INTERVIEW WITH ABBAS HYDER BILGRAMI, PRINCIPAL JUNIPER ADVISORS (PVT.) LTD & MEMBER ENERGY EXPERT GROUP

KHALIL AHMED
(feedback@pgeconomist.com)

June 11 - 17, 20
12

Abbas Hyder Bilgrami has spent 25 years in or on the periphery of the energy industry. Though his educational background and qualifications were in finance and accounting, he has been associated for most of his working life in the energy sector. He worked in North America and in the UK until he decided to move back to Pakistan some 15 years ago. However, he wanted to come back to Pakistan not to seek employment but to develop an energy project, which he could call his own. It was a tough journey but he was fortunate enough to have good friends and a brief window in Pakistan's economic journey when the economy was able to raise adequate funds for what was the country's largest privately developed energy infrastructure.

The group of people was not from the traditional business families but professionals who brought in international investment into Pakistan. This, he believes, was a unique project of national significance. How many people ever have the opportunity to develop, build, commission and operate a project of such a scale? They operated this project profitably for three years employing directly or indirectly 1,200 people. However, after initial success, the group was targeted by a cartel in the industry and at the end of which though its plight was recognised by the competition regulator. A state company now owns the asset. He is currently working on a number of energy related projects but most of his time is spent in advising and acting as a consultant to various energy sector businesses in Pakistan and internationally. He is most proud of his affiliation with the energy expert group which is a policy advisory group and which to its credit has developed Pakistan's first integrated energy plan entirely on a pro bono basis. This plan is a road map, which has been partially adopted by the government but much needs to be done before the proposed reforms in the energy sector bear fruit. He is frequently invited to speak on Pakistan and its energy sector. He uses these opportunities to meet amazing individuals and build greater understanding of what amazing potential Pakistan possesses. To him, most important are his family and friends, who are the support and without whom, he says, he could not have been able to achieve what he has. According to him, the prayers and love of this network is the best safety blanket anyone can have. It is truly humbling to have been gifted by Allah az wa jal with so much care and good life.

PAGE: YOUR TAKE ON THAR COAL POTENTIAL.

AHB: Thar coal is a huge potential that Pakistan has been gifted with. However, it is merely a potential until the first tonne of coal is extracted and used as an energy resource. Until then it is the proverbial pot of gold at the end of the rainbow. Why it has not been developed successfully is a story, which would take up many of your magazines pages. However in short it has to do with lack of political will, poor energy pricing policies, and a complete lack of sensible resource allocation within the government's plans. We are told time and again that the quantum of energy that exists in Thar is more than the oil reserves of Arabia. What is the use of that energy if it cannot be delivered to the citizens of Pakistan? What is the purpose in trying to make ourselves happier by talking about the potential? What is needed is a clear plan of action to bring this energy resource and all the other potentials from hydel, wind, solar, geothermal, and agricultural biofuels resources. We need to be looking to diversify our energy resources, reduce our dependency on hydrocarbons and on natural gas. We need not be afraid to import as long as we are using this energy sensibly and not for nonproductive uses.

Thar coal needs to be developed using conventional technologies such as mining and then power generation using the best international practices to reduce the impact on the environment. We must not be sidelined by people who claim that coal gasification is the solution. The cost in extraction of coal gas is higher than the value of mining and firing it. However, we cannot leave behind an environmental disaster for our future generations or to impose this on the poor unsuspecting people living in the Thar and Nagarparkar areas. Therefore, any potential air and water pollution needs to be mitigated using the best and most economical carbon removal and sequestration technologies. Water needs to be recycled so the project reduces its dependency on the already constrained resources of the country.

PAGE: USA IS GETTING 7.1 BILLION CUBIC FEET OF GAS PER DAY FROM TWO COALFIELDS IN COLORADO AND WYOMING STATES. THE USA IS DRIVING 10 PER CENT OF ITS NATURAL GAS FROM COAL. WHERE DO WE STAND WITH THE VAST COALFIELDS?

AHB: Coal bed methane (CBM) is energy which should be tapped once we have built the infrastructure for mining, delivered water to the proposed power plants, built the roads which will allow the projects to be built and finally for the power to be evacuated. There is no point in talking about what are the possibilities. We need to stop looking at options and potentials and start getting down to the hard task of implementing a few mining and a few power projects. The USA has been in the coal mining industry for a long time and therefore has built the necessary infrastructure for mining and CBM extraction. However, in Pakistan we are still mining using technology, which would shame 18th century coal miners in England. In Pakistan, the mining industry, barring a few exceptions, is virtually at stone age level and with very little care for the environmental degradation these mines leave behind. Pakistan still has a great deal of hydrocarbon potential. If we start pricing our energy resources properly this would allow our exploration and production efforts to bear fruit and at the same time allow us to import energy from overseas without having to build a huge budget deficit.

PAGE: YOUR VIEWS ON RENEWABLE RESOURCES LIKE BIOGAS, HYDEL, OFF-GRID, AND NET METERING TECHNOLOGY.

AHB: Pakistan produces 80 million metric tonnes of agricultural waste. Ranging from biomass from harvested crops, animal silage, and waste and processed agricultural waste from sugar mills, oil mills, cotton ginners, food processors etc. This waste with investment and some smart technologies can generate up to 8,000mw of power or biofuels and bio chemicals. There is a huge upside in this space but it requires proper policy support and implementation to capture this value. The untapped hydel potential just in the main river systems in Pakistan is estimated at least 50,000mw. Even if we assume that half of this potential can be commercially captured, this comes at about 25,000mw. Agreed that these are super large projects and raising the resources and technical studies for their realization will take some time. Even then, hydropower energy must certainly be a priority for the country. We have to overcome the politicising of the energy industry. Politicians have ensured that the Kalabagh dam is unlikely to happen because of a huge amount of untruths, half truths, and downright lies that have poisoned this project. The lack of trust between provinces on water resources is merely a sign of how much work needs to be done in making water resources an essential part of an emergency energy plan. An added benefit to these hydel projects is of course the additional water holding capacity and the ability to regulate water flows during the flooding seasons. Pakistan is likely to be one of the most affected countries because of climate change. This will result in either too much rain or not enough. Therefore, these dams will be essential to ensure large reservoirs of water for times of acute shortage.

Part of the background to the current energy crisis is the flawed policy of universal electrification, which was imposed on us by international donors and financial institutions over a decade ago. This has resulted in a huge amount of money being spent on connecting small towns and villages to the national grid. The very same people who will pay for kerosene and wood refuse to pay for electricity because it is considered to be something that they receive for free. The government and influential consumers in these regions of TESCO, PESCO and HESCO promote this attitude by not settling their bills. This leads to a vicious cycle that is a major contributor to the circular debt crisis. This aspect of the energy crisis can be resolved by provision of off grid distributed power generation using local resources. This could be a mix of renewable like solar, wind, mini hydel, geothermal, tidal, biomass (agricultural waste) and to create a hybrid solution with conventional backup from coal, gas, LPG and other clean portable energy resources. These solutions have more expensive upfront costs. I would therefore propose that each town or village where delivery of power is not viable through the national grid should be allowed through a system of cooperatives to receive these power solutions based on studies.

A round of educating and getting the consumers buy in would allow them to understand that the government is helping them with these solutions through a rural energy fund, which would be empowered to assist in improving access to energy. They would then in turn own these projects and then be required to operate and maintain them. The cooperatives would bill for the power provided recover and through these payments pay for the projects. This is probably the only sustainable way for Pakistan to deliver clean and sustainable energy to these far-flung communities.

The best way to recover money from these communities would through prepaid electricity meters. These could be recharged through the backbone of the cell phone network that is now bringing banking and internet connectivity to these very remotely located communities. The market is already purchasing airtime on a prepaid basis. It would be a very simple step to get them to start receiving energy on a prepaid basis. Ultimately, the prepaid power solution will reduce power revenue recovery, it will not do away with this completely. It will require good governance in the existing power distributors to reduce power theft and bad debts, investment in power generators to get them to become efficient, and ultimately create a public private partnership, which can lead to a more honest and corruption free energy industry.

PAGE: HOW COULD WE ATTRACT FOREIGN INVESTORS FOR RENEWABLE ENERGY PROJECTS?

AHB: Pakistan faces stiff competition for investment in renewable projects from more secure, safe and stable countries in the region and globally. There are fewer risks involved in these countries and often feed in tariffs exist, with a stable grid that can take these renewable energy sources. However, what is in Pakistan's favour is the huge potential in wind, water, biomass and solar. These natural gifts will bring investors, if only, we can be able to reform our energy sector, show good governance, policy consistency, no political interference, a fair and honest regulator and a consumer who pays their bills. I can assure you if we can do the above, the first investment will come from Pakistani investors. This will allow overseas investors to have the confidence to return to this country. I believe the first signs are there that investment is flowing to wind power from within Pakistan, Turkey, and China. However, the offtake and the investment in the grid to be able to take this power and then transport it to the market place is needed immediately. The overhang of the circular debt crisis does not also bode well for these new investors as existing IPPs are unpaid and inoperative due to the lack of unfunded subsidies and there is a talk of litigation and calling in sovereign guarantees.

PAGE: INDIA STARTED RENEWABLE ENERGY PROJECTS IN 1982 AND DEVELOPED A FULL-FLEDGED MANUFACTURING FACILITY FOR WIND AND SOLAR TECHNOLOGY LONG AGO. WHY COULDN'T WE DO ALL THESE THINGS?

AHB: Let us stop comparing ourselves with India. It is a different country. We may have been one country before August 14, 1947. However, we are now two distinct societies. It has been and remains a nominally secular democratic society with a tradition of free speech and an activism originating from Gandhi and the Ali brothers down to Anna Hazare. In Pakistan, we have had a string of broken promises from often inept and sometimes corrupt rulers. We need to consider the social contract, which binds us. It is frayed and ignored. The poor and rich are charged unfair indirect taxes because we have no governance in our tax collection system. The rich and powerful do not pay taxes. Income in the agricultural sector, which is the largest part of our economy, is not taxed. We pay very little or nothing for water that runs in the canal system. This provides a huge and unfunded subsidy to the agriculture sector. This means there is an inefficient use of water. We don't pay our bills for energy. How can we and why should we compare ourselves with India.

India has had an integrated energy plan since the early 80's. We still don't have one that we are willing to implement. Why is it that the entire nation has been held hostage to by seen and unseen cartels, monopolies, and dishonest middle men. This is why we are not manufacturing conventional power plants or building solar PVC's or wind turbines. Whatever capability did exist has been eroded over the years. But, I once again say that the ability of Pakistanis to live under these dire circumstances is a testimony to their resilience and ability to survive and even prosper on an individual basis. If we could unleash this intellectual and physical potential, we could be better than most nations.

PAGE: BADLY HIT BY GROWING ELECTRICITY AND GAS SHORTAGES, MANY MANUFACTURERS ARE TRYING TO SWITCH OVER TO ALTERNATE ENERGY SOLUTIONS TO OPERATE THEIR FACTORIES EVEN IF IT MEANS HEAVY INVESTMENTS AND INCREASED RUNNING COSTS. YOUR VIEWS.

AHB: Our manufacturers have been used to cheap electricity in the past. They have therefore not been energy efficient or conserved energy. However, these times are long gone. Industrialists will find that most of the renewable energy solutions are palliative and will not necessarily resolve their energy problems. If we do not reform our profligate ways and continue our heavy dependency on hydrocarbons, by 2025 it is estimated by the energy expert group, that our imports of energy will grow from around 20 mmt to 80 mmt annum or from $15 billion to nearly $100 billion per annum. To this import bill if we are able to add value through manufactured goods or high value agriculture, I would say, this would be fine. Countries like Japan, China, and Korea survive on import. However, they do not have huge energy cross subsidies and their nonproductive home consumer does not eat away half of the energy pie. In these countries, 80 per cent of energy is consumed by industry and services, which add value and provide income, employment and export revenues. Today, the CNG lobby is violently protesting the near loss of its franchise. I am constantly questioned why is the government taking away this privilege provided to the middle and upper classes for which billions of rupees have been invested. The government has been forced into cutting gas supplies to power generation, fertiliser manufacturers, industry which employs millions and generates export revenues. The alternative fuels may be more expensive but the middle and upper classes can pay for this. CNG should have always been used as part of its mass transit programmes to benefit the poorest in society. This has not been the case. This is precisely why it now needs to redress this balance. The rent seeking and subsidy-capturing days are gone. If we as Pakistanis do not start practicing what we preach by paying taxes, paying our energy bills and living within our means the gas and electricity shortages will only continue. In the end, I would say industry will find solutions for its problems. How will the consumer survive? They will only get their rights by educating themselves, understanding what is truly the situation and then create a platform through which it should engage with the regulators where they have no voice, with the policymakers at the planning commission where they are not heard, with the international donors who often dole out big amounts to the masses but they (the masses) receive no benefit, and in parliament by electing honest, credible and qualified politicians and then hold them to account. This is a time of action and a time for activism. I am optimistic that we will find our way out of these dark days.