By Ismat Sabir.

Energy sector in Pakistan comprises electricity, gas, petroleum and coal. The primary and commercial energy supplies increased 4.3 percent to 57.9 million ton of oil equivalent (MTOE) during 2005-06 as compared to 55.5 (MTOE) in 2004-05.

During the last ten years (1996-97 to 2005-06), the consumption of petroleum products has decreased to an average rate of 0.4 percent per annum. The consumption of gas, electricity and coal on the other hand, has increased at an average rate of 7.8 percent, 5.1 percent and 8.8 percent per annum, respectively.

The sector wise analysis shows that the country is facing a shortage of 3,000 megawatts, therefore, the new government has to take measures to overcome the power crises on the war footing.

It is to be noted that gap of demand and supply reached to 1/3 of the total electricity requirement. This simply means 8 hours load shedding will continue in future that has to be equally distributed between industrial and domestic consumers.

Though the Prime Minister has directed Minister for Water and Power to make an energy policy and submit it to the cabinet urgently for approval, att least three years are needed to overcome 3,000MW power shortfall.

This would be a challenging start for Federal Minister for Water and Power Raja Pervaiz Ashraf. This also shows that the present crisis would continue up to 2010 and complete load shedding will be abolished in 2013, which means that people have to suffer for another six more years.

Karachi is the most sufferer of this situation, now Lahore is not behind as the unscheduled load shedding has escaladed to 8 to 10 hours. The Minister blamed the previous government for failing to meet power demand. He said that not a single megawatt was added to the national grid in the last 10 to 11 years.

He had instructed the Water and Power Development Authority (WAPDA) to increase power supply to the KESC from 200MW to 500MW in order to give immediate relief to citizens. It is to be noted that WAPDA was already supplying 500MW to KESC which was curtailed and, latter on, discontinued because of non-payment of WAPDA’s dues by KESC that created the crises to the highest level.

KESC performance
The shortage of power has reached 431MW, total demand is around 1900MW. Therefore, KESC said that it has no option but to resort to power load shedding of prolonged duration in the city, on a rotation bases. The dozes of load shedding are being given every after 3 to 4 hours shutting down power for at least 2 to 3 hours. It was stated in December 2007 that work was in progress for improving the power supply position in the next summer, as compared to last year when the daily power outages had averaged 6 to 7 hours. KESC claimed that so far it has invested 800 to 900 million dollars in upgrading its units and transmission, however, no improvement has not been seen in load shedding while efficiency has further deteriorated.

Even in winter load shedding continued for at least 2 to 3 hours a day and became a part of life in the city. The KESC chief has already warned that the things would grow grimmer over the coming months of summer. This shows that this summer would not be better then the last year. The main cause of this crisis is that NTDC normally supplies 830MW to KESC but it supplied 630MW since last year that has further curtailed to 500MW. KESC owes NTDC's Rs34.8 billion but KESC said the actual amount is Rs13.7 billion. While government organizations have to pay to KESC to about Rs11.7 billion. KESC’s stand is that it would pay as and when it received its dues from the government offices.

This also shows that despite repeated claims of KESC regarding early end of load shedding in Karachi, there is no sign of betterment and Karachiites would have to bear the hell of load shedding for four to five more years. However, KESC claimed that, besides WAPDA and IPP's collaborations, Zurich, Switzerland based ABB has started work on the establishment of 9 grid stations while the KESC is already setting up 5 other grid stations to reduce burden on the system. KESC officials indicated that, after privatization, KESC has spent billions of rupees on Bin Qasim Power plant and increased its capacity up to 110MW, 11KV feeders at Korangi are also in pipeline and 188 new feeders are under construction to solve the load shedding problem permanently.

The KESC said problems are very old and should have been tackled before privatization. The organization is taking steps to reduce them by establishing 13 new grid stations at a cost of Rs3.2 billion and 500MW power station at Bin Qasim which may control power crisis in the city by the mid of 2012. The government of Pakistan in November 2005 had transferred 71.5 percent shares and management control of the company to KESC Power Limited, a company incorporated in the Cayman Islands. At the time of privatization, the financial and technical difficulties were persisting in the company. KESC is going to invest $570 million in a 560MW power generation plant, in collaboration with a Chinese firm. The agreement is to be signed soon and the plant is to be operational in 3 years.

The IPPs, have failed to come with any new project; therefore the government has finally decided to set up power plants in the public sector. It has approved setting up 2,000MW in the public sector. The officials claimed that there will be no power outages by 2010 because an additional 6,000MW will be available. The government has approved power projects with a generation capacity of 2,000MW in the public sector. Also, 15 new projects with a generation capacity of 2,868MW have achieved financial close. A new 500MW power project will be ready by the end of this year, while another 300MW project is undergoing rehabilitation by WAPDA. An open cycle power project with a capacity of 300MW is also coming up fast in the private sector, besides a 700MW power unit.

Pakistan lacks an integrated energy plan for the 21st Century and in comparison to India, Pakistan uses only 6.5 percent of its coal for energy while India uses 55 percent. Pakistan uses 50 percent gas and India uses seven percent. The use of oil in Pakistan as fuel for energy production stands at 30 percent, while it is 35 percent in India. KESC uses gas as its main source of fuel, at 78 percent while thermal sources produce 231MW. It is interesting to note that KESC owners have not invested a single penny from their pockets. They are generating finances from the local market that include:

A syndicate term loan agreement was signed, with a consortium of local banks and financial institutions; amounting Rs8.0 billion for capital expenditure on the 220MW Korangi Thermal Power Station. Besides, for capital expenditure of power generation, transmission and network improvement projects a loan agreement amounting to $125 million with the IFC was also signed. A loan agreement amounting $150 million with the Asian Development Bank, for capital expenditure on power generation, transmission and network improvement projects was also arranged. New owners include KES Power Limited, Hasan Associates (Private) Limited and Premier Mercantile Services (Private) Limited who hold 71.5 percent, 1.0 percent and 0.5 percent shares in the Corporation, respectively. Al Jomaih Power Limited, Saudi Arabia, is the ultimate parent company of the Corporation that holds 60 percent equity in KES.

Coming up projects
Currently, the priority project are being processed by PPIB includes 39 power projects of around 10,000MW, on different fuels and resources. Eight projects totaling 1,667MW have achieved financial clo¬sure, while another eight proj¬ects of 1.494MW are expected to achieve their financial clo¬sures this year.
About 615MW power will be available to the national grid by April 2009 from the private sector, which will increase to 1,667MW by end of 2010 and a total of 3,750MW will be supplied by the private sector by the end of year 2011.

Two thermal power projects of 500MW each at Faisalabad and Dadu are also being processed, through international competitive bidding (ICB) basis and the response of the local and for¬eign investors has been very encouraging. Twenty hydro power projects of about 4,500MW are at different stages of pro¬cessing, out of which, 15 proj¬ects of 3,950MW have already been issued Letters of Interest (LOIs).

Similarly, for development of indigenous coal, LOIs have been issued to four companies with a cumulative capacity of 1,550MW, while another l,000MW project based on Thar coal is being processed under international competi¬tive bidding. In addition, two projects of 1,000MW each on imported coal will be set up at Gadani by 2013, which will eventually use local coal from Thar.

In January, the government has also signed an agreement for setting up 450MW Nandipur power plant, which was the first project in the public sector in the last 17 years. International Power (IP) of UK has planned to add 1,200MW power in Pakistan to expand KAPCO power plant by 400MW and Uch power plant by 600MW to meet the future growing demand of electricity.

POL
Recently, the new government has increased the petrol and diesel prices by Rs 3 per liter. Reacting on this decision the business community said that increase in the POL, gas and electricity tariff is severely affecting the domestic users as well as industrial and commercial consumers. Moreover, it seems that export target would be difficult to achieve. From 2004 onwards, the price of oil started soaring in the international market and for the first time in October 2004, oil prices crossed the benchmark of $50 per barrel. The price continued moving upward each year and in 2007 crossed $100. For the past few weeks the prices were fluctuating in between $110 to $115 per barrel that has touched $120 on April 22, 2008.

The rising international oil prices, continuously going upward since July 2007, have increased Pakistan’s trade deficit to $7.4 billion. It is expected that oil import bill would reach $ 9 to 10 billion by June 2008. The petroleum group import bill has gone up by 40.52 percent to $7.416 billion during July-March 2008 as against $5.277 billion during the same period of last year.

POL price formula
The Minister for Petroleum Khawaja Mohammad Asif has challenged the efficacy of the existing oil pricing formula and alleged that the formula is providing oil refineries and marketing companies with windfall profits at the cost of the common man. The Oil and Gas Regulatory Authority (Ogra) may be abolished and form a parliamentary panel to determine petroleum prices. The Authority has always been under sharp criticism by parties now in the governing coalition. The Authority is tasked with recommending to the government changes in petroleum prices fortnightly.

OMCs Profitability
All the three listed Oil Marketing Companies’ profitability has shown a growth of 293 percent, during 9 months of FY08. last year, gross profits was 131 percent due to a number of factors i.e. ex-refinery prices, product margins, growth in volume and the repayment of the price differential claims (PDCs) arranged by the Government of Pakistan.

PSO, SHELL and APL shared 68 percent, 22 percent and 10 percent of the total profit respectively.

The factors which fueled bottom lines of the OMCs were growth in volume of POL products at 10.45 percent (triggered by FO 5.7%, HSD 14.5% & Mogas 30.8%), together with increased sales of high-margin products like Lubes, Naphtha and CNG. The Sui Northern Gas Pipeline (SNGPL) supplies gas to Punjab, NWFP and Azad Kashmir and the Sui Southern Gas Company (SSGC) to the remaining two provinces, Sindh and Balochistan. Since SNGPL area for gas supply is comparatively larger it gets more than half of total gas available for the consumers. SSGC projected that gas demand of Karachi will increase to 1.2 billion cubic feet, by 2010 from the current 800mmcfd.. Karachi is Pakistan’s biggest load centre, greater than Lahore, Gujranwala and Faisalabad combined.

TAPI gas pipeline
At last, an Inter Government Framework Agreement on the Turkmenistan, Afghanistan, Pakistan and India (TAPI) gas pipeline project was signed in the last week of April. Construction of the proposed $8 billion, l, 680 km pipeline project will begin by 2010, it would supply gas by 2015. The member countries are pursuing these projects to ensure meeting the future needs 0f the region. The agreement some 3.2 bil¬lion cubic felt of gas would be sup¬plied daily to the three recipient countries and after allocating a small share to Afghanistan, Pakistan and India would share remaining gas equally.

Pakistan, India IPI gas pipeline
The Indian oil minister was in Pakistan for talk', on two major cross-border gas pipeline projects. Oil Minister Murli Deora has first focused on a project to build a gas pipeline from Turkmenistan, running through Afghanistan and Pakistan to India and to discuss transit fees and transportation tariffs regarding a gas pipeline that will run from Iran, through Pakistan to India.

UP