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Abbas-Bilgrami

Alternative and renewable energy resources set to overtake hydrocarbons in next two decades

Pakistan’s whole energy sector highly politicized, optimal utilization of our indigenous resources hard to meet
Interview with Mr Abbas Bilgrami — CEO, Progas Energy Ltd

PAGE: TELL ME SOMETHING ABOUT YOURSELF, PLEASE:

ABBAS BILGRAMI: I have been educated in Pakistan, UK and Canada. I have invested heavily in the energy sector of Pakistan. I was backed by investors from the UK, Malaysia, Kuwait to build and operate a large and significant energy infrastructure. I was fortunate enough to be able to bring substantial Foreign Direct Investment to Pakistan and increased good quality employment opportunities.

My company Progas Energy Limited is a project development company operating in the Indian Ocean rim countries. We have worked on projects in Malaysia, Bangladesh, Mozambique and Kenya. Our areas of interest remain energy infrastructure, mid and downstream, gas to power and in renewable energy with a focus on hybrid solutions using conventional and unconventional resources.

I have had the privilege of working with some of the finest energy experts in Pakistan and internationally. As Secretary General of the Energy Expert Group we have written the first Integrated Energy Plan for Pakistan. We work closely with the Pakistan Business Council and other groupings who have an interest in the energy sector. The Group is not paid or supported by any groups and therefore produces completely independent reports.

I have also had the honor of working as Director/Trustee of the Indus Earth Trust, which does exceptional work in the rural and coastal areas of Pakistan. It undertakes wonderful work in the coastal communities in education, in provision of renewable and alternative energy solutions, economic and social upliftment programs for women in these deprived communities.

I have been involved in the publishing world for the past thirty years and have produced and published over 30 titles on spirituality and perennial philosophy. We have also produced the first and possibly the largest ebooks catalogue on sufism and spirituality. The books are available from Amazon Kindle, Kobo and from the Apple Store.

PAGE: YOUR VIEWS ON RECENT TREND IN RISING OIL PRICES:

ABBAS BILGRAMI: The increase in price of hydrocarbons is as a result of producers agreeing to limit production and demand for crude remaining steady. While supplies of crude are finite, alternative and renewable energy is infinite.

It is my view that in the interim prices of crude will only get higher as political tensions amongst producers remain high. Libya, Syria and Yemen are no longer producing crude for export. Yet Saudi continues to pump more crude then it has in the past five years. Iraq and Iran will be ramping up production.

It is my belief that the oil glut of the past few years is over for now. All of these countries will in the coming few years realize that competing against each other only benefits those markets where they will be supplying the crude to. The US has also created a parallel market in hydrocarbons through its shale oil production, which prices gas at significantly lower prices than conventional gas. Bearing all these things in mind my own personal view is that very quickly as prices of crude rise alternative and renewable technologies will become cheaper and more competitive. Crude is currently used to refine into fuels for transport, power generation, heating and petrochemical manufacturing. More and more as energy storage becomes a mature industry the first three users will be switching to using alternative and renewable energy forms.

So in the long run crude will be more likely used for petrochemical production and specialist materials. However in the short term say the next 10 years there is likely to be a lot more volatility. Speculation caused oil prices to spike in 2008 and is what has created a secondary market. There is very little excess capacity amongst OPEC producers. There is a lot more swing capacity amongst non OPEC countries. All this leads to greater confusion in the markets on the matter of long term pricing. It is to the benefit of speculators to see prices remaining volatile. There is more money now tied up in the very markets that were supposed to provide some level of stability. It is therefore to the advantage of speculators operating in these markets to see there being volatility. A lot of the politics of the region also indicates to myself that price volatility will be something that we need to accept.

PAGE: WHAT COULD BE THE IMPACT OF RISING OIL PRICES ON THE ECONOMY OF PAKISTAN?

ABBAS BILGRAMI: While Pakistan’s dependence on hydrocarbons remains high we will continue to suffer due to the volatility in prices. The volatility of prices leads to lower investment in capacity and leads to poor business decisions. Pakistan’s heavy reliance on gas and oil is a matter of serious concern. This has been the subject of many studies undertaken within Pakistan and internationally

PAGE: HOW WOULD YOU COMMENT ON THE INDIGENOUS ENERGY RESOURCES IN PAKISTAN?

ABBAS BILGRAMI: Pakistan has a whole menu of energy options which are available to it. Coal, natural gas, crude and alternative and renewable resources like hydel, solar, wind and geothermal.

The policy structures in the past two governments have increased local production of hydrocarbons but demand has increased as well. This is mostly as a result of poor demand management, energy efficiency and price distortions. Pakistan’s record in implementing its policy structures and then having a stable regulatory regime is patchy at best. The whole energy sector is highly politicized and cartelized. This has lead to poor decision making and utilization of existing resources.

It is our view that the Government has no right to be in business and business has no right in developing policy making or influencing regulatory regimes. Unfortunately, Pakistan sees a free for all policy where special interests are involved. This results in poor policy implementation leading to less than desired investment in the sector.

The recent decision to bring regulators under the respective ministries and re-regulating the LPG sector are indications of a completely confused energy market. The economy somehow muddles through.

Foreign investment other than from China will be limited. The state of our public sector, state owned enterprises is as a result of these poor investment decisions as a result of government attempting to be in business and private business influencing the policy makers and regulators. In brief this means optimal utilization of our indigenous resources will not be possible.

PAGE: YOUR VIEWS ON STRATEGY OF OPEC AND OTHER OIL PRODUCING COUNTRIES PARTICULARLY RUSSIA:

ABBAS BILGRAMI: OPEC has less surplus capacity and less control over the international markets then it used to in the 1980’s through to the early 2000. It is our view the cartel’s lack of cohesiveness and unity has once again resulted in poor investment decisions and political posturing and interference, which has resulted in a general decline in investment in maintaining capacity.

The civil conflicts in Syria, Yemen and Libya are either a result of, a combined program of regime change by the US as well as fear of a more strident Iran and a global war on terror. This has meant that OPEC will be less and less relevant. The OPEC plan to ramp up production to put a lot of the new shale oil producers under pressure in the US has resulted in driving the Saudi government and other oil producers to go to the international markets for debt. The political adventures in Libya, Yemen and Syria will also have a massive social and financial blow back to the very financiers of these projects.

More and more non-traditional oil producers will drive the future development of the hydrocarbon sector and more and more, it is our view, that even they will be irrelevant to the overall energy industry. Witnessing the value of all the big oil majors it has severely declined in the last ten years. Today more and more oil markets are controlled by speculators and traders. It is therefore our view that Russia, which is a command economy, will provide greater swing production as their investment in hydrocarbon exploration and production results in increased production and greater influence over the oil sector. Equally the US, through its sheer drilling capacity and loose environmental regulations will produce more oil and gas.

The global markets over the next twenty years will see the relevance of liquid hydrocarbons and OPEC being greatly reduced. It is our view that in the next two decades we will see hydrocarbons being replaced, initially gradually but ultimately swiftly, by alternative and renewable energy resources. Energy storage capability will expand rapidly both through conventional battery technologies or some new technologies becoming evident due to higher oil prices and through greater volatility.

For now in the immediate, Russia, with its major gas and oil production has come to an unofficial agreement with OPEC to limit production, in order to steady international crude prices. OPEC by itself could not have been able do this. It is, therefore our view, that these two unlikely allies will fall out in the mid to long term due to their political ambitions leading to further chaos in the energy sector. It is therefore all the more important to see energy autarky in Pakistan. There must be less reliance on imported hydrocarbons and less reliance in our energy mix on liquid and gaseous hydrocarbons.

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