it is reliably learntThursday. “The country may face energy crisis by the year 2007 followinghealthy growth of 13 per cent in electricity demand during the last quarter,which will erode surplus production in absence of commissioning of any newpower generation project during this financial year,” informed sources toldThe Nation. As per Pakistan Economic Survey 2003-04, electricity consumptionhas increased by 8.6 per cent during first three-quarter of last fiscal year.However, a top level WAPDA official maintained that electricity demandsurged up to 13 per cent during last quarter. The survey said household sector has been the largest consumer ofelectricity accounting for 44.2 per cent of total electricity consumptionfollowed by industries 31.1 per cent, agriculture 14.3 per cent, othergovernment sector 7.4 per cent, commercial 5.5 per cent and street light 0.7per cent. Keeping in view the past trend and the future development,WAPDA has also revised its load forecast to eight per cent per annum asagainst previous estimates of five per cent on average. Even the revised loadforecast has also failed all assessments due to which Authority has left noother option but to start load management this year, which may convert intoscheduled load shedding over a period of two year, sources maintained. The country needs a quantum jump in electricity generation inmedium-term scenario to revert the possibilities of load shedding in futuredue to shrinking gap between demand and supply of electricity at peak hours. According to an official report, the gap between firm supply andpeak hours demand has already been shrunk to three digit (440 MW) duringthis fiscal and will slip into negative columns next year (-441 MW) andfurther intensify to (-1,457 MW) during the financial year 2006-07. The report maintained that the difference between firm supply andpeak demand is estimated at 5,529 MW by the year 2009-10 when firmelectricity supply will stand at 15,055 MW against peak demand of 20,584MW. Chairman WAPDA Tariq Hamid at a Press conference early thisyear warned about the possible energy crisis and stressed the need for‘quantum jump’ in power generation. The experts say it could only bepossible through a mega project of hydropower generation; otherwise thegap between firm supply and peak demand will remain on the rise.
  6. 6. 2 IPRI Factfile They said the power generation projects, which are due tocommission in coming years are of low capacity and will not be able toexceed the surging demand of the electricity. They say no power generation project will commission during thisfiscal year and the total installed capacity of electricity generation will remain19,478 MW to meet 15,082 MW firm supply and 14,642 MW peak demand. Giving details of projects, the sources said Malakand-lll (81MW),Pehur (18MW) and combined cycle power plant at Faisalabad (450MW) areplanned to be commissioned during the year 2007. Mangla Dam raisingproject would also add 150 MW capacity to the national grid by June 2007. Besides this, Khan Khwar (72MW), Allai Khwar (121MW), DuberKhwar (130MW) and Kayal Khwar (130MW) are expected to be completedin 2008 along with Golan Gol (106MW) and Jinnah (96MW). Moreover,Matiltan (84MW), New Bong Escape (79MW) and Rajdhani (132MW) areexpected by 2009 while Taunsa (120MW) is likely to be completed by 2010.Sources say WAPDA has also planned to install a high efficiency combinedcycle power plant at Baloki (450MW), which is expected to be completed by2010. In addition of these, power plant 1 & 2 of 300 MW each at Thar Coalwith the assistance of China are also planned for commissioning in 2009,sources said. Moreover, efforts are also under way with China NationalNuclear Corporation for the construction of a third nuclear power plant witha gross capacity of 325 MW at Chashma, they added. When contacted, a WAPDA official said there is no power shortagein the country at present as the Authority still has over 1,000 MW surpluselectricity. However, he admitted that the shortage may occur in the year2007 and onward and said the Authority will utilise all options includingrunning of IPPs plant at full capacity to avert any possible crisis. About the system augmentation to bring down line losses, theofficial said the Authority would spend Rs 3.5 billion on augmentation ofdistribution lines this fiscal while another Rs 5 billion will be consumed ontransmission lines. “We have been negotiating Rs 9 billion loan with aconsortium of local banks to upgrade and augment the power transmissionsystem,” he disclosed. The official further said that five new transmissionlines of 220-KV would be installed by the end of 2004, that would ensuresmooth supply to the consumers. He expressed full trust on presenttransmission and distribution system and said it could easily sustain the loadof total installed power generation in the country. July 2, 2004
  7. 7. Energy Crisis in Pakistan 3 M AJOR E NERGY C RISIS F EAREDPakistan is most likely to face a major energy crisis in natural gas, power andoil in the next three to four years that could choke the economic growth formany years to come, official estimates and energy experts suggest. Pakistan’s total energy requirement would increase by about 48 percent to 80 million tons of oil equivalent (MTOE) in 2010 from about 54MTOE currently, but major initiatives of meeting this gap are far from turninginto reality, said a former petroleum minister on condition of anonymity forthe simple reason that he had also served the present government. Major shortfall is expected in the natural gas supplies, he said.According to official energy demand forecast, he added, the demand fornatural gas, having about 50 per cent share in the country’s energyconsumption, would increase by 44 per cent to 39 MTOE from 27 MTOEcurrently. Partly contributed by gas shortfalls, the power shortage is expected tobe little over 5,250MW by 2010, he said, adding that the oil demand wouldalso increase by over 23 per cent to about 21 million tons in 2010 from thecurrent demand of 16.8 million tons. This would leave a total deficit of about nine million tons of dieseland furnace oil imports, he said. Since the gas shortfalls were expected to bemuch higher, the country would need to enhance its dependence on importedoil, thus increasing pressure on foreign exchange situation, he added. Last year’s oil import bill amounted to about $6.5 billion comparedwith about $3.5 billion in 2004-05, mainly because of higher international oilprices - a burden expected to be even higher in future as a result of growingMiddle East crisis. Current year’s oil import bill has again been projected by thegovernment at about $6.5 billion on last year’s average prices, which havestarted to rise in the recent days. According to the former minister, the government had planned fivemajor initiatives to meet these energy requirements. They included three gasimport pipelines, Gwadar port as energy hub and LNG import. However, fourof these measures, including the three import pipeline projects, show no signsof progress for various reasons while concentration on energy facilities inGwadar would chiefly depend on security situation, besides oil and gas importpipelines. Planning Commission sources said the government had planned toadd an overall power generation capacity of about 7,880MW by 2010. Of this,about 4,860MW is to be based on natural gas, accounting for 61 per cent ofcapacity expansion.
  8. 8. 4 IPRI Factfile However, the gas-based power expansion of about 4,860MW wouldremain in doubt since these estimates were based on gas import options forcompletion in 2010, 2015 and 2020, said the sources. The fifth initiative of LNG import was on schedule and would startdelivering about 0.3 billion cubic feet of gas (BCFD) by 2009 and another 0.5BCFD by 2015, said the sources. Petroleum ministry officials are not ready to speak on record aboutgas import options and resultant overall energy shortfalls because of recentpolitical developments on Iran-Pakistan-India pipeline project and securitysituation in Afghanistan and non-certification of gas reserves in Turkmenistan. According to World Bank estimates, a demand gap (supply shortage)of about four per cent of the total demand, is expected in 2010. Even thoughthis gap would be met by LNG imports, it would again increase to 20 per centof the total demand. The bank said the indigenous gas supply would fall from32.6 MTOE in 2010 to 20.7 MTOE in 2025 while the ‘gas supply-demand gap’would rapidly increase as demand is expected to grow continuously,quadrupling in 2025. As per the World Bank estimates, the gas imports will representalmost 67 per cent of natural gas supply in 2025. One can, therefore, gauge thequantum of shortage in case import pipelines are not materialised. Pakistan’s gas reserves are 32.8 TCF at present, with reserve-production ratio in the order of 27 years, considering that domestic productiondoes not grow substantially. Power sector demand represents 41 per cent oftotal gas consumption, general industries 24 per cent, fertiliser 7.8 per cent anddomestic-commercial 22.8 per cent, cement 1.5 per cent and CNG 2.8 percent. Demand growth has been up to 8.5 per cent in recent years and isexpected to be seven per cent with power industries and domesticconsumption accounting for 82 per cent. Gas demand already displaysseasonal pattern with national demand growing in winter beyond transmissioncapacity. Therefore, supplies to large users mainly industries and power plantsare curtailed during winter months to ensure supplies to domestic, commercialand small industries. Annual production at present is about 1.16 TCF. Khaleeq Kiani, Dawn, July 28, 2006 P AKISTAN ’ S Q UEST FOR E NERGY S ECURITYEnergy has become an important prerequisite for the economic developmentof a country. On one hand it is used for the industrial and agriculturalpurposes and on the other hand it is required for domestic use of the citizens.Natural gas is the fastest growing primary energy source. Globally
  9. 9. Energy Crisis in Pakistan 5consumption of natural gas is projected to increase by nearly 70 percentbetween 2002 and 2025, with the most vigorous growth in demand expectedamong the emerging economies. Consumption of natural gas worldwideincreases in the forecast by an average of 2.3 percent annually from 2002 to2025, compared with projected annual growth rates of 1.9 percent for oilconsumption and 2.0 percent for coal consumption. The electric power sectoraccounts for almost one-half of the total incremental growth in worldwidenatural gas demand over the forecast period. South Asia is important to world energy markets because it contains1.3 billion people and is experiencing rapid energy demand growth. AfterIndia, Pakistan and Bangladesh are the next largest South Asian countries inthese categories. Economic and population growth in South Asia have resultedin rapid increases in energy consumption in recent years. The major energyissues facing South Asian nations today are keeping up with rapidly risingenergy demand. Agency for energy consumption has projected that by the year2010 South Asian countries shall be consuming more than double the currentlevels of primary commercial energy. Pakistan’s largest energy source is natural gas, with demand andimports growing rapidly. Currently, natural gas supplies 49 percent of Pakistan’s energy needs.According to the Oil and Gas Journal (OGJ), as of January 1, 2005, Pakistanhad 26.83 trillion cubic feet (Tcf) of proven natural gas reserves. Pakistan islooking to increase its gas production to support increasing consumptionthrough Pipelines from Iran and Turkmenistan. Currently, Pakistan ranks thirdin the world for use of natural gas as a motor fuel, behind Brazil andArgentina. In addition, Pakistan hopes to make gas the fuel of choice forfuture electric power generation projects. Pakistan ambitiously seeks toincrease oil production through new alliances with foreign companies.Pakistan’s net oil imports are projected to rise substantially in coming years asdemand growth outpaces increases in production. Pakistan will see power shortages by 2007 unless actions are taken toincrease generation and reduce transmission losses. Pakistan has 18 gigawatts(GW) of electric generating capacity. Thermal plants using oil, natural gas, andcoal account for about 70 percent of this capacity, with hydroelectricity(hydro) making up 28 percent and nuclear 2.5 percent. Pakistans total powergenerating capacity has increased rapidly in recent years, largely due to foreigninvestment, ultimately leading to a partial alleviation of the power shortages.Pakistan often faces load shedding in peak seasons. Transmission losses areabout 30 percent, due to poor quality infrastructure and a significant amountof power theft. Periodic droughts affect the availability of hydropower. TheGovernment is understandably engaged in a vigorous effort to expand thenation’s power generation capacity through building of dams and invitingforeign investors for establishing thermal units in the country. The things are,
  10. 10. 6 IPRI Factfilehowever, seemingly getting out of its hand due to the yawning gap betweensupply and demand of electricity. Coal currently plays a minor role in Pakistan’s energy mix. However,Pakistan contains an estimated 3,362 million tons, sixth largest in the world.President Musharraf has stated that coal should make up more than thecurrent 1 percent of electric power generation in Pakistan. The PakistaniMinistry of Industries and Production has granted a Chinese company to buildtwo coal-fired power-generation plants to supply 600 MW of electricity. Asidefrom power plants generated by coal, Pakistan is also working to expand theuse of wind turbines. For instance, the Pakistan Alternative EnergyDevelopment Board (AEDB) recently approved New Park Energy Phase I, a400-MW wind project near Port Qasim. Energy cooperation is the key to regional development. Pakistan’sgovernment is working on plans to build an Iran-Pakistan-India (IPI) pipelinethat spans from Iran’s massive reserves to Indian markets across Pakistaniterritory. Russia’s biggest gas producer, Gazprom, has recently shown interestin the $7.4 billion pipeline project and has indicated its desire to invest in it.While Iran and Pakistan have made agreements to move forward, India stillremains reluctant due to its recent nuclear deal with USA. Iran has offered tocover 60 percent of the construction costs of the pipeline and Pakistaniofficials have stressed their ability to safeguard the pipeline. Iran will lay thepipeline from Pars to Pakistani border. Islamabad will build the pipeline fromthe Iranian border to its Central Pakistani city of Bhong in District RahaimYar Khan. Both countries have discussed the gas pricing formula, projectstructure, its feasibility, gas off-take volumes and the gas sales and purchaseagreement. In spite of US pressure for not building IPI pipeline, Pakistanremains determined for the pipeline. In fact, in the face of the US pressureagainst IPI, now two pipelines from Iran are under "active consideration" —one for Pakistan and the other for India, through Pakistan. If India participatesin IPI project, Pakistan will be entitled to transit fee. But, if Pakistan builds thepipeline from the Iranian to the Indian border, then it will also be entitled totransportation charges. This is the great vision of President Pervez Musharraf and PrimeMinister Shaukat Aziz according to which Pakistan is going to become anenergy corridor for China. Islamabad’s negotiation for a second transnationalgas pipeline from Turkmenistan to Pakistan via Afghanistan (TAP) alsoentered a final stage because experts are of the view that Pakistans fastgrowing energy demand requires laying two gas pipelines. Washingtonsupports the TAP project and has assured the pipeline’s security throughAfghanistan. It also holds good prospects for other South Asian users,depending on the size of supplies that Turkmenistan can arrange. The plans tobuild a third transnational gas pipeline from Qatar to Pakistan and India—-Gulf-South Asia Pipeline (GUSA)-—seem to have slowed down because of
  11. 11. Energy Crisis in Pakistan 7the gas availability issues. "The plan to import gas from Qatar is not, however,shelved," maintained by Jahangir Khan, spokesman for Ministry of Petroleum& Natural Resources. With the development of Gawadar Port, Pakistan can provide thetrade and energy corridor for the whole region especially to China. In thisperspective president has rightly remarked so, “When Karakoram Highwaywas built, the world called it the eighth wonder, and we can create the ninthand tenth wonders by establishing energy pipelines and railway linkagesbetween the two fast growing economies.” China and Pakistan agreed towiden KKH for larger vehicles with heavier freight. The rebuilding of KKHwill enable China to ship its energy supplies from the Middle East fromGwader Port in Balochistan through the land route of KKH to western China,which is its development hub. This alternative energy supply route will reduceBeijing’s dependence on the Malacca Straits. Pakistan also wants to set up a“crude transit route” through Gwader Port for Beijing’s energy shipmentsfrom Iran and Africa. For this reason, Pakistan is building oil refineries, naturalgas terminals, oil and gas equipment, and transit facilities in Balochistan. Chinahas agreed to help Pakistan with its plans for the development of its oil andgas industry. With this planned elaborate energy infrastructure, KKH hasassumed an added significance as an alternative land link between China andits energy sources, of which Iran is at the top. The recent Pak-China energyforum in Islamabad was a major step in formulating future strategy to ensureenergy security of both countries. Muhammad Munir, Pakistan Observer, 20 May 2006 W ASTE TO E NERGY IS N EEDED IN P AKISTANGrowing urbanisation and changes in the pattern of life, give rise to generationof increasing quantities of wastes and it’s now becoming another threat to ouralready degraded environment. However, in recent years, waste-to-energytechnologies have been developed to produce clean energy through thecombustion of municipal solid waste in specially designed power plantsequipped with the most modern pollution control equipment to cleanemissions. Yet, solid waste management practices differ for developed anddeveloping nations. In developing countries like Pakistan, institutions chargedwith the responsibility to make decisions on solid waste management, operatein the enormous information, policy and strategy vacuum and lack thereforethe ability to address this looming environmental disaster. The perfect ‘case study’ of information gap in selection of appropriatemethodology to dispose municipal waste exhibited by the apex civic authorityof Pakistan is when the capital development authority has finally decided tosolve the ever-increasing volume of municipal waste by landfill in groundwater
  12. 12. 8 IPRI Factfilerecharge area. While in developed countries, landfills are now bracketed as‘obsolete’ and ‘mines of the future’ after observing several problems likepollution and contamination of groundwater by leachate and residual soilcontamination after landfill closure and simple nuisance problems. This is thevery reason why in the United States sanitary landfill techniques have steadilydecreased from 8,000 in 1988 to 1,767 in 2002. Extensively focusing onturning waste to energy, municipal authorities in USA have realised thecontribution of waste to an increasing electricity shortage. Today in America, 2500 MW are solely generated by the waste-to-energy plants. Many other countries in the world, Sweden, Japan included,have applied this technology since the last 20 years. In the sub continent, Indiainstalled three projects to produce electricity from waste with a total capacityof 17.6 MW. Although these ‘made in India’ power plants are generatingelectricity by direct incineration, causing pollution and must be upgraded bysophisticated monitoring systems to check pollution. These examples areenough to establish that CDA’s ignorance of modern technologies is surelynot simply a lack of ‘access to information’, but questions the professionalcapabilities of the planners within its corridors. The site selected for the landfill project is at Kuri, an ancient city ofPotwar and its aerial distance is hardly five kilometres from sector G-5, knownas the nucleus of Islamabad. Though, in July 2003, the same site wasconsidered for a landfill project but UNDP out rightly rejected and warnedthat environmental cost would be considerable, besides air pollution,contamination of groundwater if Kuri was selected as a landfill project. JICAin 1988 also compiled a detail investigation report, which established that thearea is the recharge zone of the aquifer catering for more than 50 per cent ofthe twin cities’ drinking demand. Based on these serious environmentalconstraints, as its location is up a slope and within the flood plain of GumrahRiver, the recharge-basin of the twin cities aquifer, the site was rejected.Recent floods substantiated the finding of all the reports, as the site isdefinitely within the flood plains of the Gumrah River and would need to beprotected on a priority basis, especially as water shortages is now a permanentproblem of the twin cities. Whoever selected and approved the site for the ‘disaster of the future’,showed ignorance of the above reports and absolute ignorance of the adverseenvironmental impacts this project would create. Is this ignorance simplyunawareness of the planners or is it complete apathy towards anything old,which rejects that Kuri is recorded as an ancient city of the Potowar Region.As CDA is constantly focusing on developing tourist attractions, why notpreserve this historical area? Aware of the unprofessional management atCDA’s varied directorates one anticipates leachates from the landfills,polluting the amazingly still clean groundwater table, while the wind will carry
  13. 13. Energy Crisis in Pakistan 9waves of leaking gases towards the G-5 Sector, farther adding to the prevalenthealth hazards of the capital. ‘Access to clean water’ has been given the ‘top priority’ flag by thepresident. Selecting a site along the Gumrah River, known to recharge thegroundwater along its winding course through Chak Shehzad and Kannashows the warped priorities of the planning commission that approvesprojects, the ministry of interior responsible for CDA affairs and the CDAitself. Had CDA only followed the minutest details provided in the FederalCapital Commission Reports of 1960 by the earlier planners of the capital city,Islamabad today would have been a model for the rest of Pakistan. The CDA ignored the most recent seismic zoning report of the regiontoo. According to EPA US regulations, duly adopted by Pakistan’s EPA, thereshould be no significant seismic risk within identified landfill sites. Kuri iswithin a highly sensitive earthquake zone, according to new seismic zoningmaps prepared after the earthquake 2005. An earthquake having a magnitudeof 4.2 was recorded on July 7, 1989 and its epicentre was at a distance of 10kilometres from Kuri. Had the spread of this infectious disease the ‘vacuum of information’been contained in time, CDA would surely have been able to diagnose that theestimated cost of two billion rupees for the landfill site, would have sufficedfor setting up an ‘energy-to-waste’ plant in the city. With load-shedding apermanent crisis in Pakistan, adding some extra megawatts through waste-to-energy could have solved many ills in the rapidly growing energy needs. A vacuum of information has not allowed the CDA to communicateeither with the alternate energy development board, established by the federalgovernment in 2003. This board was given the mandate to solve the energycrisis that is facing this country through renewable technologies. Althoughadvertisements in the printed media asked for feasibility studies of ‘waste-to-energy’ units for ten cities of the country, the twin cities were ignored. Hadmutual interactions been part of the government systems, the funds availableto the CDA for the ill-fated sanitary landfill, and the technical know-how ofalternate energy development board (AEDB), Islamabad could have prideditself of being the first ever waste-to-energy unit in the country today. The decision to construct a landfill project at extremely sensitive areasneed not only to be reviewed but also need to empower the AEDB to generateelectricity from waste to cope with the energy demand in the lines ofinternational environmental commitments avoiding violation of the KyotoProtocol and Stockholm Convention. Now decision-makers have to choosewhether to allow the CDA to go ahead with the landfill project, to dump wastefor adding more pollution and contamination of groundwater or to allowproduction of environment friendly energy. Arshad H Abbasi, November 9, 2006
  14. 14. 10 IPRI Factfile T YPES OF E NERGYEnergy can be differentiated as 1. Kinetic energy 2. Potential energyKinetic Energy 1. Sound 2. Wind 3. Mechanical for example moving piston in a cylinder 4. Electrical energy. Electricity, lightning 5. Thermal Energy, Heat, hot water, steam 6. Light , microwaves, x-rays , solar, ultra violet raysPotential energy 1. Gravitational energy. Hydro power, ball above ground 2. Spring . stretched rubber band 3. Magnetic planetary poles 4. Nuclear , fission, fusion, heavy water uranium 5. Chemical , gasoline, batteries, oil natural gas, gun powder, coal, wood 2007 T HERMAL E NERGYThermal Energy is the oldest type of energy. With all known history available,Wood was always used for heating and cooking. In 2nd world war fossil fuelsentered in the form of coal to get the energy, until liquid fuels were discoveredand because of their convenience of transportation they took over as majorcontributors of the energy source. Once the steam engines were invented then the coal or liquid fuel wasburnt in the boilers and the heat produces steam which is used to driveelectrical generators, or any other mechanical device. Rudolph diesels invention of diesel engine revolutionaries the energyconcept and today we see sine the majority of machines moving on dieselengines. Diesel engines can be 2 stroke or 4 stroke type. They can be in line orarranged in V or even W shape. They can be single acting or double acting. Another method of converting thermal energy to mechanical energy isby the gas turbines. Turbines are also used to run by steam or hot gases whichare produced by igniting fuel.
  15. 15. Energy Crisis in Pakistan 11 For converting thermal energy to electrical energy alternators are usedto drive on constant RPM. The choice of gensets strictly depends on the requirement of theclient, before ordering a power plant following points to be considered 1. Expected demand of the power. 2. Type of fuel required 3. Space available for the power plant 4. Avilability of genset 5. Avilability of local service back up and stock of parts 6. Price is paramount importance and hidden expenses should be looked carefully The major manufacturers and suppliers of Gensets based on internalcombustion engines are given below 1. MAN 2. Wartsila 3. Caterpillar 4. Jen Bacher 5. Waukesha 6. Mitsubishi 7. Detroit Diesel 8. Rolls Royce Internal combustion engine can obtain 30-50% thermal efficiency. Itmeans that around 50% energy is wasted in the form of exhaust gases , coolingsystems and radiation. Therefore for larger plants heat recovery systems areutilized. In Pakistan due to attractive gas prices this is a general trend that gasoperated power plants are preferred if gas connections are available. The gas gensets are available from less than 1 MW sizes to 6 MWconfiguration. Normally they are V type and 12,16 18 and 20 cylinderconfiguration. In addition some models are available on duel fuel technology whichcan be operated simultaneously on gas and furnace oil. The price of a 3 MW gas genset can be expected around 1 Million $.However low RPM engines will be more costly Unit cost of fuel on gas gensetcan be evaluated as followsFuel Cost Rs 2.7 (depends upon the genset )Maintenance Rs 0.20Lubricating Oil Rs.0.10Chemical R Rs. 0.02General stores Rs. 0.01Labor Rs.0.10Overhead +Insurance Rs.0.07Financing 0.20
  16. 16. 12 IPRI FactfileTotal Rs. 3.40The engines which are running the fuel cost is only variable and can becalculated by multiplying fuel cost by a factor of 225. (225 grams / KWHR isan average net fuel consumption expected.) 2007 H YDEL E NERGYWater flowing in the rivers has kinetic energy. Once they are used to drive theturbine and produce electricity the power generated as Hydel Energy. Power produced by the turbines depends on quantity of waterflowing/minute and the head of water available. Mostly river flows by melting glaciers on high mountains. Once thewater start flowing in the valleys it changes its head very rapidly. This energycan be converted into electrical energy. Two method are normally used:- 1. Dams 2. Run of River projects. In case of Dams the water flow is restricted by making a huge storagedevice and the head of water is increased, the water then is allowed to flow bymeans of gates and pass through the turbines, the head of reservoir level ismaintained to provide uniform power, and the water stored in peak seasonadditionally is used for irrigation purposes in dry seasons. In run of river projects the water is diverted through the tunnels andonce it gains the head allowed to fall and pass through the turbines and backto river. the water in these projects is continuously flowing and not beingstored. Geographical situation is paramount importance in choosing asuitable site for the hydro project and it evolves a very serious time and moneyconsuming study. Once a site is located further detailed feasibility study is requiredbefore proceeding any serious effort to start the work. The feasibility study should include following field work. 1. Detailed Mapping of the area 2. Topographic study of the area 3. Seismic refraction study 4. River flow data 5. Weather data containing, Temperatures, pressures, rain humidity 6. Water sampling and testing 7. Environmental study 8. Social impact
  17. 17. Energy Crisis in Pakistan 13 9. Wild life and fish study 10. Identification of stake holders of the area 11. Coring and getting samples of the soil at 50-200 meters depth 12. Laboratory testing of the cores samples 13. Tectonic study to evaluate earth quake dangers 2007 W IND E NERGYPakistan is facing acute shortage of energy. with 7% increase of its economythis short fall soon to slow down its economic growth and will shatter itsdream to become one day a developed country. Most of its energy demand is being met with either Hydro power orthermal units. Pakistan is spending a very large amount of foreign exchange topurchase the furnace. The gas reserves already start depleting and oil marketsare sky rocketing. To overcome this shortage Government take a initiative toinvestigate Alternate energy resources in Pakistan developed Alternate EnergyBoard AEDB. The Board is headed by Retd Air Marshal Shahid Hamid.identified 50,000 MW energy potential from wind resource Pakistan is blessed with a large resource of wind corridor. AlthoughPakistan meteorological Department was gathering wind data for quite longtime But recently United States provided wind energy map for Pakistan whichconfirms a strong wind corridor in Sind coastal area. AEDB issued about 80 LOI to the investors List of LOI holders )todevelop 50 MW wind farms. Out of which 15 are already issued the land andfeasibility reports and financial closings are in progress.The following is a brief road map for developing a wind form 1. submission of proposal by sponsor 2. Review of proposal by AEDB 3. Posting of Bank Guarantee 4. issuance of letter of intent ( LOI ) 5. Feasibility study 6. Generation License 7. Tariff Determination 8. Submission of Performance Guarantee 9. Tariff determination by NEPRA 10. Submission of performance guarantee 11. Issuance of Letter of support
  18. 18. 14 IPRI Factfile The first requirement of conducting feasibility study is to install awind mast. The three major manufacturers of wind data are listed below. Thisdocument explains the method for installing weather station. 1. 2. 3. Geological, seismic, tectonic and environmental studies will berequired along with Digital mapping and topography of the site for preparing abankable feasibility study. A confirm EPC cost will also be needed forcalculation of tariffs.Some large manufacturers of wind turbines are given below1. Denmark (27.9%)2. GE Wind, US (17.7%)3. Enercon,Germany (13.2%)4. Gamesa, Spain (12.9%)5. Suzlon, India (6.1%)6. Siemens, Denmark (5.5%)7. Repower, Germany (3.1%)8. Nordex, Germany (2.6%)9. Ecotecnia, Spain (2.1%)1 Mitsubishi, Japan (2.0%)WIND ENERGY BASICSPower developed by a wind turbine can be mathematically shown in followingformulae1/2xdensity of air x effective area of rotor blade x cube of speed ofwind
  19. 19. Energy Crisis in Pakistan 15The lay out and designing of the wind form can be done by wind energyplanning and project software available in market in a reasonable price . Onesuch software is Wind Pro which is a very convenient tool for projectmanagement.Environmental Protection agency require a detailed environmental impactstudy of the project. The following issues should be discussed detail 1. Birds collision or alteration of their migration routes 2. Noise impact 3. flickering 2007 R ISING O IL P RICESAll predictions now failing and the oil prices are rising and now about to reach100 $ level. who knows that in market trading if even the customers are buyingthe oil on +100 $. the reason being given for this enormous rise is the US oilreserves are depleting and therefore customers are ready to purchase the oil atany price available. The future prospects also not very encouraging. All trading is beingmade on +90 $. OPEC promised to raise its out put but with out any
  20. 20. 16 IPRI Factfilesignificant effect. for the time being the prices were dipped but risen again onmuch higher values. The winter is just arriving and nobody knows that these prices willsettle at what level. Rising tension between US and Iran is one reason. Some sources arepredicting the attack on Iran is imminent. If the condition continues like thiswho is going to be benefited. Emerging economies and developing will suffer most. Their economyis dependent on energy resources. how can survive and how can they meettheir production commitments. In recent months oil surged from 70$ to 92$ and still rising. Thoseindustries which consumes more energy will suffer with maximum. It will leadto rise of inflation shutting down in efficient industries and rising unemployment in third world countries. When come to individual the poor will suffer most .High incomegroup will survive and it will not effect on their livings. But the strains comingon poor in third world countries will transform to social unrest and hence willcause instability in the region. Pakistan economy is already under intense pressure. On one hand ithas the competitors like China and India giving cut throat fight. Another end ithas continuous problem on its western borders draining its resources andcausing political chaos. The election is just three months away and the resultsexpected are the change of government to Pakistan Peoples Party. Pakistan exports and its all economic activities are dependent ofuninterrupted energy supplies for its energy requirement maximum share stillof furnace which is imported from Middle East countries. Rising prices willbring a wave of inflation. Already many textile mills closed down due to higher production costswhich make it un economical. further increase in oil prices will definitely bringmore strain on existing working units. In election environments it will bedefinitely a difficult decision for Prime Minister Shaukat Aziz to authorize thefuel prices in Pakistan. But he has no other option. How far the Government continues toabsorb the fuel bills eventually it has to increase the prices. And again who willsuffer simply the poor Today only there are news that Pakistan is going ahead 2000 MWpower plant based on furnace oil. Now we have to look for the future andsustainable economic activity. Development of Renewable energy resources are not moving aheadbeyond symposiums and conferences or in other crude words lip services.Pakistans future as economic leader in the region is at stake if sustainablecheap energy resources are not developed on priority.
  21. 21. Energy Crisis in Pakistan 17 So the solution is not so simple. Renewable yes. The hurdles shouldbe identified and removed on priority.One area which we want to emphasize is the conservation of energy. We haveto persuade all concerned that all possible measures to be taken to save energyso it can be used for future. Energy efficient plants and machines are the recipe for our survival. 2007 P AKISTAN C OAL R ESERVES S HOULD BE E XPLOREDThe energy shortage is increasing day by day and the resources of Pakistan arelimited and this year we are witnessing increasing of imported fuel bill. This istime that Pakistan should explore all its available resources. We see a limited progress in alternate energy sector. But so far littleefforts are being made to explore and use the coal reserves in Sind. This is claimed that coal quality is inferior and having low BTU. Thisis a challenging task. Today technology and boilers are available that can burnany kind of coal. Therefore all possible measures should be adopted to utilizeexisting resources. The smaller size power plants near the coal mines which can get directfeed and connect to National Grid will be an ideal configuration. 2007 P AKISTAN I RAN A GREE ON G AS P IPE L INE P ROJECTThis week very good news coming in energy sector that Iran and Pakistanfinally agreed to go ahead with the project. The gas project which was initiated by Iran India and Pakistan washaving many constraints and was continuously under pressure from US. Indiawas asking more time to make the decision and therefore the project wasdelayed. Finally Iran and Pakistan decided to continue with the project andwhen ever India decides it can be accommodated in the project extension. The major issue which is now resolved is the gas price which is nowrelated to petroleum prices as per the international practice. For all practicalpurposes the gas purchased will be based on BTU values as agreed by bothpartners. For Pakistan it means that the gas will be on higher price than thedomestic supply which is subsidized for common house hold users.
  22. 22. 18 IPRI Factfile The gas is prime energy source for domestic usage as well as fertilizersand power generation companies. This is expected that the average price when fixed for local consumerswill take care for common users as well as industrial usersIran wants quick decision for Gas PipeIran asking India to make the decision of joining Gas Pipe Line projectsoonest, otherwise the project will be started with Pakistan.Reluctance of India to make a firm decision is understandable due to Geo-Political Scenario. However this project is vitally important and profitable forIndian sustainable economic growth. Therefore a positive outcome is expectedsoon. 2007 ECNEC A PPROVES E NERGY P ROJECTSThe Executive Committee of the National Economic Council ECNECapproved 23 projects worth 116.5 Billion Rs. The meeting was the last on thechairman ship of Prime Minister Mr. Shaukat Aziz whose term is expiring inthree weeks. Energy sector was given prime consideration and the development ofnuclear power projects approved. Pakistan facing acute shortage of energy andthis is a wise decision to focus on nuclear energy which is renewable, cheapand environment free. with furnace reaching 100$ Large Hydel projects having socialconcerns ,wind turbines not available in market, and gas reserves depletingnuclear becomes most attractive option. 2007 E NERGY C RISIS IN P AKISTAN - IWe have written many blogs on this subject. But we never thought that thesituation will reach to such disastrous condition so soon. Last week we saw a series of disasters in energy sector. Pakistanelectrical energy production sustain shortfall of 3000 MW. Actual figure isslightly controversial as we have seen various statements emerging fromvarious sectors. Production units were shut. There was severe load shedding through-out the country. APTMA was forced to accept volunteer load shedding of 5hours each day on all units. And the residential areas were with out power
  23. 23. Energy Crisis in Pakistan 19maximum time of the day. The situation was worsened because Sui Gas Company alreadystopped the supply of industrial units and was going through a system of loadshedding it self. Therefore captive units were shut off due to non avilability ofthe gas. The IPP who were operating on furnace could not get the regularsupply of furnace and they did not bother to keep enough stock forcontingency therefore stop shutting. And then naturally the blame game started, starting from the watershortage in Dams to furnace oil transportation problem, violence in Sind andmaintenance activity in some independent power producers. Now it is officially declared that in last 10 years not a singles MW wasadded. We have seen hundreds of seminars, conferences and events on energyissues in Pakistan. The money wasted there if utilized then at least we can addfew hundred MW of Power. The fact is that Pakistan is sustaining an acute shortage of Power. Itsdemand is increasing and production is declining due to aging of the plants. And no solution is in sight. The projects which are in pipe line willnot come in line before 2009. And even the magnitude is such that it will notbe able to fulfill the demand of today. WAPDA is in favor of large dams and thinks that the delay ofconstruction of large dams was the basic reason for the shortage of power.The issue is very controversial subject and it is not expected to resolve soon.Moreover the construction of the dam will take at least 10 years and if thesituation persist our economy will then come to a stage where it will need anypower any more. The situation demand an urgent decision. A decision which is vital forthe safety, stability and survival of Pakistan. Energy is a key factor for the stability and prosperity of Pakistan. Ifour production units keep on shutting then un employment will rise and hencestreet violence will rise. This is the time to restructure our energy policy. In our opinioninstead of many agencies one central ministry should look after the energyissues in Pakistan. This is utmost important that an environment should be createdwhere the investments are made in energy sector. Recently Government isadvocating a policy of promoting the investment in Private Sector. Althoughthe response is favorable but the out come is very slow. Now Government has to make a huge investment in energy sector.And the investment has to be in direct purchase of power plants,manufacturing main and auxiliary units, The objective should be utilization of diversified energy resources. Itis imperative that renewable energy resources should be explored but stillconventional thermal and coal fired power plants should be established.
  24. 24. 20 IPRI Factfile The strategy should be to explore indigenous local resources. Forexample furnace oil plants are best suited in Karachi where the port andrefinery facilities are available. Gas plants to be installed in Baluchistan, Sindand N.W.F.P near to existing gas fields. N.W.F.P should explore medium,small and micro size hydro projects. Sind must use its Coal reserves. Windturbines to be installed in coastal belt, and Punjab must explore bio-gas andcity waste plants. From US and Europe we should borrow and purchase the technologyto manufacture various power plants in Pakistan. For example if we startbuilding 1-3 KW micro hydro, wind or solar power plants in Pakistansufficient to provide energy to one home we can sell to individual familiesdirect at low installments. The cost will be recovered in utility billscompensation. For the furnace IPP and captive power plants should be allowed toimport furnace oil duty free. Then existing laid up power plants will againbecome operational. All efforts to be made that Iran Pakistan gas pipeline project isimplemented soonest. Moreover one additional pipe line for crude oil to beinstalled to reduce our dependence on sea route. Pakistan is in need of energy very badly and urgently. Pakistan shouldlook for nuclear energy possibilities. Pakistan is one of seven countries in theworld who has an indigenous capability to operate the nuclear power plant forlast forty years. Pakistan should look all alternatives to increase its electrical energyproduction by 10,000 MW in two years. This is a very challenging and difficulttask. But if it fails its target then all other indicators will go negative leavingbehind a disastrous situation. A dedicated campaign of energy conservation is needed to spread theawareness of energy conservation programs. This is also believed that ingeneral major energy consumers have little or no awareness of energy savingprocedures. The machinery when purchased a very little emphasis is given onelectrical or mechanical efficiency of the plant. The result is that ourproduction units are consuming much more energy than their competitorsresulting their product cost high and it is not competitive in internationalmarket. Energy conservation is indeed energy production. So if an investmentis made in this sector then it will pay back in 3-5 years. This is the responsibility of Government to start various energyconservation programs suited for various industries. 2007
  25. 25. Energy Crisis in Pakistan 21 E NERGY C RISIS IN P AKISTAN - IIA very common question asked in Pakistan is about the most burning issue inPakistan? The answer you will get may be a list of hundreds of issues whichstart from Kashmir and will end on terrorism or militancy etc etc. Recently Mr. Mansha in an interview in CNN replied same questionby giving a simple answer that water and energy are two most valid problemsin Pakistan. Energy is a most problematic issue in the world. Whereas oil pricesare steadily rising and no stability is seen in near future. Demands of energyfrom the emerging markets like China and India are growing day by day.Pakistan with official figurers of growth rate of 8% will have a definite rise indemand of energy for minimum 3% In USA the Gulf of Mexico is famous for oil producing and refiningfacilities. The prosperity of Houston is only due to oil industry beingflourished. However the weather is not so kind on this area and hurricanes andtornadoes commonly hit the southern part of USA and Caribbean. Such is the volatility of fuel market now that just news of onehurricane developing in Caribbean shoots the oil prices in the world. A fewyears before oil was being traded on 20$ and no body ever thought that theweather conditions in the gulf can effect the oil market. Politically the Iran situation is deteriorating day by day where as Iraqcondition is not stabilizing. Oil today is being traded around 65 $/, and themost vital question now is what will happen if the prices rises to 75 $ or evenone hundred $/barrel. Pakistan with small manufacturing market, surrounded by majoremerging economies like China, India, Malaysia, Indonesia, Philippines andBangladesh will be worst effected with the rise of energy prices. As a rule of thumb modern day manufacturing industries utilize atleast 33% production cost in terms of energy prices. An increase of energycost will effect their production cost and will force the manufacturers thateither to reduce the labor cost or to remain competitive in market byimproving the quality standards. Major giants China and India will benefit with this condition andsmaller economies will suffer badly. Are our policy makers in Islamabad thinking for the gravity ofproblem which is now just standing on our door step? On famous oil embargo days a lot of research in Europe was carriedout to find the alternate source of energy. The findings are available even incollege books. However with the drop of oil prices such alternatives wereuneconomical and therefore shelved.
  26. 26. 22 IPRI Factfile This is the time that Pakistan now asses very carefully that in case ofoil prices rising to 75 $ what actions it should take to conserve energy and tofind the alternate source of energy. A volunteer option for all energy users is to conserve energy. To makethe plants more efficient and to see that each drop of petrol is saved .If wemake serious study on this subject then we may achieve up to 20% saving inenergy ,hence saving in our production cost and making our products moreattractive in international market. Of course the energy conservation programs cost money. Howeverthe investment will be rewarding and will be beneficial in long terms. Pakistan’s thermal units are day by day become aging, reducing theiroutput power. With the rise of demand very soon we will see an acute shortageof energy and hence load shedding and shutting of the industrial units. Thiswill seriously affect our competitiveness in the international market. A liberal and progressive policy with less bureaucratic approachtowards energy producing units will help and bring attractive investment inPower sector. This is the responsibility of government to look for the alternateoptions for finding the energy resources. This investment can only be made bythe federal government. This is the time of survival. Only the countries which are prepared forthe worst will have a prosperous future. 2007 P AKISTAN S E NERGY C RISIS TO W ORSEN IN N EXT T WO Y EARSThe Pakistani government is anticipating the energy crisis to worsen in thecoming two years due to a 50% increase in the demand and a rather slowimprovement in the supply, the leading Pakistani newspaper DAWN reportedMonday. The power shortage, estimated to be 1000 to 2000 MW during thecurrent year, is likely to hit 3000 MW next year and to increase to about 5300MW by 2010, said the report. The overall energy requirement of Pakistan is expected to be about 80million tons of oil equivalents (MTOE) in 2010, up by about 50% from the 54MTOE of the current year, it said. A government official told DAWN that the energy shortage wassevere and widespread in almost all areas, and natural gas, power, and oilshortages were all posing risks to the economic growth in medium to longterm period.
  27. 27. Energy Crisis in Pakistan 23 Another official, quoted by the report, said that the development ofwater resources would resolve the problem in the long run but in the shortterm, there was a limit to constructing costly thermal power projects giventheir high economic costs. A major shortfall is expected in natural gas supplies, as an officialenergy demand forecast indicates that the demand for natural gas, whichmakes up about 50% of Pakistans energy consumption, would increase by44% to 39 MTOE from 27 MTOE currently, DAWN reported. The government had planned five major initiatives, including three gasimport pipelines, the Gwadar port as energy hub and the LNG import to meetthese energy requirements. But four of these measures, namely the three import pipeline projects,are uncertain at present, while concentration on energy facilities in Gwadarwould chiefly depend on security situation, besides oil and gas importpipelines, said the report. Xinhua English Newswire, January 9, 2007 W IND P OWER : A S OLUTION TO E NERGY C RISISTO encourage private investment inpower sector, the governmentformulated power generation policy(2002). However, progress incommissioning of new power plants hasbeen slow. In the four years since therevised policy was implemented, onlyone 225 MW gas-fired power plant hasachieved financial close. The extended time lag is not entirely unusual as power projects basedon natural gas and furnace-oil involve prolonged negotiations to securecontracts guaranteeing uninterrupted supply of fuel over the life of the project.Up till now, these contracts were entered into with state-owned energycompanies such as PSO and OGDC. As these corporations are to beprivatised, the government-guaranteed fuel-supply contracts might not beavailable for new projects. This will make project financing more difficult since a privateenterprise is more likely to default on its fuel-supply obligation over the 25-year life of a power project than a state-owned corporation. This couldpotentially result in further delays in implementing thermal power projects.
  28. 28. 24 IPRI Factfile As Pakistan’s energy needs are immediate , thermal and large hydro-electric plants may not be the solution because such projects may take between4-12 years to become operational. In order to meet the energy requirements,the best option is exploiting wind energy because wind power projects canstart generating electricity within two years. This is why wind energy is the fastest-growing source of power in theworld and its globally-installed capacity has risen from 20,000MW in 2001 to70,000MW in 2006. USA alone is installing 4,500MW per annum and Chinaplans to install 20,000MW by the year 2020. India offers a good example of a country that has embraced windenergy and has added substantial electricity generation capacity within a shortperiod of time! It’s cumulative wind power generation capacity is 6,018MW, ofwhich 4,500MW was installed in last five years! If Pakistan can realise half thegrowth that India has achieved, it can add 2,250MW to its electricity supply inthe next five years, much more than possible by pursuing thermal powerprojects. In fact, wind energy can go a long way in meeting our acute energyshortage. It has also the following additional benefits. First, thermal electricity production ignores certain “negativeexternalities”. Externalities are implied costs which are not reflected in theprice of a service. For example, a power plant running on natural gas willdivert its limited supply from domestic consumption as well as vital industrialuse. The total supply of natural gas is fixed and so its usage for powergeneration could result in a shortfall in other sectors of the economy. Anexample being the recent shut-down of 11 cement and two fertilizer plants dueto gas-supply shortage. The economic loss resulting from deficiency of naturalgas due to excessive reliance on gas-fired power generation is a negativeexternality. Similarly, in event of war or terrorism, supply routes of oil-tankers/gas-pipelines will require extensive military protection. This extra cost ofsecurity is also a negative externality of thermal power plants. The exclusion ofnegative externalities understates the true cost of thermal power generationand makes it appear cheaper than it is. Compared to thermal powergeneration, wind power provides a secure and independent source ofexternality-free energy. Second, Pakistan’s current account deficit for FY2006 was recorded at$5.7 billion. The deficit is likely to worsen next year when it is expected toexceed $8 billion. The large increase in the current account deficit is mainlydue to a 66.6 per cent surge in oil-imports, a large portion of it is due toincreased demand from oil-fired power plants. Any strategy to cut current account deficit has to deal with cutting oilimports and this can be achieved by reducing reliance on power-generationfrom furnace oil. Here again, wind energy offers an effective alternative to oil-fired power plants which will help reduce the current account deficit.
  29. 29. Energy Crisis in Pakistan 25 Third,, thermal power tariff is vulnerable to spikes in oil prices similarto the one in early 2006 when the crude-oil prices jumped to $78. As the tariffregime compensates the IPPs for the cost of fuel, any sustained increase in oilprices will feed into the tariff calculation and result in higher cost of electricity.Exploiting wind energy makes economic sense since wind is free and it willmake cost of electricity generation less vulnerable to temporary or permanentincreases in oil prices. Lastly, wind power plants will be able to claim carbon-credits(certified emission reductions or CERs) for producing clean energy. CERs arealready trading on European commodities exchanges and a global tradingmechanism is being developed. Recently, an investment bank (Morgan Stanley)invested more than $3 billion in CERs. Therefore, CER prices are expected to rise as they continue to attractinterest. Under the renewable energy policy, the CERs will be shared betweenthe IPP and the government. This will have the effect of reducing the net-costof wind power since revenues generated from sale of government-ownedCERs will off-set a portion of the tariff paid to the IPP. Exploiting wind power offers the best route for attaining sufficiencyin electricity production and reducing reliance on gas and imported furnace oil.Though wind power requires greater investment per mega-watt produced,however, unlike thermal power generation wind power avoids negativeexternalities such as additional cost of protecting fuel supply routes. Wind energy will help reduce the country’s oil-import bill and the costof power generation less vulnerable to fluctuations in oil prices. In addition toall these benefits, windfall from sale of carbon credits will make wind poweran economically attractive proposition for meeting our electricity demand at anaccelerated pace. Pakistan has a huge potential to develop wind power. The “windcorridor” in the coastal area of Sindh alone has the capacity to generate50,000MW and AEDB has put in place a `renewable energy policy that is oneof the most comprehensive and investor-friendly in the world. However,progress towards first wind power plant has been handicapped by a severeshortage in supply of wind turbines. The experience of other countries is thatonce the first project is executed, subsequent additions to capacity take placeat an accelerated pace. This should be the case with Pakistan as well. It is important that the government continues to provide incentives toprivate investors in the form of an attractive tariff. This support is essential forthe development phase of wind power sector and to realise its potential.Exploiting wind resources is not only in our economic interest, but serves oursecurity interest as well! Malik Ahmad Jalal, Dawn, January 29, 2007
  30. 30. 26 IPRI Factfile E NERGY C RISIS M AY G O FROM B AD TO W ORSEThe country may witness an aggravated energy crisis in the years to come asthe proposed thermal power house at Chichuki Maliyan with a capacity togenerate 500 megawatt electricity is in the doldrums, as the project has beenwithdrawn from Wapda in a strange development, The News has learnt. Right now power consumers are facing a massive power shortfall ofabout 2,000 megawatt and this crisis will persist in the years to come as theChichuki Maliyan power project will get delayed. Earlier the government had decided that the Chichuki Maliyan powerproject would be initiated in the public sector and Wapda had been assignedthe task. Wapda conducted the international competitive bidding (ICB) andreceived the lowest bid from the Japan-based Marubeni Company. Under theagreement, the Marubeni Company was also to invest in the project and to thiseffect it had arranged a loan from the Japan Bank for InternationalCooperation (JBIC). Wapda was to complete the thermal plant at Chichuki Maliyan with340 megawatt production in August 2008 and another 160 megawatt by Dec2008, and it was strong perception that this project would give a massive reliefto the common man and wriggle the country out of load-shedding and powercrisis. Confirming the shocking development, a senior Wapda official fromLahore said that the top decision makers in the country have taken a U-turnand decided that the private sector would complete this project of paramountimportance. “But under the new decision, the project would be inordinatelydelayed,” he feared. The price of the project has also increased by Rs 100million because of the delay, and this a very shocking decision. “The earliercost of the project was Rs 2.6 billion.” In the wake of the decision, Wapda had to stop all the spadework toinitiate the project. “The government has taken the new decision as the QatarInvestment Authority (QIA) will initiate this project,” the official said. The Board of Investment (BoI) has managed to bring the QatarInvestment Authority in the country and persuaded it to invest in this project.However, sources in the BoI confided to The News that Saifur Rehman, aclose aide to former Prime Minister Nawaz Sharif, was a partner of the QIAand had 25 per cent equity in it. The official said that in the last two months the BoI has held abouttwo meetings with QIA officials and Pakistan has inked an MoU with Qatar tothis effect. “Under the MoU, the Qatar Investment Authority has to come upwith financial close within three months,” the official said.
  31. 31. Energy Crisis in Pakistan 27 Asked about the status of the project after the government decided towithdraw it from Wapda, he said that Wapda was about to start the projectand the Japanese company had been short-listed and its terms and conditionswere also evaluated. But after the new decision, all the activities have beenstopped. Replying to a question, he said that in case the QIA failed to come upwith financial close within the stipulated time, the project would be furtherdelayed, escalating the project cost further, and worsening the power crisis. Khalid Mustafa, The News, June 13, 2007 A SIAN D EVELOPMENT B ANK C ONSIDERING 250 M ILLION $ L OAN FOR S MALL H YDRO P ROJECTS IN P AKISTANIndeed a very positive development if the terms of this loan finalizes soon.Pakistan is heading for acute shortage of energy and therefore all measureswhich can enhance the countrys ability to produce clean energy will bewelcomed by all quarters. The important question which should be looked is that how this loanwill be distributed. We suggest that small packaged turbines of 10-50 KW tobe assembled or manufactured in Pakistan and these turbines distributed toLocal residents on easy loans. Since the turbines will be providing electricityfor small group of houses therefore transmission expanses will be cut. This addition of power will not affect the existing shortage ofelectricity. Because beneficiaries will be mostly those people who does nothave an electrical connection. But a lager saving will be in the form of forestwood which is now used for heating and cooking. September 9, 2007 US A DVISE P AKISTAN T O P URCHASE E LECTRICITY F ROM C ENTRAL A SIAThe recent story in Daily Dawn reconfirms US advice to Pakistan to purchaseelectricity from central Asia. We are of view that US should be persuaded to provide technical andfinancial assistance to manufacture Wind Turbine technology in Pakistan aswell as boilers and turbines manufacturing facility which can burn low qualitycoal available from Sind Province. Self reliance in Energy requirements is a key element for sustainableeconomic growth of Pakistan.
  32. 32. 28 IPRI Factfile Pakistan should have a fair treatment to explore all possible energyresources including nuclear energy for its growing energy demand. September 9, 2007 E NERGY S TRATEGYUpdated 9th November 2007Few weeks before when oil started rising we predicted that no need for panicand the oil will maintain a position between 70-76$/barrel. We were proved tobe wrong. But not us. Just last months there was not much anxiety all around theworld. But now, what it looks, the world is again heading towards an energycrisis similar to 1970. So far the surge in markets always pointed to OPEC which wasblamed for throttling the production valves to regulate the market. Short termcrisis were related to speculations of war and political disturbances in shippinglanes transporting the fuel. Now the situation is different. OPEC is helpful more than ever to pump maximum oil it can deliverbut the demand is growing steadily. One reason is the change in life stylewhich came with the increase of net income in Asian countries due toeconomic growth tempting them to spend on luxury transportation andelectronic goods. But, the major source is the rising economic growth of Chinaand India as well as other emerging markets which need more fossil fuels tokeep their industries running. The future outlook, therefore, is the worst than expected. There ispanic all over the world to explore renewable energy resources but due to highdemand of machinery the delivery time is quite long. Pakistan is caught up between a crisis. On one hand it wants to catchthe growth rate at par with the region and on other hand it has already beenfacing the acute shortage of energy. There are many reasons for slow growth in energy sector. But onesimple reason is that many departments are responsible for energymanagement in Government. There is Water and Power Ministry, Oil and GasMinistry, OGRA, AEDB, NEPRA, PPIB, WAPDA, NTDC, SHYDO andmany more. To streamline the system, this is suggested that one unified energyMinistry has to be made responsible for all energy issues and different desksare made in one roof for developers and end users. For developers, paper work has to be made simple. The investorsshould be offered up front tariff and can only appeal if their real cost isenhanced by some reason. Presently, before the construction starts, investors
  33. 33. Energy Crisis in Pakistan 29have to go for lengthy processes. The government should invest substantialamount for wind and solar energy and once the projects are matured then canprivatise.Updated on 3rd November 2007ECC on Wednesday approved 5.89 cents as an upfront tariff for Hydelprojects. This is a revolutionary step taken by Pakistan Government topromote and encourage the investors in Hydel sector. In fact, this is the mostlogical and wise step adopted by the government for energy sector. This willencourage investors to come forward in Hydel sector. Pakistan is blessed with high mountains covered by glaciers and therivers flowing across the country. PPIB, so far, processed 19 Hydel powerprojects to produce 4900 MW energy. Now we request honorable Minister to further persuade allgovernment agencies to facilitate that these projects can be commissionedearlier than scheduled time. For this purpose, all red tapes are to be removedas far as possible. We learnt from reliable sources that Asrit-Kedam 209 MWpower project is moving with record speed and the sponsors, Yunus Brothers,are highly committed to complete the project by 2011 instead of scheduledtime 2014. RSWI, the consultants, are confident that the project is verypromising and can be completed ahead of schedule. October was a month to be remembered when world oil prices shotup at record level and at the end of the month it was staying at 94$ level. Itwas almost certain that OGRA will allow the price hike for petrol and dieselfrom 1st November. However a cabinet meeting in the chairmanship of PrimeMinister Shaukat Aziz overruled this decision and kept the prices same. However, furnace prices were raised all time high by Rs 4210 /ton fordomestic market. The price now stands on 34000 Rs./ton. This price hike can be justified in the light of rising crude oil pricesbut for domestic market the fuel tariffs now are not so realistic. The diesel and furnace prices are now standing at almost same level. Alittle intelligent power house manager can start using diesel instead of furnacewhich is cleaner and easier to burn or even can mix the diesel with furnacelowering its viscosity and make it more comfortable to burn. Those diesel generators, which were running as standby generatorsand were less efficient, will be more attractive for end users and the furnacepower plants will be shut down. For those IPPs which run their plants on furnace, this increase will beshifted to utility company which is purchasing the power and hence toWAPDA, which is already deep in trouble.
  34. 34. 30 IPRI Factfile Meantime power shortage in whole country remained forcing theutility companies for load shedding. Mr. Liaqut Jatoi, Minister for water andpower, called a press conference and expressed his views. He acknowledged the shortage of 1500 MW which will continue innext summer also. He told reporters that 13 memorandum of understandingshave been signed to overcome the shortfall of 1500 MW power with foreigninvestors and an investment of 200 billion $ will be made in power sector. Healso told that government is allocated 140 billion Rupees for the developmentof power sector including Bhasha Dam. He also told that 100 MW electricitywill be imported from Iran. Presently we have three different critical problems in energy sectorswhich all need immediate attention:- 1. Current shortfall in production and availability of no standby power to meet any emergency. 2. Long term increase of shortfall with increased energy demands. 3. Rising fuel prices making the production cost high. The projects in pipeline will start commissioning from 2014.All planning of Hydro and alternate energy is for next five years. So the biggestquestion now is what to do for the current situation. This is itself promising news that in spite of political uncertaintyhonorable Minister finds an opportunity to address the energy sector. In ouropinion, situation now is so critical that it needs a diversified approach. Wehave to look for all options of existing as well as alternate energy resources. As earlier been written our existing machines are less efficient. Theend users should be persuaded to replace with more efficient machines. Wehave to discourage use of larger cars and should develop mass transit systemsin mega cities to avoid use of one car/person. November 9, 2007 P AKISTAN U RGED TO I MPORT 4,000MW FROM CAR SThe World Bank has advised Pakistan to start working on import of 4,000MWof cheap electricity from Central Asian states, besides working on domesticsources to overcome electricity shortage owing to a 43 per cent expectedincrease in demand to 20,000MW by 2010. The World Bank estimates that Pakistan’s peak demand now exceeds14,000MW and the present installed capacity of 19,500MW has becomeinadequate on account of the wide variations in the water availability, whichgreatly reduces the firm capacity available. “Electricity demand at the generation level is forecast to grow at 7-8per cent per year to about 20,000MW by fiscal year 2010 and 44,700MW by2020,” a government official told Dawn quoting fresh World Bank estimates.
  35. 35. Energy Crisis in Pakistan 31 The country that had a comfortable supply position during the lastseveral years has already started experiencing shortages during peak periodsand “it is anticipated that if no new capacity is added, firm power shortagewould amount to 5,500MW by fiscal year 2010.” The World Bank understanding that besides improving supplyefficiency, demand management, addition of new hydro and thermal powerstations, Pakistan should expedite importing 1,000MW from Tajikistan andKyrgyz Republic in the first phase and then increase such imports to 4,000MWin the second phase. These imports, the World Bank believes, have two major advantages.First, the cost of supply from Sangtuda, Rogun, Talimardjan and Kambaratapower stations in the CARs would range between 2.26 cents to 3.75 cents perunit compared with existing average generation cost in Pakistan at 5.6 centsper unit. Pakistan is now entering into contracts with independent powerproducers (IPPs) for thermal power generation at a tariff as high as 14 centsper unit. Second, the attractive feature of the imports form CARs is thatPakistan’s peak demand occurs in summer, when the Central Asian powersystems have large surpluses from their hydroelectric generation stations. The WB says that international financial institutions like AsianDevelopment Bank, Islamic Development Bank and USAID and privatesector companies like AES Corporation of USA and RAO UES of Russia havealready indicated to be part of the project once feasibility studies currentlyunderway are completed. According to the government of Pakistan estimates, the country ismost likely to face a major energy crisis in natural gas, power and oil in thenext three to four years that could choke the economic growth for many yearsto come. Pakistan’s total energy requirement would increase by about 48 percent to 80 million tons of oil equivalent (MTOE) in 2010 from about 54MTOE currently, but major initiatives of meeting this gap are far from turninginto reality. Major shortfall is expected in the natural gas supplies, the sourcessaid. According to official energy demand forecast the demand for naturalgas, having about 50 per cent share in the country’s energy consumption,would increase by 44 per cent to 39 MTOE from 27 MTOE currently. Partly contributed by gas shortfalls, the power shortage is expected tobe little over 5,250MW by 2010, a little lower than World Bank’s estimates of5,500MW. Simultaneously, oil demand would also increase by over 23 per centto about 21 million tons in 2010 from the current demand of 16.8 million tons. This would leave a total deficit of about nine million tons of dieseland furnace oil imports, sources said.
  36. 36. 32 IPRI Factfile Since the gas shortfalls were expected to be much higher, the countrywould need to enhance its dependence on imported oil, thus increasingpressure on foreign exchange situation, more so as international marketcontinues to go up. Planning Commission sources said the government had planned toadd an overall power generation capacity of about 7,880MW by 2010. Of this,about 4,860MW is to be based on natural gas, accounting for 61 per cent ofcapacity expansion. However, the gas-based power expansion of about 4,860MW wouldremain in doubt since these estimates were based on gas import options forcompletion in 2010, 2015 and 2020. None of these projects could achievethese deadlines. According to World Bank estimates, the indigenous gas supply wouldfall from 32.6 MTOE in 2010 to 20.7 MTOE in 2025 while the gas supply-demand gap would rapidly increase as demand is expected to growcontinuously, quadrupling in 2025. Khaleeq Kiani, Dawn, November 17, 2007 F UEL S HORTAGE M AY W ORSEN P OWER S ITUATIONThe electricity shortage that currently fluctuates between 1,000 and 3,000megawatts is likely to worsen in a few days because of problems oftransporting furnace oil and diesel through the railway system and othermeans. Petroleum Ministry sources told Dawn that Pakistan State Oil (PSO)has sought federal government’s permission to invoke force majeure clauses ofits fuel supply agreements (FSAs) with independent power producers (IPPs)because of its inability to meet fuel requirements because damage caused torailway tracks and fuel-carrying bogies was much more than originally believed. Force majeure clauses in FSAs and power purchase agreements allowsuppliers to announce in advance that they would not meet contractualobligations because of natural calamities or conditions beyond their control. “Availability is not a problem, all products are now in abundance butstorage and movement (of oil products) is a serious dilemma,” said a seniorofficial. PSO sources also confirmed that force majeure notices had beencommunicated to all independent power producers as a protective measurebecause a default in supply contract attracts large financial penalties that couldalso be a problem for the government which guaranteed these agreements.These notices would enable IPPs to serve similar notices to power companies,but hopefully the situation would improve a crisis situation averted. The
  37. 37. Energy Crisis in Pakistan 33sources said that the PSO supplied more than 40,000 tons of fuel to powercompanies every fortnight through train but problems were also being faced inthe pipeline system. The problem was compounded by non-availability oftanker lorries, the PSO sources said, adding the force majeure notices wouldavoid imposition of financial penalties. The sources said that the PSO had written to the government that therailway authorities had informed them that they would not be in a position torepair the damaged infrastructure in less than 20 days, hence it would not bepossible for the PSO to meet its contractual obligations. The sources, however, said the secretary petroleum was working incoordination with the ministry of defence to make alternate arrangements,including engaging the National Logistics Cell and even the private sectorbecause of the limited capacity of NLC. The sources said prolonged disruption in the movement of fuel oilcould also lead to shortage of other products because of 20-25 per centreduction in capacity utilisation of refineries. Since the uplift of fuel oil and diesel stocks and their transportationemerged as the real problem, the storage capacity of refineries was filled to thebrim. As a result, they had reduced their refining capacity that could eventuallylead to shortages of products in the market. Munawar A. Baseer, managing director of Pakistan Electric PowerCompany (Pepco) which looks after corporate generation and distributioncompanies formerly run by the Wapda, told Dawn that fuel shortage was aconcern but not a crisis. He said that public sector generation companies had enough fuel forabout 20 days. Khaleeq Kiani, Dawn, January 01, 2008 E NERGY C RISIS : S ERIOUS AND W ORSENINGSerious energy shortage, massive load-shedding and lowest ever strategic oilreserves are emerging as major risk to the economy. The situation, it appears, will not be any better in the days ahead giventhe political uncertainty and policy planning failure over the last few years. Combined with multi-layered risks including current account deficit,the critical shortage of energy — an ingredient that fuels the economic growth— has the potential to choke economic growth. The shortfall in electricity generation did not emerge suddenly but wasdeveloping over the years as the development of cheap and indigenous energysources was discouraged for lack of any vision. Sponsors of hydropowerproducers who were offered a tariff of 4.7 cents per unit under the 1997 policy
  38. 38. 34 IPRI Factfilewere practically blocked from developing their plants at this tariff rate andoffered a much lower rate of 3.3 cents per unit in 1999. Same happened with development of coal resources. A Chinese firmthat had agreed to set up a 600MW project at Thar for 5.79 cents per unit wasforced to quit when the authorities refused to offer a tariff of more than 5.39cents per unit. As a result, no power project could be set up in the last eightyears. The regime never tired of criticising political governments for signingcostly energy contracts (at the average rate of 5.7 cents per unit). But it allowedsigning of contracts for thermal power project at a much higher tariff of up to15 cents per unit, although none of these projects would be available to theeconomy in the next 6-12 months. Likewise, the recent revelation of the country’s strategic oil reserves ata precarious level clearly exposed the government’s lack of vigilance andfailure of energy companies to meet their contractual obligations. The strategicoil reserves for defence had also been consumed to meet shortage and thus thecountry’s security has been exposed to great risks. Under the fuel supply and power purchase agreements, the oilmarketing firms and power generation companies - whether in the public or inthe private sector – are required to maintain a minimum of 21 days of theirfuel requirements. Non-compliance of such contractual obligations is subjectto heavy penalties under the law. The government, too, is required under thestandard operating procedures defined in the official Blue Book to ensure thatit has oil stocks for at least 21 days of consumption to meet any eventuality,either a natural calamity or war or any such event. The imperative of maintaining stocks for 21 days was highlighted bythe blocking of communication routes during the violent protests followingthe tragic killing of former Prime Minister Benazir Bhutto. The entire episodeled to disruption of fuel supply chain that included railway, pipeline and roadtransport. In varying degrees, it came to light that neither the independentpower producers, nor the oil marketing companies including those in thepublic sector had maintained sufficient stocks as required under the law. The result would be more load shedding in the days ahead. Theexport growth that is already stagnating would be hit if enough energy – gasand electricity – is not ensured to the industrial sector. The power shortage that had officially been estimated to remain in therange of 1000-2000MW during the current year has already touched 3600 MW.The economy is being run at almost 30 per cent energy shortage, which couldworsen if oil supplies continue to remain short or the current disruption of oiltransportation prolongs. Wapda estimates that the country could face a power shortage ofabout 5,500MW by 2010. Overall, Pakistan’s total energy need is expected tobe around 80 million tons of oil equivalents (MTOE) in 2010, up by about 50per cent from the current year’s 54 MTOE. And since at least four out of five