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Developing local gas resources can answer to energy problems in Pakistan

May 08 -21, 2000

Pakistan has paid an additional amount of $1 billion on import of oil during the current financial year taking the expenditure on oil import to $3 billion during the said period.

The enhanced oil bill, due to increase of oil prices in the international market may however impair the government's efforts to reduce trade deficit this year.

It may be noted that bulk of the imported fuel oil is consumed by the thermal power generation both in the public as well as private sector.

As against the total demand of 385000 tonnes of oil, Pakistan is producing hardly around 57000 tonnes within the country while rest of the need is met through imports. Although the natural gas available within the country is contributing significantly in arresting the demand for imported oil yet it is still short of around one billion cubic feet per day. Currently the total production of gas in Pakistan is around 2.4 billion cubic feet per day (BCFD) against the demand of 3.4 BCFD.

This shortfall in gas has to be met in the shortest possible time with a view to check foreign exchange outflow on account of import of oil.

According to informed source, the present government is striving hard to develop the proven oil fields as early as possible to consolidate its energy resource but also paying serious attention on import of gas which comparatively much cheaper than oil and its consumption is also friendly to environment.

Currently, there are four options for import of gas into country. These options include a 48-inch-diameter 1620-kilometer pipeline from Qatar at a cost of $3.2 billion. Another 48-inch diameter 1440 km pipeline from Turkmenistan at a cost of $1.9 billion. Two projects of 36-inch diameter 2150 km and 48 inch diameter pipeline 2670-km pipelines are also under consideration from Iran. Their estimated cost is $ 2.5 billion and $3.2 billion respectively. Unfortunately all these projects are continued to suffer for one reason or the other. The unabated political disturbance in Afghanistan has almost resulted in winding up of Turkmenistan pipeline project. Pipeline projects from Iran could only be commercially viable if India agrees to enter into a purchasing agreement. Although India is in dire need of gas and looking for various options to overcome this problem, however politically biased leadership of that country is not accepting the hard fact that this pipeline should pass through from Pakistan? A green signal to that project would mean about $500 million transition fee to Pakistan besides availability of gas at a cheaper rate without any investment on developing an infrastructure to bring gas into Pakistan from Iran. Another option now left is to consider the Qatar pipeline. Though it is comparatively cheaper as far as pricing of the gas is concerned, yet being an off-shore project, the cost of infrastructure is too high and time consuming in nature. Keeping in view the current scenario due to tense relations with India and political disturbance in Afghanistan, authorities in Pakistan should concentrate on developing the home gas resources, which according to an estimate have the potential to cater to the entire energy need of the country.

The energy policy 1994 declared by the government of Pakistan, attracted international investors in the field of power generation from all parts of the world. These investors are renowned multinational companies, leaders in energy sector with worldwide presence in the field. Share of United States investment in power plants is the highest. They are General Electric Capital Corporation, Midland Bank, Hawkins Oil & Gas, Continental Energy, Tanaska International, Illinova Generating Company etc. Major projects include 586 MW Uch Power Project, M/s Elpaso of USA are the equity partners in 157 MW Fauji Power Project, Coastal Power has two projects with total 265 MW capacity, both having achieved the commissioning tests are already on bar. AES Corporation's two IPPs, around 700 MW are also functioning well. Other sponsors include Siemens of Germany, Japan International Banking Corporation, Malaysian State Power Utility etc.

The World Bank and multi-lateral financial institutions provided a lot of financial support to the IPPs. Others include US-EXIM bank, JEXIM, Citibank international, CDC, Governments of UK, Italy and France. Xenel of Saudi Arabia, Pakistan Power Ltd., National Power of UK are also major stakeholders in Hubco Power Project which is outside the 1994 power policy.

Although per capita power consumption is comparatively on the lower side in Pakistan but the country promises a strong demand for energy sector investment in near future. There is a need of the policies to attract the international investors already engaged in power sector towards the oil and gas sector if we have to develop a strong energy base in Pakistan. It is heartening to note that WAPDA has managed to revise the power purchase agreements with most of the IPPs. The dispute, between WAPDA and HUBCO which is blown out of proportion by those who are not well-wisher of the country, is also needed to bring to an end at the earliest so that a good working condition is provided for local as well as foreign investors.