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A consistent energy policy is at the crux of resolving Pakistan’s self-imposed energy crisis

An Interview with Mr. Abbas Bilgrami


Abbas Bilgrami having an extensive exposure to the local and global energy sector is the former Chief Executive Officer (CEO) of Progas Energy Limited. At present he is engaged in development energy projects in different parts of Africa region. He has the privilege of working with some of the finest energy experts in Pakistan and internationally. As Secretary General of the Energy Expert Group he has written the first Integrated Energy Plan for Pakistan. He also worked 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.

While discussing energy issues in Pakistan, Abbas Bilgrami said in an interview that:

ABBAS BILGRAMI: Pakistan’s energy policy structures that have been announced over the previous four governments and generally speaking are reasonably good and competitive against Pakistan’s other regional neighbors. In some respects, Pakistan’s energy policy structures were ground breaking and farsighted. Pakistan produced the first bankable Power Purchase Agreement in the region and a pioneer in the development of a private power sector.
However, issues of governance, enforcement of policies and regulatory flip flops has impaired investment in the sector and made a mockery of any policy structures.
One of the major issues which has not been clearly debated and defined has been the role of the public and private sectors in the energy space. It is my personal view that the government has to realize that base load power generation should remain in the public sector. The private sector should be used to build peak load, stand by and alternative power generation. While the national grid should remain inthe public domain for strategic reasons. This will ensure investment goes into this most vital function of transnational power and energy delivery. The last mile delivery of power should be in the private sector to ensure better governance and viability.
Equally while the national transmission of natural gas should remain in the public sector, last mile delivery should be privatized. There must be greater competition and greater choice be provided to consumers. Most importantly healthy competition should be promoted. All this can happen if the government steps out of regulation and restricts itself to policy making, policy enforcement, capacity building and ensuring good governance.
The current government has been more robust in its approach at implementation of a whole host of power projects. While progress could have been better, competition has not been encouraged, indigenization of technologies has not happened. Directionally the policy structures and implementation has been better than in the past. In particular, the Ministry of Planning has been successful in being able to articulate the long term goals of the energy sector reasonably well and brought investment in the sector to the country.
The one matter which is of concern is the lack of movement in creating an energy ministry. This was part of the manifesto of the current government but this has been forgotten. It maybe that this move stepson too many sensitive and important toes. The ministry of energy is a necessity which we believe will give greater impetus to better planning, policy making and reducing duplication of efforts between ministries and provide ownership and responsibility to one entity.
At present the energy sector has to deal with the Ministry of Petroleum and Natural Resources, Ministry of Water and Power, Ministry of Planning and the many regulators. Let’s not discuss the Pakistan Atomic Energy Commission in this interview. What has happened in the recent past is that ENERCON and the AEDB have been brought under the Ministry of Water and Power, a step in the right direction but still not a solution to the overall problem. Pakistan needs a balance in its energy mix and this can only be better created if there is a centralized Energy Ministry.

ABBAS BILGRAMI: There is nothing wrong with power generation using imported fuels, many countries like Japan, Korea and Taiwan generate most of their power from imported fuels. However, their economies have flourished, because they have converted the feed stocks efficiently, delivered the power efficiently, charged and recovered for the power successfully. They have not allowed for subsidy capture or hidden inefficiencies by burdening consumers or allowed for the creation of unhealthy monopolies. They have also kept politics out of strategic decision and policy making.
The issue is when Pakistan has been blessed with so much energy potential from conventional energy resources viz; coal, hydel and renewables why are we so reliant on imported liquid hydrocarbons? The reason for this has to do with poor planning and policy implementation in the past thirty years. In the first thirty years after Pakistan’s creation, policy making, policy enforcement and governance was world class. Pakistan discovered and utilized its hydel, natural gas and nuclear potential. In the past forty years in particular we have seen, a whole host of policy flip flops, policy changes and reversals that have hurt Foreign Direct Investment, virtually wiped out local investment, local Development Financial Institutions have been bankrupted through corruption and political interference, world class public sector organizations have been degraded and run as personal fiefdoms to benefit certain political classes. Transparency, accountability, energy security and sustainability have been sacrificed at the altar of personal and political gain.
Pakistan has potential to increase local natural gas production by atleast 2 bcfd in the short term. However, this would require increasing drilling activities in Pakistan to at least 200 wells being dug annually to extract conventional onshore and offshore potential.
Pakistan has at least 20,000MW of run of the river hydel projects. This potential must be tapped at all costs along with the development of large water reservoirs to capture and hold water run-off from glacial melt and from heavy rains to meet water needs and power generation needs during drought periods. Pakistan also has a potential to produce a further 20,000 MW of wind power generation. This additional power generation can only happen if the grid is improved and alternative power generation using natural gas provides the necessary back up when there is no availability. Solar potential in Pakistan is huge, however we have not focused on Concentrated Solar Power using salt caverns and salt to store energy to provide electricity during the night. So our passive PV based power generation while necessary has been an expensive venture. Pakistan’s geothermal, tidal power generation potential hasn’t even been properly mapped.
In my view, we have at least 5,000MW of potential for both of these energy resources that are relatively easy to harvest in load centers. The biggest resource, which we currently have ignored is the potential in biomass. It is estimated that there is approximately 80 million Mt of waste Biomass, which could yield a very large amount of biogas for power generation and biofuel production.
The reason why we are where we are, has to do with not good policymaking, but in the lack of political will, policy flip flops as governments change, politicizing economic decisions in the sector and a wholly inept set of regulators who have seen capacity degradation and ultimately been defanged by the federal government.
The state of OGRA and NEPRA is in front of us. The lack of a central planning and implementation process through an Energy Ministry has lead to where we are today after 70 years of independence. If we have to ever achieve autarky in our energy needs, we must bear in mind that we will need to provide 50,000MW by 2025 to cover our power needs we will need to increase natural gas availability to 6.2 Billion Standard Cubic Feet Daily (BCFD) while local production is expected to drop to around 3BSCFD by 2025 and our annual primary energy needs will be over 115Million Metric Tonne Oil Equivalent (MMTOE) imports of crude and other liquid hydrocarbons will reach 560,000 Barrels Per Day (BPD).


ABBAS BILGRAMI: The IP Gas Pipeline project is the lowest of hanging fruit, which Pakistan has refused to harvest. Even though government protocols have been signed, gas sale and purchase agreements are in place, pricing mechanisms are accepted and well recognized and despite the fact that Iran has built its side of the gas pipeline infrastructure, surveys on the Pakistan side are complete and there are a number of financing options (from China and Russia), Pakistan has been timid in proceeding with this project due to sanctions on Iran from the USA.
This project needs to be built and commissioned within this current government’s term and before there are any new sanctions are imposed by the USA. Pakistan’s declining conventional gas production means that the future supply of natural gas from unconventional fields will be more expensive than what we have seen so far. It is therefore imperative Pakistan should build the IP pipeline, but simultaneously, it should also go for the TAPI natural gas pipeline as well. This will take longer because of security issues on the Afghanistan portion of the pipeline but this is a project, which Pakistan needs to build, to increase energy security and diversify its energy resources. We must remember Pakistan has not been accepted by the NSG as a member of the nuclear club. Pakistan needs to chart its own path and it must source its energy needs from Iran and its other neighbors as long as the pricing is realistic and beneficial for our consumers.

ABBAS BILGRAMI: The CPEC project will certainly increase Pakistan’s oil import bill as more logistics requirements will need fuel to transport. The entire project hinges on its ability to transport goods between China and the Middle Eastern and Indian Ocean Rim markets.
Whether it is natural gas, minerals or crude to China or industrial goods to the Middle East and Indian Ocean Rim markets via Gwadar the transport of all these products by pipeline, rail or highway will require fuel. So yes, Pakistan will need to increase its refining capacity or imports and for this there will be increased import of crude and hydrocarbons. There is nothing wrong in this if the means of transport and logistics are efficient and provide a positive input to Pakistan’s GDP without damage to the environment and natural resources of our own country.

ABBAS BILGRAMI: Pakistan’s total gas reserves and production are in decline as the conventional large fields are depleting. More and more exploration needs to be done on unconventional reserves including tight gas and to tap the offshore potential.
The Khyber Pakhtunkhwa and Balochistan are domains, which have been highly underrated by international experts, however, Pakistani geologists have always felt this is an area where the potential to find large conventional reserves is very good. There is talk of finding large untapped reserves once the security issues are resolved and Force Majeure lifted.
Equally offshore exploration has been limited due to the expensive nature of this work and because the large oil companies like Shell, Total and BP have tried and not been successful.
Pakistan needs to look further a field and partner with Petrobras and other national oil companies who have expertise and appetite in deep water drilling.
According to experts the unconventional gas, offshore and unexplored force majeure areas like FATA, KP and Balochistan could collectively and potentially yield over 50 TCF of natural gas reserves. But this will require proactive participation between state-owned exploration companies and international and national oil companies.
More investment in drilling, to bring it to at least 200 wells a year will result in the discovery of more reserves. It is necessary to reduce the amount of bureaucratic hurdles and empowering and depoliticizing our exploration and production companies and encouraging them to partner with world class experts to lead to better results. There are operators that have found reserves but have had to wait years to get Ministry clearances to be able to go into production due to political rivalries and red tape.
Pakistan needs to create strategic partnerships with global national oil companies who have the wherewithal and expertise to bring to bear not only on Pakistani opportunities but for Pakistan to be exposed to international hydrocarbon plays that they could participate in.

ABBAS BILGRAMI: The economic managers have been able to build the LNG delivery capacity, which had been stymied for many years due to political wrangling in successive governments. This has been commissioned fortuitously at a time when LNG production capacity has seen a huge leap and at the same time crude prices have been at an all-time low. This has meant that we have benefitted from signing off on long term supply agreements for LNG, which have been advantageous.
However, we have not upgraded our transport infrastructure during this time where crude prices were low, we have not invested in improving our fleet of fuel transportation whether by rail, truck or pipeline.
This is a matter of great concern. We have also not tied up new producers of crude like Iraq and Iran by co-investing with them in new production and large storage in Pakistan for these crude resources.
Pakistan Petroleum Limited has undertaken some work in Iraq but Iran has seen no investment from Pakistan in its upstream sector. Production capacity is increasing both in North America and in OPEC producers this means that prices are not likely to go up significantly in the short term. It is our view that oil prices will firm up in the mid term. We still have a window in which new producers could see investment from Pakistani exploration and production companies like Pakistan Petroleum, Mari Gas, Government Holdings and the largest upstream company OGDCL. While I wouldn’t say that our economic managers have fully taken advantage of the opportunities due to low crude prices we have benefitted from building the necessary infrastructure to land LNG.
I disagree that Pakistan is a small economy. It is potentially a very large economy. Statistically for a population rapidly closing on 200million citizens it is amongst the largest markets in the world. However as an economy it is just around the size of the Malaysian economy, which has nearly 15 percent of Pakistan’s population. We need to be more productive and we need to create a new social contract between the government and its citizenry.
Globally the energy sector is changing dramatically and all of this will have an impact on Pakistan as well. The hydrocarbon centric global economy is rapidly changing. Within the next two decades my belief is that the use of liquid hydrocarbons in power generation will drastically reduce to hybrid natural gas and renewable resources such as wind and solar. The use of liquid hydrocarbons in transportation and logistics will change to electricity and natural gas. Within forty years hydrocarbons will be used for developing new materials and new generations of petrochemicals that will drive the global economy.
I am positive about Pakistan’s energy future. If the public and private sector are unshackled from retrograde policies and regulatory environments the country will innovate and create a vibrant and dynamic energy sector. There has to be political will and collaborative efforts between all stakeholders for the benefit of Pakistan and its citizens.

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