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searchwinginsafresearchwingins afresearchwinginsafresearchwin ginsafresearchwinginsafresearch A Critical Review of Energy Sector winginsafresearchwinginsafresea in Pakistan rchwinginsafresearchwinginsafre searchwinginsafresearchwingins afresearchwinginsafresearchwin ginsafresearchwinginsafresearch winginsafresearchwinginsafresea rchwinginsafresearchwinginsafre searchwinginsafredisciplinejusti cehumanityequalityfaithpietydis ciplinejusticehumanityequalityin
Almost every way we make electricity today, except for the emerging renewable and nuclear, puts out CO2. And so, what we are going to have to do at a global scale is create a new system. And so, we need energy miracles. Bill Gates May 03, 2012 Author: Zaid Khan Committee: Energy Dossier # 001 Version # 001 Report
Committee on Energy
Insaf Research Wing (IRW) is a part of Pakistan Tehreek-e-Insaf (PTI) reporting to the secretary general. IRW was created in 2009 to carry out research in order to find solutions for problems in Pakistan. The foremost goal of IRW is to keep people of Pakistan and PTI informed and prepared. The wing is composed of 10 committees. Each committee addresses issues related to its field of expertise. The committees defined as of yet are (i) Socio-Political (ii) Information & Technology (iii) Economic (iv) Energy (v) Healthcare (vi) Corruption (vii) Foreign Affairs (viii) Education (ix) Environment (x) Strategic Thinking. The research reports/papers are either commissioned by the central executive committee of PTI or committee members of IRW. PTI members can also suggest IRW to consider researching on a matter they find important. IRW welcomes any contributions in the form of scholarly work addressing important issues. Nevertheless, after the author(s) sends the document it is peer reviewed before getting published. In the process of peer review the document is technically analyzed and scrutinized. The procedure is necessary to maintain quality control. However, varying opinions & ideas are not penalized. Apart from working on research reports/papers which shed light on problems and provide basic solutions, IRW aims to act as a conduit to the shadow cabinet and/or spokespersons aiding them with the task of preparing extensive policies for PTI. These inputs are from several professionals who are well versed in the subject. IRW also serves as a check on the reigning governments policies. The Wing does not follow a preset ideology while carrying out research. IRW does not endorse any opinion presented in a published report/paper as an official position. Likewise, several research reports/paper on a similar subject published by IRW can have contradictory recommendations though it should be noted that these point of views are sole responsibility of the author(s). Very rarely when there is a complete consensus on a certain research report/paper within IRW only then it is recommended to PTI for official perusal. Any published document by the wing does not constitute it as an official position of PTI unless otherwise stated. Insaf Research Wing works at a national level but its members are located throughout the world bringing in the much needed international experience. IRW practices an open membership policy valid for all Pakistanis regardless of religion or race. Nevertheless, members of other nationalities from international organizations interested in helping Pakistan are always welcome to join IRW.
Published reports of IRW can be accessed at PTIs website www.insaf.pk. The headquarter of IRW is located at PTIs Central Secretariat, Street No. 84, Sector G -6/4, Islamabad, Pakistan.
The contents of this report/paper cannot be reproduced without prior permission of IRW.
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Committee on Energy
Table of Contents
EXECUTIVE SUMMARY .............................................................................................................................................................. 4 ACKNOWLEDGEMENTS ............................................................................................................................................................ 5 BACKGROUND .................................................................................................................................... 6 AIMS AND OBJECTIVES ....................................................................................................................... 6 WORLD ELECTRICITY GENERATION ................................................................................................. 7 TOTAL WORLD ELECTRICITY GENERATION BY FUEL (2006) .......................................................................................... 7 COAL AND ELECTRICITY ............................................................................................................................................... 7 SOURCES OF ELECTRICITY IN PAKISTAN ..................................................................................................................... 8 DISTRIBUTION LOSSES IN ELECTRICITY ....................................................................................................................... 8 EFFICIENCY LOSSES IN ELECTRICITY ............................................................................................................................. 8 CIRCULAR DEBT ............................................................................................................................................................. 8 GAS EXPLORATION AND IMPORTS (LNG) ................................................................................................................. 9 GAS THEFT AND LEAKAGE ............................................................................................................................................ 9 THAR COAL PROJECT .................................................................................................................................................. 10 ALTERNATIVE ENERGY RESOURCES ........................................................................................................................... 10 ROLE OF THE REGULATORY BODIES (OGRA, NEPRA) ........................................................................................ 10 INVESTMENT OPTIONS ................................................................................................................................................ 10 SHORT TERM (3-18 MONTHS) ................................................................................................................................... 11 MEDIUM TERM (2-5 YEARS) ........................................................................................................................................ 11 LONG TERM (5-10 YEARS).......................................................................................................................................... 11 REFERENCES ............................................................................................................................................................................. 13 ABOUT THE AUTHOR ............................................................................................................................................................ 13 INDEX A ................................................................................................................................................................................... 14 INDEX B ................................................................................................................................................................................... 15
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Committee on Energy
Executive Summary
This short paper outlines Pakistans potential in hydro, coal, gas, oil and alternative energy sources. It is vital to meet the countrys energy requirement as this is directly linked to the e conomic development. This can only be achieved if economical and sustainable energy is provided. Incompetency, mismanagement, cronyism and vested interest have bankrupted the Pakistani economy. It is imperative to take tough and crucial decision to save future generations. The problem mainly consists of five key issues: 1. 2. 3. 4. 5. Lack of political will and top level corruption Dishonest and incompetent management Severe theft and inefficiencies Delaying and/or non-implementation of major projects like gas and oil exploration especially large dams Over reliance on oil and misuse of finite gas resources through CNG.
Pakistan has to deal with its energy mix from Oil (35% to 20%) to Coal (6% to 20%) and hydro share needs to go up from 12.5% to 20% within the next five years. Gas demand and supply needs to be met through local increase in production along with effective planning and management of LNG imports.
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Committee on Energy
Acknowledgements
A very special thanks to Mr Munawar Baseer Ahmed, former managing director PEPCO and SSGC. He was a source of great inspiration and provided help in electricity and gas insight to Pakistans current energy crisis. I would also like to express my gratitude to Mr Asim Khan President PTI London who introduced me to IRW and very special thanks to Mr Asad Mahmood, Coordinator IRW, who is always helpful to facilitate and encourage members in Insaf Research Wing (IRW). I would also like to express thanks to my parents, family and friends for their support, encouragement, constructive criticism and suggestions throughout the course of the research work. Lastly it is hoped that this paper will be used in stimulating thought, self reflection and valuable discussion amongst Central Executive Committee (CEC), PTI members, academics and provide as valuable a learning experience for them as it has for the author.
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Committee on Energy
Introduction
The paper will highlight the energy mix consisting of oil, gas, electricity, coal and alternative resources available to Pakistan. The paper will then discuss current shortages in energy sector including electricity and gas and available solutions for short, medium and long term solutions. Background Pakistan has been suffering from acute shortage of energy due to a lack of political will, incompetent institutions, deteriorated law and order situation in the country and absence of level playing field for foreign and local investors. Since independence, Pakistan has built only 13 dams while India has built more than 1,500 dams. Similarly China has built 80,000 dams out of which 20,000 dams are relatively large dams including the worlds biggest hydro dam known as Three Gorges Dam (capacity of 22,500 MW). Pakistan has a potential of above 100,000 MW 100,000 MW with identified sites of 59000 MW including 44334 MW on Indus River alone but due to infighting among various political parties, corruption, and manipulation of bureaucracy nothing has been done in this regard. As a result, the entire country is suffering in its domestic life, industry, commercial, exports and local businesses. Since, the problem has not been addressed it has become very challenging for any government to meet the energy demands for the foreseeable future. The electricity shortfall is made worse by increasing gas shortages as well. The install capacity of electricity is around 21,036 MW but due to circular debt, line losses and theft we are unable to generate electricity. As a result continuous load shedding, and unscheduled power outages are everyday story for all segments of Pakistan. Many economic experts believe Pakistan is losing around 2-3% of GDP every year due to the energy crisis and if the problem is not addressed immediately the flight of capital and collapse of economy will be inescapable.
Pakistan has been blessed with ample water resources but can store only 13% of the annual flow of its rivers. The storage is fast depleting due to sedimentation. In contrast USA has developed 497% storage capacity of annual flow of River Colorado; Egypt possesses 281% of River Nile and India 35% on Sutlej-Bias Basin. All these statistics warrant construction of a number of reservoirs to enhance availability of water which stands at 1070 cubic meter per capita. Anything below 1000 cubic meter will lead to a water crisis. With regards to coal reserves there is increasing controversy among proven reserves of coal in Pakistan. Some experts believe that Pakistan has nd the worlds 2 largest reserves while others claim to be the 5th largest. However, Pakistan stands on 19th position on world coal proven reserves with 0.3 of total share1. Similarly, Pakistan has the worlds 28th largest gas reserves according to World Fact Book2. Ironically the country with so much energy potential is on an energy meltdown. In the overall energy mix, the share of coal power is only 7% as compared to world average of 40%. Coal is the main source for producing cheaper electricity and the Government needs to enhance the share of coal in the overall energy mix of up to 18% by 2025. Aims and Objectives This paper has been drafted in order to identify the problem areas in the current energy crisis facing Pakistan. There is immense potential in different areas; the paper will also seek to provide practical, workable solutions for short, medium and long term to meet Pakistans energy requirements.
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Committee on Energy
Sources of Electricity
Main sources of electricity are: Coal Gas Hydro Oil Nuclear Alternative/renewable
Total World Electricity Generation by Fuel (2006) Source: IEA 2008 *Other includes solar, wind, combustible renewables, geothermal & waste Coal and Electricity Coal in Electricity Generation
World Electricity Generation There are many sources of electricity generation in the modern age where coal provides 41% of world electricity. Others sources include gas 20%, hydro 16%, nuclear 15%, Oil 6%, and others 2% which includes solar, wind, combustible renewable, geothermal & waste3. Modern life is out of oxygen without electricity. It lights houses, buildings, streets, provides domestic and industrial heat, and powers most equipment used in homes, offices and machinery in factories. Improving access to electricity is vital to alleviating poverty.
South Africa 93% Poland 92% Australia 77% Israel 63% Greece 52%
PR China 79%
Kazakhstan 70%India 69% Czech Rep 60% Morocco 55% USA 49% Germany 46%
Coal plays a vital role in electricity generation worldwide. Coal-fired power plants currently fuel 41% of global electricity. In some countries, coal fuels a higher percentage of electricity.
Ironically Pakistans current energy supply comes primarily from indigenous natural gas which is 45%, oil imports at 35% of the energy mix, with the balance from hydro at 12%, coal at 6% and nuclear at 2% respectively. Pakistans production of energy from coal is abysmal when compared to the advanced economies mentioned above like US, China, Germany and Greece which are heavily relying on Coal.
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Committee on Energy
Sources of Electricity in Pakistan Pakistan has 13 hydro power plants which are vital for the countrys energy requirement as well as key water reservoirs for agriculture. The electricity produced from these dams varies yearly from 6500 to 2300 in summer and winter respectively. Hydro electricity is still the cheapest source of electricity in Pakistan with a total capacity of 21,036. Out of which 6,516 MW is produced through Hydropower, 3,580 MW by Government (GENCOs), 8,295 MW by Independent Private Power Producers (IPPs) and 594 MW through Private Rental.
losses of up to 16%. Some distribution companies like Hyderabad Electric Supply Company, Peshawar Electric Supply Company, Quetta Electric Supply Company and Multan Electric Supply Company collectively losing Rs 90 Billion in distribution system. The most efficient of all is Islamabad Electric Supply Company with 8% distribution losses. The losses are due to poor maintenance of Wapda power generation costing around 6 Billion due to inefficiencies. Similarly, National Transmission and Dispatch Company (NTDC) is losing power worth Rs 6 Billion annually in 4 transmission . Efficiency Losses in Electricity Three major thermal companies in Muzaffargarh, Guddu and Jamshoro, with a combined installed capacity of 2800 MW can hardly produce 1700MW and that too at an output efficiency of only 25%5. Circular Debt
14.74
Wapda has a install capacity of above 22500 MW, but due to gap in pricing it is unable to produce the electricity. Wapda was producing electricity from hydro and gas plants and some from furnace oil. Due to the rapid growth of CNG, the demand of gas
RPPs
has soared while new reserves have not been discovered. As a result it has become impossible to
Unit Cost of Different Sources of Energy WAPDA is producing hydropower at Rs.1.06 per unit as compared to Rs.9.07 per unit of thermal power being produced by the IPPs and Rs.14.74 of thermal power produced by Rental Power. The demand of power is currently about 20,000 MW which will rise to 36,000 MW by the year 2015. WAPDA has added 72 MW to the system in 2010 whereas it will add 1556.76 MW when Duber Khwar HPP (130 MW), Allai Khwar (121 MW), Jinnah HPP (96 MW), Gomal Zam Dam (17.4 MW), Satpara Dam (17.36 MW), Rehabilitation of Tarbela (100 MW) will produce power within 2012. Distribution Losses in Electricity PEPCO has line losses of 26% while, National Electric Power Regulatory Authority (NEPRA) line Insaf Research Wing
provide gas to the power sector which in turn provides either expensive electricity or is forced to stay idle adding in circular debt. In fact gas reserves are not enough to meet industry requirements. There is a huge gap of 1000 1500 mcf per day which needs to be bridged immediately. Major industries have been closed due to the energy crisis. The government and policy makers have to take tough decisions and prioritize between industry and CNG which many believe the latter is mostly owned by the politicians. The current circular debt is around 600-700 Bn consisting of loans from local banks. Government is paying around Rs 40-50 Bn interest to banks. Page 8
Committee on Energy
Sui Northern Gas Pipeline Limited (SNGPL) were supposed to invest around $1.2 billion to $1.4 billion to create an additional capacity in their pipeline networks to transport imported LNG to the consumer, which to date they are unable to 6 develop . Gas Theft and Leakage Gas theft and leakage in Pakistan was under control until 2003-2004 though it never has been to international standards. The international standard for theft known as unaccounted-for-gas (UFG) is 1-3 percent whereas the benchmark in Pakistan has been set at 7%. The two gas utilities, Sui Southern Gas Company (SSGC) had UFG level at 9.43 percent in 2010-11 compared to 7.09 percent in 2003-04 while Sui Northern Gas Pipeline Limited (SNGPL) had UFG level at 11.21 percent in 2010-2011 compared to 6.75 percent seven years ago7. Some expert says that 500 million cubic feet of gas per day is stolen, leaked or illegally sold to enrich private pockets at public expense8.
Gas Exploration and Imports (LNG) Pakistan has immense potential in further gas and oil exploration. The exploration of oil fields around the world is 1 to 10 where as Pakistan rates 3 to 10. However the major hurdles are a lack of vision, incompetence, low rate of drillings, demand of heavy commissions from bureaucracy and absence of level playing field for investors and international companies. Pakistan was already suffering from electricity shortages for a decade but the problem is further compounded with gas shortages due to the growth of CNG, depletion of current gas reserves and poor planning of LNG imports. Turkmenistan, Afghanistan, Pakistan and India (TAPI) gas pipeline and Iran, Pakistan and India pipeline has been debated and written by many experts in both the print and electronic media however will remain a dream. Both Sui Southern Gas Company (SSGC) and Insaf Research Wing Page 9
Committee on Energy
to investors and manufacturers. Solar can replace our current UPS if government provides installment facility to consumer. It will definitely reduce burden on grid. In spite of all the benefits, alternative energy cannot replace our base load which needs to come from hydro, gas, & coal plants in the long run. Role of the Regulatory Bodies (OGRA, NEPRA) The role of Oil & Gas Regulatory Authority (OGRA) and National Electric Power Regulatory Authority (NEPRA) has been inclined to business protection rather than consumer. Both authorities have failed to meet demand and supply of market and Pakistans economy is suffering badly due to demand and supply gap. There were many instances where public interests were not protected for instance Rental Power Projects (RPPs). They have also failed to create an unbiased image to attract local and foreign investment. Investment Options Donors like Asian Development Bank, IMF, World Bank Private (local & foreign) investment on small dams, wind, and energy projects Government Bonds and Wapda Bonds Advance bill option Agriculture tax on land using dam water Quantitative easing (Currency Printing)
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Committee on Energy
Recommendation
Short Term (3-18 Months)
Gas boiler needs to be replaced with efficient and standby operative facility as currently geyser or boiler who either run 24/7 or manually controlled to save energy.
Medium Term (2-5 Years) Enable full fuel supplies to power plants to reduce power outages by about 25 to 30 percent (1500 MW 2000 MW) within 3 months. Fast Track Action to bring on-line stalled power projects to add 400 MW (Nandi Pur) in 6 months. Fast Track local gas production of 350 mmcfd in 6-9 months Facilitate local LPG production by 200 tons/day in three months from available capacity of processing rich gas, plus additional 300 tons in six to nine months from a new plant to reduce LPG shortage and lower prices. Discovered gas of 500 mmcfd needed to bring in supply pool ASAP which is held back for unknown reasons. Forceful and coercive actions to control theft and corruption in power and gas companies to save Rs. 15 to 20 billion per month and control circular debt. Recover lost capacity of 1000 MW of generation companies through emergency repairs, parts and rehab and reduce load shedding by 15 percent. The total customers for domestic, commercial, trade & industry, and agricultural are 23 million. Among them, 15.5 million are domestic users. Out of these 15.5 million domestic users, 5.7 million users are on 50 units usage tariff, and 4.6 are on 100 units usage tariff, causing a lot of theft. It needs to be revised according to load management. Scrap of Rental Power Projects (RPPs) immediately and recovered the monies which has been given in advance to supply electricity. Phase out ACs which consumes more electricity and regulate manufacturer to only produce ACs with high efficiency & thermostat setting with range of (22-30). Use of Bicycle in government and private sector through media and public partnership awareness campaigns. War footing completion of projects under development at Annexure A. 500 MW (Chicho Ki Malian) in 18 months and 400 MW (Guddu) addition in two years Facilitate LNG imports of 1000 mmcfd in 12-18 months with implementation of private sector LNG projects, as well as LNG to reduce gas load shedding by 70 percent. Smart prepaid/post-paid meters needs to be installed in higher theft areas in stages to reduce losses in PEPCO. Circular debt reduction by Rs. 250 billion by recovery/deduction at source of Rs. 100 billion from provincial governments, and federal agencies and Rs. 150 billion from private sector. Energy mix needs to be shifted from POL to Hydel, Bio-Diesel, and Coal thus reducing burden on imports of oil which are around 12 Bn US$ every year. GENCOs efficiency enhancement through necessary repairs and rehabilitation. Theft control Independent firm hired and given share from theft recovery for gas and electricity.
Long Term (5-10 Years) The launch of new power projects on fast track for 3,000 MW - 5000 MW. There is a discovery of 27 Billion Barrel in Pakistan, but only 3% has been utilized. More local oil needs to be refined and influence of cartels needs to be reduced. Thar Coal project needs to be expedited to add 3000-4000 MW in 4-5 years time. Meeting energy requirements by building dams (Annexure B), awarding new contracts to gas and oil exploration to in line with demand and supply requirement of market.
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Committee on Energy
Oil base loads needs to be reduced from 35% to single digit by 2025. Industry, Domestic, and commercial users needs to be educated towards energy efficient buildings, maximum utilization of sunlight during the day, and energy efficient home appliances by electronic and print media campaign. Energy Saving Targets needs to be set by public engagement through electronic and print media, school and university campaigns. Transport policy to save fuel and control of transport through taxation. Public transport needs to be improved and subsidized to discourage private transportation. Mass transit in big cities like Karachi, Lahore, Islamabad, Faisalabad, Peshawar.
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Committee on Energy
References 1. 2. http://en.wikipedia.org/wiki/Coal Accessed January 2012 https://www.cia.gov/library/publication s/the-worldfactbook/rankorder/2179rank.html accessed January 2012 http://www.worldcoal.org/coal/usesof-coal/coal-electricity/ accessed January 2012 http://tribune.com.pk/story/326078/tra nsmission-issues-power-companiesblamed-for-rs90b-electricity-losses/ accessed January 2012 http://www.dawn.com/2011/10/17/slo w-progress-on-1bn-genco-planworries-adb.html accessed January 2012 http://tribune.com.pk/story/285815/fat e-of-mashal-lng-project-unclear/ Accessed January 2012 http://tribune.com.pk/story/324213/og ra-likely-to-reject-high-ceiling-for-gastheft-leakage/ accessed January 2012 http://www.thenews.com.pk/TodaysPri ntDetail.aspx?ID=85705&Cat=2 accessed January 2012 http://jang.com.pk/thenews/jan2012weekly/moneymatters-16-012012/mm_p3.htm Accessed January 2012 http://jang.com.pk/thenews/nov2011weekly/moneymatters -07-112011/mm_p8.htm
3. 4.
5.
6. 7. 8. 9.
10.
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Committee on Energy
Index A
Sr
Location
Donors/Lenders GOP Funding/ Wada Bonds GOP Funding/ Tariff Financing GOP funding IDB/Wapda Bond, Tariff financing IDB/Wapda Bond, Tariff financing IDB/Wapda Bond, Tariff financing Chinese Supplier's Credit/Tariff Fin afd France/Tariff Fin Surcharge/Middle East donors/CEXIM
Mirpur, AJK
62.558
644
2 3
12.829 4.397
17.4 15.8
Khan Khwar
Besham, KPK
5.363
72
Duber Khwar
9.754
130
Allai Khwar
8.578
121
Jinnah Barrage
7.68
96
Malakand, KPK
3.734
22
5% (June 2013)
Neelam Jhelum
AJK Total
130
969 2087.2
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Committee on Energy
Index B
Hydropower Projects For Future Completion 2014 S# Project River Capacity (MW) Storage (MAF) Estimated Cost (US$ Mn) 11178 Earliest Project Initiation 1. 2. Kalabagh Diamer Basha Gilgit Baltistan Kurram Tangi FATA/KPK Tarbela 4 Ext KPK Munda FATA/KPK
th
Status
Indus Indus
3600 4500
6.1 8.1
2012 2012
3.
Kurram
84
1.2
700
2012
4.
Indus
1410
826
2012
Detailed engineering and design is under process Feasibility completed. RFP under issue for detailed engineering & design. Feasibility study, detailed engineering & design completed. LOI issued by PPIB. Feasibility study completed. Detailed engineering & design completed and under review by WAPDA experts Feasibility study completed. Selection of consultants for detailed engineering & design is under process. Projects for Public Private Partnership
5.
Swat
740
1.3
1401
2012
6.
Kohala AJK
Jhelum
1100
RoR
2212
2012
7.
Indus
7100
RoR
6800
2012
8.
Dasu KPK
Indus
4320
1.15
6000
2014
9.
1761
RoR
2011
24615
17.85
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