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Pakistan must have evolving and dynamic policies and strategies to face new energy challenges and technologies

Interview with Mr Sohail Butt – CEO, Energy Energetics Consulting

PROFILE AND THE CURRENT ENERGY SITUATION:

Mr Sohail Butt has spent over twenty five years internationally in the energy sector value chain as a finance professional, systems and business process improvement specialist and as a consultant/advisor working with senior oil and gas executives to develop and implement value creating strategies in transformational and business development mode.

He is a UK-qualified Chartered Accountant and most recently his area of focus is to provide consulting and advisory services in the field of petroleum, power generation, transmission and distribution as well as focusing on sectoral reforms, governance issues and lobby for improving project management discipline for implementation of energy sector projects and if required facilitate the availability of requiredhuman resources to achieve the desired objectives.With this thought in mind and as a first step he established an advisory and knowledge gathering and sharing platform of Energy Energetics, a consulting firm specializing in value creating strategies.

The next step already taken is that Energy Energetics is collaborating with a US-based entity AdvanGram Advance Data Management Inc. for providing solutions to energy sector value chain entities in creating efficiencies, improving monitoring of operations at various levels, achieve cost reduction and improve productivity of man, materials and machinery through advanced information systems and technologies. There is a dire need for experts to get engaged in a collaborative mode and to remain aware of all the technological developments, current and future strategic shifts taking place, supply/demand curves as a result of economic and political activity, emerging business opportunitiestaking place in the world of energy at any given point in time.

Energy Energetics through its knowledge and experts database will just do that and AdvanGram Inc. where doable andapplicable will translate the vision and strategies so developed and take it down to macro andmicro levels in an entity and provide workable automated solutions, ensure measurable information for decision making is available and document the underlying core work processesin achieving the desired objectives. In essence both the entities at strategic and operational levels complement each other in creating value and determining the direction.

In future, those entities and economies will survive, grow and flourish that can produce and deliver energy in an environmentally-friendly and economically sustainable criterion on where required, when required and a least cost basis.

Accordingly in order to face the new challenges and competitive technologies in a rapidly innovative environment, a comprehensive and dynamic policy and strategy development framework would need to be established in line with changing regulation, rules of conducting business and resulting impact on policy formulation and implementation of project development in different segments of the energy sector in Pakistan.

The world is undergoing massive transition in the field of energy and related technologies. The age of renewable energy has arrived with all the innovations, efficiencies and cost reduction initiatives. In every year since 2011, renewable power generation technologies have accounted for half or more of total new power generation capacity added globally. In 2015, a new record was achieved with around 148 GW of renewable power added. In 2016 this trend continued and the next decade is expected to increase the renewable energy component of the total energy mix in the world to about 20% or even more.

From Pakistan‘s perspective we are passing through critical times in view of major transition inenergy sector and introduction of innovative technologies, which will drive and alter energy availability, mix and resultantly impact cost in the next few decades in a significant manner.

Accordingly in order for Pakistan to remain competitive and relevant in the international market it is imperative that Pakistan‘s energy landscape is aligned with the rest of the world. Future energy projects in Pakistan must be conceived based on future course and direction identified in the world of energy.

PAGE: WHY OIL PRICES AND HAVE BEEN FLUCTUATING SO MUCH OVER THE LAST THREE YEARS? IS THERE A REBOUND IN SIGHT?

SOHAIL BUTT: The price of energy which encompasses all sorts of fossil fuels as well as renewable and nuclear energy is primarily driven by the economics and politics of the world. Historically speaking, the oil and gas as well as coal that comprises major component of fossil fuels serves as the Primary Energy Supply of the world in a very big way. This position is now being gradually reversed by different segments (Hydro/Solar/Wind/Biomass) of Renewable Energy sector that is making significant inroads in the world energy mix due to climate change compulsions as well as cost reduction and energy security considerations.

In addition to the above, the improvement in energy technologies, energy efficiencies and consumption pattern is also impacting the energy demand and supply equation. The world is currently undergoing a major shift in the world of energy in terms of availablesupply sources, regulatory developments, regulation changes by major world economies, supplychain constraints and technological developments.

Accordingly the current energy transitionperiod that started from July 2014 when the oil prices were at its recent peak of around $115 per barrel to the lows of $27 in January 2016 speaks of the inherent dynamics of this current Boom and Bust cycle, which is entirely different from the earlier cycles. Hence the price of oil and resulting price of the gas has seen abnormal fluctuations within an average price band for oil between $40 to $55 per barrel and Natural Gas Price of $2 to $4 per MMBTU.

In the immediate to short term, the oil prices fluctuate due to one or a combination of following factors. This is a brief (but certainly not all inclusive) list of factors impacting oil prices and would include:

1. Global economic growth forecasts and any intermediary revisions.
2. Oil demand.
3. OPEC and non-OPEC oil supply/exports.
4. US oil output, US drilling activity.
5. Refinery maintenance schedules.
6. Geopolitical events.
7. Internal OPEC oil consumption or Production Strategies.
8. The value of the US dollar, oil price volatility measures.
9. Global and US oil and refined petroleum product inventories.
10. Financial products based on Oil and Gas – Short and Long positions.
11. Worldwide or localized changes in energy regulation, energy strategy, energy technologies and shifting preferences.

GEO POLITICAL CHALLENGES:

There are, of course, worldwide geopolitical challenges that could affect oil prices and supplies.

The US deployment of missile defense system in South Korea and North Korea‘s response has sparked fierce protests and further strained already tense relationships between the US, North Korea, Japan and China over this issue. Around the same time, North Korea attempted another missile launch in mid-April and news surfaced that the test was disrupted using cyber warfare.

An increase in tension in this area of the world could, of course, impact oil markets. Syria remains another important geopolitical factor for oil markets. Foreign Affairs Magazine reported that US Secretary of State had ―tense but engaging meetings,‖ with his Russian counterpart and with Vladimir Putin in late April. Each side believes ―the glass is half full in their relationship, after the Syrian strikes, and neither side believes there will be any direct military or diplomatic conflicts taking place. The current international environment is tense and potentially destabilizing but one should bewary of oil prices rising based purely on political or geopolitical risk.

What should concern bullish investors are announcements by the Saudi Energy Minister stating it is too early to decide if OPEC will extend production cuts, along with Libyan political instability, Venezuelan production going offline and Nigerian unpredictability. These are geopolitical issues that can greatly affect crude prices. Next to outages and production cuts in OPEC member states, there are also a number of facts pointing to increased oil output, which could continue depressing prices in the long run.

Accordingly in absence of a major geo political event the prices of oil are unlikely to rebound to the levels that were seen in periods before July 2014. Goldman Sachs has taken a some what conservative view from other investment banks and firms who follow oil prices and the prediction for current year is an average range of $45 -$55.

PAGE: YOUR VIEWS ON OIL PRICES TWO TO THREE YEARS DOWN THE ROAD:

SOHAIL BUTT: In order to go for a sound prediction range of oil prices in the short/medium term time span it is important to look at the current scenario and likely future scenario after weighing in all relevant factors pointed above and then logically proceed for a fair predictive estimate.

OIL & GAS: THE CURRENT SCENARIO

Since last January 2016 the price of oil touched a low of $27 per barrel and then nearly doubled to around $57 in March 2017 after going through significant volatility sessions during the intervening period before sliding down to current level of $49 per barrel. The oil bears are gaining leverage over the bulls as confidence in the stability of crude prices continues to wane.

The major factors of price volatility or for that matter stability within a tight range of $48-$55 are OPEC and Russia‘s planned cuts in production and US Shale drillers record production increasing US production from all sources to 9.250 million barrels a day. The high level of OPEC compliance has surprised skeptical market analysts who predictedplenty of cheating, so the cuts of 1.2 million barrels per day from OPEC, plus smaller cuts from a slightly less compliant non-OPEC group, have put the market on a course towards balancing, albeit at a painfully slow pace.

Global inventories have begun declining even if US stocks are still at exceptionally high levels. An extension of the OPEC deal would take the market back to normal levels in the second half of the year. The rig count also continues to climb putting the oil rig count around 700, or up 120 percent from its low point a year ago. Aside from just a handful of exceptions, the rig count has grown almost entirely uninterrupted, week after week, for the past 12 months. Lower breakeven prices have allowed shale drillers to confidently hike their spending plans even if oil prices fail to rally any further. Then there are unexpected gains from elsewhere around the world. Libya, in particular, is one country to watch. The North African OPEC member‘s production has whipsawed up and down by attacks on key export terminals, which have forced the closure of some very large oil fields. Libyan production stood at 700,000 bpd earlier this year, but dropped to just 490,000 bpd over the past month, helping to tighten the global market and push up prices. But output is back up to700,000 bpd and likely to reach as much as 1.2 mb/d by the end of the year if there is no major disruption.

Libya could therefore play a major role in price volatility in future. The return of bearishness is borne out by the latest trading trends in the futures market. Hedge funds and other money managers continue to back their bets on crude futures, reducing net long positions for the third week in a row.

According to Bloomberg, major investors cut their bullish bets by 21 percent at the end of April. The selloff indicates a belief among oil traders that oil prices had ― gone up too much compared to the fundamentals. The shale oil production trend is definitely bullish, which is bearish for prices.

The market share war is also going on at micro level within OPEC itself – a diverse group of producers, with each pushing and pursuing their own agenda in every meeting and collective decision. This time around it is no different.

Saudi Arabia, OPEC‘s biggest producer and de facto leader, is losing market share, while Iran and Iraq have so far emerged as winners of the cuts within the cartel in a battle for market share. The Saudis were aware that they would be ceding some market share with the OPEC deal, but opted for higher and more stable oil prices by signing up to a deal that allowed Iran to slightly lift its output, while others — especially Riyadh — would have to cut. The lower-for-longer oil prices have led to a considerable deficit in Saudi Arabia‘s budget, and the Kingdom had to draw from reserves and increase the issue of debt to finance the gaps in its oil-dependent government revenues. The Saudis now need higher oil prices if they want their oil giant Aramco to be valued in next year‘s IPO anywhere in the vicinity of US$1 trillion, let alone the US$2-trillion valuation that Deputy Crown Prince Mohammed bin Salman has mentioned. The Saudi 2017 Budget sees higher oil prices this year lifting oil revenues by 46 percent compared to the 2016 estimates.

As per OPEC‘s agreement, Saudi Arabia had to cut output by 486,000 bpd to a ceiling of 10.058 million bpd. OPEC‘s No.2 producer, Iraq, promised to cut 210,000 bpd to a level of 4.351million bpd, while Iran — the cartel‘s No.3 and bitter regional rival of Saudi Arabia — was allowed to raise its output to 3.797 million bpd. Now the oil market and analysts are waiting to see whether OPEC will decide in a meeting to be held on 25th May 2017 to roll over the production cuts until the end of the year. The current Saudi rhetoric to the market is that there seems to be a consensus over extending the cuts beyond June, but further discussions need to be held, including with non-OPEC Russia.

The Saudis may demand that Iran also cuts output. Iran is unlikely to concede to any cuts now that it has regained the market share it had lost due to the Western sanctions. The Saudis may also find it difficult to impose a strict binding deal on non-complying OPEC members and this may lead to an oversupply situation and a possibility that oil prices may fall below $40 if the deal is not extended. Saudi Arabia may therefore once again choose higher oil prices over market share. The OPEC aim to shave off 1.8 million barrels from global daily supplies as this will be a key to stabilization of oil prices. US production from all sources including shale oil fields too have to follow a disciplined approach and not scuttle the OPEC strategy of maintaining higher prices at the cost of market share surrender .

TOP 5 RISKS TO OIL PRICES

Global oil inventories have started to decline and the supply/demand balance may soon tip into a deficit, if it hasn‘t already. That will accelerate the draw downs in crude oil stocks, and bring the market back into ―balance,‖ providing a lift to oil prices. The opposite can happen if the supply exceeds demand because of either OPEC member‘s noncompliance to agree production cuts or US Shale driller‘s maximum production strategy.

Here are the five countries that could provide an unexpected jolt to the oil market:

1. VENEZUELA: Venezuela‘s economy has been in free fall since oil prices collapsed in 2014. Oil production already dropped by nearly 10 percent last year, and will continue to fall this year.

Depressingly, total collapse of Venezuelan society is possible, threatening 2 mb/d of oil production. At a minimum, output will continue on its downward path. On the other hand, Venezuela‘s demand cold also plunge in this meltdown scenario, offsetting the supply loss but creating another, if different, risk to the oil market.

2. LIBYA: The North African OPEC member has successfully brought back a huge chunk of its latent oil supply, ramping up output to 700,000 bpd earlier this year, essentially double 2016 levels. Currently they are producing around 500,000 bpd. Their output has seesawed back and forth in the past few weeks, with oil fields and export terminals going offline for a week or so, only to quickly resume operations. It is therefore difficult to incorporate Libya into oil forecasting scenarios because of the immense uncertainty. On the bullish side of things (for oil prices, that is), the outages in Libya could persist, leaving several hundred thousand barrels per day offline. But there is a bearish case as well – Libya‘s National Oil Company is targeting production of 1.2mb/d by the end of the year.

3. NIGERIA: Nigeria is a somewhat similar risk factor to the oil market as Libya. Both countries are exempted from the OPEC cuts and both represent both downside and upside risks to the oil market. Last year, Nigeria made a lot of headlines because of the attacks on pipelines from the Niger Delta Avengers. The attacks have slowed dramatically, but critical infrastructure – such as the 300,000 bpd Forcados export terminal remains shut– That has reduced production to a three-decade low of 1.6 mb/d, down from a peak of 2.2 mb/d reached in 2014. The upside potential in Nigeria seems more limited than Libya, given the damage to infrastructure, but so does the downside risk since much of the sabotage has passed. Still, Nigeria presents a lot of uncertainty going forward.

4. US SHALE: While other countries present oil market risk because of conflict, the US could spoil a lot of forecasts because of the uncertainty surrounding the pace of the shale industry‘s resurgence. Previous forecasts pegged shale growth at just a few hundred thousand barrels per day this year. However, preliminary data from the EIA has US oil production up by almost 300,000 bpd already in 2017, and output could grow by another 400,000 bpd by the end of December. Not only is it difficult to forecast the pace of growth, but U.S. shale is much more sensitive to oil prices than other sources of production, so what happens for the remainder of the year is highly uncertain and subject to market conditions.

5. RUSSIA: Finally, the largest short-term catalyst to global supplies and, thus, oil prices, is whether or not OPEC and Russia agrees to an extension of its cuts. There is roughly 1.8 mb/d that hangs in the balance (1.2 mb/d of OPEC production, plus 558,000 bpd from non-OPEC). For now, it appears that OPEC is on board with an extension, with the group’s monitoring committee formally recommending an extension. However, the final ingredient for an extension is the cooperation of Russia, which has so far declined to publicly state its position. Russia could derail the deal, resulting in much higher levels of global supply and sizable losses to crude oil prices.

LONG TERM FUTURE OF OIL PRICES:

The 2020s could be a ―decade of disorder‖ for the oil markets as the lack of drilling today leads to a shortfall of supply. Demand will continue to grow, year after year, and shale will not be able to keep up. It may be hard to envision today, with an oil market suffering from low prices and a glut of supply. Falling breakeven prices have drillers still churning out huge volumes of shale oil, with production in the US already rebounding and rising on a weekly basis.

The tidal wave of shale, however, is the direct result of extreme market tightness a decade ago, which pushed oil prices up into triple-digit territory. The rapid rise of China and other developing Asian countries in the early 2000s put the squeeze on the market, as conventional production struggled to keep up with demand. High prices sparked new shale drilling in the 2010-2014period, which, as we now know, brought a lot of supply online. That, subsequently, led to a price meltdown. It also needs to be understood that there is a real possibility of price spike in a few years time because of the drastic cut back in drilling and investment over the past three years.

Between 2000 and 2014, the oil industry saw a fivefold increase in upstream oil and gas investment, growing from $160 billion in 2000 to $780 billion in 2014. But investment fell by over $300 billion in the two-year period of 2015 and 2016 – ―an unprecedented occurrence,‖ the IEA noted in a 2016 report on energy investment. 2017 could show marginal increases in spending, but the industry is not returning anywhere close to thepre-2014 levels of investment that could set the world up for a supply shortfall by the end of the decade when large deepwater projects that were not given the green light over the past three years would have started to materialize. The lack of new production will mean that suppliers struggle to keep up with demand. Supply shortfall could hit as soon as the 2020-2022 period, assuming annual oil demand growth of 0.8 to 1 mb/d,. However the above demand and supply constraint scenario can only materialize in the world where:

1. Renewable Energy growth and mix in the primary energy supply is not growing rapidly as it has in the last two years and does not reach 20% or above of the World‘s energy supply by source.
2. Climate Change Policies of the US government are drastically changed.
3. Non implementation of commitments made by major economic powers in COP 21 and further ratified in COP 22 to restrict Carbon emissions.
4. Energy Efficiencies s and emerging energy technologies do not maintain their present momentum and somehow fail to achieve their designated targets in the next decade.

However assuming that the above four points continue their current positive trends, it is safe to assume that the increase in demand for energy on a worldwide basis will be met in a significant manner by renewable energy with storage capacities developed in the next few years as a result of technological advancements thereby reducing the dependence on fossil fuels. In such a situation the market for fossil fuels will remain oversupplied‘ and hence keeping constant pressure on price and prevent resurgence to three digit price level that has been experienced in previous Oil bust and boom cycles where the oil traded between the ranges of $ 20 to $ 120.

This is highly unlikely to happen.

Based on the above risk factors‘ which are highly uncertain and can be manipulated by powers that matter as well as the longer term outlook as predicted now the oil prices future will remain volatile between a worst scenario of price crash (below $40) to a likely scenario of price stabilization in the range of $45 to $65 . The best scenario from producer‘s perspective of oil price exceeding $100 is highly unlikely in the foreseeable future and perhaps will never happen.

PAGE: HOW WOULD YOU COMMENT ON OIL IMPORT BILL OF PAKISTAN?

SOHAIL BUTT: The oil import bill weighed heavy on the country‘s foreign exchange reserves. There were periods in the past when oil import bill on its own was over half of the amount of total export earnings. In 2015 oil import bill surged to $ 12.1bn while the total export the same year reached at $ 23.8bn. The steep 60pc fall in crude oil prices during 2015-16 from an average of $ 110 per barrel to $45 provided relief.

In Pakistan, despite rising volume of oil import, the spending fell to$ 7bn in 2016, according to State Bank data. Oil prices have started crawling up, but energy experts do not see it rising over $ 65 per barrel over the next two years at least and I agree with that assertion. According to Pakistan Bureau of Statistics (PBS), petroleum imports have increased 20.97pc year-on-year to $ 6.682bn in July/Feb 2017. Imports of petroleum products went up 23.28pc to reach $ 4.193bn during the reviewed period. However, a decrease of 7.13pcwas witnessed in import bill of petroleum crude. The import bill of Liquefied Natural Gas (LNG)hiked up 144pc while that of Liquefied Petroleum Gas (LPG) registered an increase of 45.38pcduring the same period.

Going forward the increased Industrial and transportation activities due to CPEC projects there would be higher demand of petroleum products in Pakistan and resulting higher import bill for crude and petroleum products.

PAGE: YOUR VIEWS ON ENERGY PROJECTS IN PAKISTAN:

SOHAIL BUTT: Energy projects in Pakistan should be conceived under a well thought integrated energy strategy covering Upstream (Oil & Gas Exploration and Production), Midstream (Pipelines, Transmission and Distribution Network, Infrastructure and Storage facilities) and Downstream(Refining, Petrochemicals, Oil Marketing etc.) with following key objectives and essentials: (a) Sustainable energy mix, combining indigenous sources of Hydro and variety of other renewables (Solar/Wind/Biomass) with locally available fossil fuels – Oil, Gas and Coal to the fullest (b) Flexible backup supply arrangements for imported Oil, LNG/LPG/ Coal and Electricity for border areas etc. (c) Strategic replacement or improvement of the retiring capacities, (d) Demand management through Energy Efficiency program, (e) Investment in Energy Technologies of the future including battery storage and (d) investment in development and manufacturing of efficient solar panels, wind turbines and bio mass /bio fuel plants backed up by battery storage technologies for the renewables.

Energy projects in Pakistan have received a big boost as a result of $ 36 Billion allocation of investment funds as a result of China Pakistan Economic Corridor ( CPEC) . The investment between different segments of energy like generation from indigenous Hydro, Coal as well as imported coal and LNG and transmission/distribution of power seems to be fairly balanced. The provincial governments are also investing heavily in power sector projects notable in the renewable energy segment to harness the local availability of solar and wind corridors. Major criteria for investments in Energy Sector which should meeting the following objectives:(a) Sustainability; (b) Energy Security, (c) Energy Equity, and (d) Environmental Sustainability(e) Cost competitiveness.

Effective management of primary energy sources, reliability of infrastructure, and ability to meet current& future demand. Energy Equity is the accessibility & affordability of energy across the whole population of the country. Environmental Sustainability is the use of RE & low Carbon sources and achieving supply & demand side efficiencies. In any economy, the individuals‘ first choice is Energy Equity i.e. having power all the time everywhere at an affordable price, whereas the governments‘ emphasis is on Energy Security i.e. securing the supply chain of energy resources and infrastructure like grid, pipelines, railroads, port facilities. Several projects are currently in various stages of completion and a summary will highlight some of the major ones: already in line and new generation of more than 1,500MW will be added in the system by May 2017.

The Nandipur power project is operating at around one third of its capacity due to high cost of operating at furnace oil. However, the plant will be converted to RLNG by the end of May or June and the capacity too will be enhanced to 525 MW from the existing 425MW.

C-IV nuclear power plant at Chashma, producing 340 MW that too will be supplying power to the grid. RLNG based power plant Bikkhi will be producing 800MW, by August its two units are already producing 400MW whereas, by the month of August this year, Coal based power plant at Sahiwal will produce 1,320MW, Bagasse‘ being a waste product of sugar mills is expected to gradually generate around 1,000MW by the end of the year when the sugarcane crushing will start. To ensure long-termutilization of these power plants many of them are converting to gas based co-generation too as bagasse supply is limited to sugarcane crushing season. The government also planned two large cross‐border grid interconnection projects for import of electricity; one from Kyrgyz Republic through Tajikistan & Afghanistan, the CASA 1000 project, and the other through Iran, the Zahedan –Quetta transmission line; each of them will have 1000 MW capacity. NEPRA has given a tariff of 9.4 cents per kWh for the CASA 1000 project. The other wind corridor which can also give 5,000 MW wind power projects by the year 2022 is the Sindh wind corridor. Enough commitments from foreign and private sectors are already in place, the only issue is the grid interconnection.

Although NTDC is working hard to arrange the required interconnection and Government of Sindh is very supportive on this matter, support from the Ministry of Water & Power is crucial. Comparatively, the scope of work for the required transmission network at Sindh wind corridor is very small as compared to large transmission networks already planned and being executed in the country, whether grid or RLNG pipelines. Apart from wind, the country‘s solar potential is also enormous; the best case is in Balochistan, having the excellent solar resource in the country.

Distributed generation, T&D losses will also be minimized as generation and consumption will be in close vicinity;

HYDEL RESOURCE:

Pakistan has two huge hydro cascades namely Indus and Jhelum, then there are tributaries like River Swat, Kabul, Kunhar, Poonch, etc. feeding these two mega cascades. Indus cascade has projects like Skardu (1600 MW), Tangus (2100 MW), Yulbo (3000 MW), Bunji (7100 MW), Diamer Bhasha (4500 MW), Dasu (5400 MW), Patan (2800 MW), Thakot (2800 MW), Tarbela (3500 MW), Kalabagh (3600 MW) and Swat & Kabul river projects (2500 MW). Among these 37,500 MW potential, we have only Tarbela operational, which means only 10% utilization of this huge energy resource. The Jhelum Cascade starts from ChakkotiHattian (500 MW) followed by Neelum Jhelum (969 MW), Kohala (1100 MW), Mahl (600 MW), Azad Patan (650 MW), Karot (720 MW), Mangla (1000 MW), New Bong (84 MW), Kunhar Projects (1600 MW) and Poonch Projects (500 MW). Out of these 7,700 MW projects, Mangla& New Bong are commissioned; 14% utilization, whereas work on many projects is in progress.

BIOMASS:

Pakistan is blessed with millions of tons of biomass every year, which can be converted into power easily. There is a need to accelerate the progress of these projects, enhance their efficiency and establish attractive wheeling policies to support the agricultural cum industrial sector. Moreover, use of multiple fuels should be introduced; currently it is a bagasse oriented industry only.

NUCLEAR ENERGY:

Pakistan has three operational plants having cumulative capacity of 700 MW and the country has planned five projects of 4,000 MW, primarily at two locations; (a) 2200 MW at Karachi (K‐1 & K‐2), which will be operational in 2020 and (b) 1800 MW at Chashma, 700 MW (C‐3 & C‐4) will be operational in 2017 and the rest 1100 MW (C‐5) in 2022. After this 1100 MW C‐5 project, 6 more nuclear power plants, 1100 MW each, are planned to be completed before 2030. If achieved as planned, in 2030 Pakistan will have 11,300 MW of nuclear power.

To sum up we have already installed 10,000 MW thermal power plants under previous and current power policies and by the year 2025, we will further add 12,000 MW coal, 3,600 MW LNG and 10,000 MW nuclear power plants. So we will have above 35,000 MW flexible back up thermal power plants in 2025, which are enough to support an extensive Renewable Energy power technology program for decades.

PAGE: WHAT ARE YOUR VIEWS ON ELECTRICITY SHORTAGE IN PAKISTAN?

SOHAIL BUTT: Electricity shortage in Pakistan has been primarily the result of bad and inept planning by the relevant organizations and entities at the helm of affairs of power sector management at various levels over the past many decades. The problems of governance, long term integrated planning, lack of dynamic energy strategy and aphorism leading to power generation plants built on expensive imported fuels with unfavorable terms and conditions for the government that eventually led to the expensive tariffs and inefficiencies in the power generation system. In addition to the above flaws the emphasis have always been on Power Generation projects and not on the Transmission and Distribution network that entails line, technical losses and thefts worth billions of rupees.

CPEC activity in Pakistan will increase the current demand of around 76 MTOE (Million Tons of Oil Equivalent) against supply of 68 MTOE to 100MTOE gradually over next 3 years – current deficit is around 8 MTOE which will grow in line with GDP growth envisioned in the future years along with a multiplier impact of CPEC and CPEC related Industrial zones in the country.

Accordingly electricity shortage which is part of the total energy availability shortage will need to be addressed in line with the expected demand determined as a result of integrated planning between concerned government departments as well as public and private sector entities. As a result of the significant allocation of Rs 36 Billion to Energy Sector Projects in the CPEC budget it is now expected that power sector is on the verge of a turnaround. Currently plans are already under way to ensure that before the end of 2017, a large generation capacity will be added in the system to help reduce the gap between supply and demand. Likewise, enhanced transmission system is being strengthened for evacuation of power from these generation facilities. The government strategy is to ensure that more than 10,000MWs will be surplus to the demand requirements by 2021, which will be required to maintain necessary reserve and operating margins in the system as per international practice. However, it is noted that to meet these targets, timely completion of projects is critical and of paramount importance. Currently, the Transmission and Distribution (T&D) network across the country is hardly adequate to meet the enhanced and continuous power supply. In view of these conditions, it is imperative that transmission and distribution systems may be strengthened and stabilized besides completion of new transmission and distribution systems planned to transmit electricity generated by upcoming projects. Due to various measures taken by the Ministry of Water and Power, the overall T&D losses, which were 19.40 per cent, were brought down to 18.7 per cent in 2015 and have currently been brought further down to 17.9 per cent.

The decrease of 0.8 per cent in one year also accounts to an increase of around 747mn units in the supply system. The following MIX proposed by POW&P in terms of Megawatts and percentage of MIX is likely to achieve the objectives of energy security, reliance, cost competitiveness and indigenization and every effort should be made to translate this plan into reality and bridge the gap between future demand and supply at the cheapest price.

MOWP RECOMMENDED MW (%)

1. Hydel 19,200 (36%); 2. Furnace Oil 5,900 (11%); 3. RLNG 5,350 (10%); 4. Nuclear 5,350 (10%); 5. Imported Coal 4,800 (9%); 6. Local Natural Gas 3,700 (7%); 7. Local Coal 4,300 (8%); 8.RE (Wind + Solar + Biomass) 4,800 (9%).

Where there are gaps in demand and supply on a regional basis the arrangements for direct import of electricity from neighboring countries like Iran should continue and enhanced if economically feasible. Renewable energy component should be gradually increased to above 15% of the total mix while reducing dependence on imported Furnace Oil, LNG and Coal.

GOING FORWARD:

Federal & provincial governments should also provide a conducive environment for rooftop solar PV installations on residential, commercial, educational, and Government buildings throughout the country during this period. Invest heavily say 30% of the funds allocated to energy sector on replacing or improving the existing transmission and distribution system, increasing storage capacity of crude oil and petroleum products to improve energy security and invest in energy efficiencies at all levels in order to reduce the demand/supply gap by as much as 30% due to inefficiency and wastage of power at user level.

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